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Perspective on Insurtech
September 2016
VC insurance investments are on the rise
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
VC Insurance Investment as of August 2016
Deal Count Capital Invested Sum
Insurance has become the new hot topic in venture capital. Online lending set the stage for insurtech – increasing
investor confidence in verticals with heavy regulation and high capital requirements.
0
0.5
1
1.5
2
2.5
VC Funding ($B)
The majority of VC money has gone towards health and auto
Health and auto insurance account for the majority of early insurance investments. Health and auto are two of the largest
segments within insurance, which explains the interest from Silicon Valley.
Most startups are not attempting to displace incumbents
0
5
10
15
20
25
Insurance Deals 1/1/2015 - 9/1/2016
Most startups are developing products which complement current insurance offerings. These startups will likely be
dependent on partnerships to reach scale.
Pain points in insurance
Insurance
Innovation
Zebra
Auto Comparison
Engine
PolicyGenius
Insurance
Comparison and
Education
Zendrive
Mobile Telematics
Knip
Digital Insurance
Manager
InforcePRO
Policyholder Data
Mining
Trov
On-Demand P&C
Insurance
Metromile
Pay-Per-Mile Car
Insurance
Zipari
Real-Time Analytics
for CRM
BIMA
Mobile Micro Health
Insurance
Roost
Smart home
technology
Praedicat
Risk Analytics to
Improve
Underwriting
Avesthagen
Predictive
Preventive
Healthcare
The poses an opportunity for insurance companies
AXA Strategic Ventures Aviva Ventures USAA
Allianz Digital Corporate Ventures Intact Financial MassMutual Ventures
AIG Sun Life Financial New York Life
American Family Ventures White Mountains GIS Strategic Ventures
Startups don’t necessarily have the upperhand
• Brand awareness and marketing spend
• Capital requirements
• State licensing and regulation
• More agile internal processes
• Lack of legacy systems and products
• Talent recruitment
• Lack of stringent regulatory scrutiny (SIFI)
You are building two identical houses; would you rather remodel an existing house or start from scratch?
Challenges for Startups Startup Advantages
It depends. Certain aspects are easier to build from scratch, and certain aspects are not.
The target market and product of the insurance startup matters.
VC considerations
Product offering
Does the startup have a compelling value proposition?
Is the product advantage evident to customers?
Is the improvement a nice to have or a need to have?
Investment Criteria
How much capital will need to be invested to reach break even?
What is the time horizon for an exit?
Industry Experience
Does the management team understand the dynamics of the insurance business?
Does the company understand the regulatory environment?
Business Processes
How quickly can the company train their underwriting models?
Can the company identify and attract low risk customers?
How well diversified is the company’s portfolio?
Marketing Expenditures
Can the company market and sell to customers at a reasonable cost?
Where is this all going?
We believe insurtech will play out in a very similar manner to how fintech – specifically lending - has played
out.
Namely:
Partnerships will be vital for startups to reach scale. Startups will struggle to work around insurance
company timelines, as partnerships are more urgent for the startups
Insurance companies will feel pressure to innovate as new products enter the market. Executives and
management will need to adopt and promote a culture of change
Once startups reach scale, regulators will pay closer attention to the operations of insurtech startups –
potentially fining companies for actions taken years prior
As winners are determined, consolidation among startups will occur. Insurance companies will need to
be mindful of the shifting startup ecosystem
1.
2.
3.
4.

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Perspective on Insurtech

  • 2. VC insurance investments are on the rise 0.00 200.00 400.00 600.00 800.00 1,000.00 1,200.00 10 20 30 40 50 60 70 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 VC Insurance Investment as of August 2016 Deal Count Capital Invested Sum Insurance has become the new hot topic in venture capital. Online lending set the stage for insurtech – increasing investor confidence in verticals with heavy regulation and high capital requirements.
  • 3. 0 0.5 1 1.5 2 2.5 VC Funding ($B) The majority of VC money has gone towards health and auto Health and auto insurance account for the majority of early insurance investments. Health and auto are two of the largest segments within insurance, which explains the interest from Silicon Valley.
  • 4. Most startups are not attempting to displace incumbents 0 5 10 15 20 25 Insurance Deals 1/1/2015 - 9/1/2016 Most startups are developing products which complement current insurance offerings. These startups will likely be dependent on partnerships to reach scale.
  • 5. Pain points in insurance Insurance Innovation Zebra Auto Comparison Engine PolicyGenius Insurance Comparison and Education Zendrive Mobile Telematics Knip Digital Insurance Manager InforcePRO Policyholder Data Mining Trov On-Demand P&C Insurance Metromile Pay-Per-Mile Car Insurance Zipari Real-Time Analytics for CRM BIMA Mobile Micro Health Insurance Roost Smart home technology Praedicat Risk Analytics to Improve Underwriting Avesthagen Predictive Preventive Healthcare
  • 6. The poses an opportunity for insurance companies AXA Strategic Ventures Aviva Ventures USAA Allianz Digital Corporate Ventures Intact Financial MassMutual Ventures AIG Sun Life Financial New York Life American Family Ventures White Mountains GIS Strategic Ventures
  • 7. Startups don’t necessarily have the upperhand • Brand awareness and marketing spend • Capital requirements • State licensing and regulation • More agile internal processes • Lack of legacy systems and products • Talent recruitment • Lack of stringent regulatory scrutiny (SIFI) You are building two identical houses; would you rather remodel an existing house or start from scratch? Challenges for Startups Startup Advantages It depends. Certain aspects are easier to build from scratch, and certain aspects are not. The target market and product of the insurance startup matters.
  • 8. VC considerations Product offering Does the startup have a compelling value proposition? Is the product advantage evident to customers? Is the improvement a nice to have or a need to have? Investment Criteria How much capital will need to be invested to reach break even? What is the time horizon for an exit? Industry Experience Does the management team understand the dynamics of the insurance business? Does the company understand the regulatory environment? Business Processes How quickly can the company train their underwriting models? Can the company identify and attract low risk customers? How well diversified is the company’s portfolio? Marketing Expenditures Can the company market and sell to customers at a reasonable cost?
  • 9. Where is this all going? We believe insurtech will play out in a very similar manner to how fintech – specifically lending - has played out. Namely: Partnerships will be vital for startups to reach scale. Startups will struggle to work around insurance company timelines, as partnerships are more urgent for the startups Insurance companies will feel pressure to innovate as new products enter the market. Executives and management will need to adopt and promote a culture of change Once startups reach scale, regulators will pay closer attention to the operations of insurtech startups – potentially fining companies for actions taken years prior As winners are determined, consolidation among startups will occur. Insurance companies will need to be mindful of the shifting startup ecosystem 1. 2. 3. 4.