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Despite drop in deals volume, large deals keep insurtech investment high

Insurtech investment grew slightly from US$14.3 billion in 2019 to US$14.5 billion in 2020, despite a major drop in the number of deals from deals to 287. Maturing fintech companies attracting larger rounds combined with incumbent carriers recognizing the need to accelerate their digital transformation efforts helped buoy insurtech investment.

Big VC funding rounds in H2’20 help mitigate H1’20 dip

Insurtech was a hot sector for VC investors in H2’20, helping to keep investment levels high for 2020. During H2’20, US$100 million+ rounds were raised by Bright Health (US$500 million), Hippo Insurance (US$500 million across two rounds), Next Insurance (US$250 million) and Oscar (US$140 million) in the US and by Shuidi (US$480 million across two rounds) in China.

Total global investment activity in Insuretech

A year ago, we talked a lot about customer differentiation and segmentation; about the high-net-worths, the baby boomers, and the millennials. COVID-19 has changed all that, and actually consolidated interactions between the insured and the carriers. Everyone has moved to a mobile, digital model and that’s really requiring carriers to move much faster in that arena.

Gary Plotkin
Global Insurtech Leader, Principal,
Insurance Management Consulting Lead, KPMG in the US

Increasing number of deals driven by insurance brands

During 2020, many of the largest insurtech funding rounds focused on challenger insurance brands, rather than on software players. Investments in alternative full-stack providers really took off compared to previous years, with many providers now working to achieve scale. 

Corporate investment growing stronger

Corporate investment in insurtech continued to grow in 2020 as incumbent insurance companies heeded the wake-up call provided by COVID-19 and looked to quickly progress their digital capabilities. Big techs are also targeting insurance; in H2’20, Alphabet-owned Verily announced Coefficient Insurance — a new subsidiary focused on providing stop-loss insurance.1

Collaborative partnerships on the rise

Partnerships gained traction as insurance carriers looked to get closer to their customers, such as by working collaboratively with automotive Original Equipment Manufacturers (OEMs) to provide insurance at the point of sale of a vehicle. Collaborations also occurred at the platform level; in H2’20, Chubb introduced Chubb Studio to provide integrated insurance offerings through their partners’ digital channels.2

Mature insurtechs begin exit march, led by Lemonade

Lemonade raised US$319 million in its successful July IPO, with shares popping 132 percent on the first day of trading. Its strong performance helped drive interest in exits, with Root Insurance quickly following suit. In November, Metromile also announced its special purpose acquisition company (SPAC) acquisition, with shares expected to start trading in 2021.

What to watch for in 2021

  • Increasing number of IPO exits and SPAC IPO exits
  • Insurtechs making acquisitions to acquire additional capabilities and insurance licenses
  • Growing partnerships related to embedded insurance
  • New alternative full-stack providers, particularly in markets with low insurtech penetration.

Footnotes

1 https://www.theverge.com/2020/8/25/21401124/alphabet-verily-insurance-coefficient-stop-loss

2 https://www.insurance-canada.ca/2020/09/14/chubb-studio-launch-simplifying-digital-partner-integration/

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