InsurTech is a relatively new industry. However, it’s developing quite fast and becoming one of the most booming verticals in the FinTech space. First of all, don’t pay too much attention to the 34% drop in the InsurTech market in 2016; it actually grew up by 25% considering the number of deals. The year 2015 showed an abnormal rise in the InsurTech market, which was mainly driven by Chinese large and extra-large deals, including $1B USD invested into the world’s largest InsurTech startup Zhong An.
Today, the market consists of about 1400 InsurTech companies; however, the launching tendency is decreasing. While in 2015, almost 300 companies were launched; in 2016, we see a 40% decrease in this number (about 180 new startups). In 2015, the pike was mainly because of a largest in InsurTech history Chinese deal – Zhong An, that made almost 40% of the whole year’s funding amount. However, the number of investment deals continue to stately grow and 2016 showed 25% Y0Y increase: 54 deals in 2014, 125 in 2015 and 157 in 2016.
The US is still a dominant InsurTech market – almost 50% of all investments came to US companies. India is surprisingly catching up to the insurance trend; China, on the other hand, went silent in 2016, counter to the InsurTech boom there in 2015.
Most of IPO at their core are classic insurers, that dive into the transformation:
The largest deal was done by Oscar (US); it raised $400M in a financing round led by Fidelity Investments, which valued company at $2.7B (#2 InsurTech unicorn after ZhongAn). A colossal $500M (at $3B valuation) round was raised by PingAn Good Doctor, Metromile raised $191.5M, Oscar – $150M (valued at $3B), Quartet attracted $40M, Lemonade – $34M ($60M in total), FinanceFox – $5.5M ($28M in total), Huize Insurance – $30.8M, Zebra – $17M (of $21M in total), Trov – $25.5M, DocPlanner – $20M ($34M in total), FriendSurance – $15.3M, PolicyGenius – $15M ($21M in total), Clark – €13.2M, Alan – €13M, Slice – $3.9M, Bunker – $2M, FitSense – £0.3M.
In 2017, we expect to see several interesting M&A deals made by largest traditional insurance companies. In comparison to banks, they became really active in terms of innovation, trying to work and cooperate with InsurTech startups at the beginning of their growth – that is why investments and acquisitions from them are just a matter of time.
Online insurance is one of the most dynamically developing FinTech sectors and it will evolve in a separate sector in a couple of years without a doubt. Meanwhile, Chinese insurance companies (PingAn and Zhong An) and Hong Kong investors (Horizon Ventures) could give a head start to any other players in terms of practical results. As always, American and Chinese players focus only on the corresponding domestic markets (Lemonade and Metromile want to cover all country by 2017), and only European players think in terms of expansions (with FriendSurance and Trov entering the Australian market, FinanceFox expanding to Switzerland and Austria, while DocPlanner is operational in 25 markets).
As the online insurance sector passes the formation stage, price comparison, product aggregators and brokers (Zebra, PolicyGenius, Bunker, FinanceFox, Alan, CoverFox) account for the majority of the market. However, as in the case with FinTech as a whole, such services flourishing now will subside in the future and make room for players able to deliver added value for their end client and give him an enhanced range of services. Otherwise, they will have to migrate to complementary sectors for survival and retention of their client audience. For example, Oscar Health is very active now in many areas: from arranging doctor appointments online and developing solutions for telemedicine to opening a new hospital in Brooklyn (in order to increase customer loyalty and revenue per client by providing more complex services for its clients), and working with small employers from the audience’s point of view.
All in all, companies focus more and more on work with SMEs instead of big companies, which is an apparent trend caused by the growing role of gig economy(composed of freelancers, employees, and clients of intermediary marketplaces and on-demand services). Slice, Stride, Bunker and CoverFox offer their Uber-like services for the new types of employees (and clients), which did not exist before. Metromile and Slice sell insurance services according to pay-per-mile and pay-per-use models, respectively, demonstrating clearly an on-demand approach and catering to the needs of low mileage drivers.
Another interesting approach, also borrowed from the pool of overall economy trends, is P2P insurance. Services such as Lemonade and FriendSurance allow one not to obtain an individual insurance policy, but to become a member of the insurance group, consisting of people you probably know or at least people with similar needs and circumstances as you have, instead. In case the insurance event does not happen, the money is paid back to the members (with a deduction of the platform fee).
The rapid development of online consumer lending leads to an increased demand for online insurance services: electronics insurance, sports equipment insurance and even musical instrument insurance (available at Trov, for example). The high sales volumes of fitness trackers and increasing use of fitness apps instigate the emergence of companies aggregating and analyzing this kind of information about your physical activity (like FitSense). Innovations in AI and chatbots lead to an emergence of services, which automatically offer products (Clark) or foresee critical situations (Quartet).
InsurTech and HealthTech are rapidly converging nowadays and this development seems logical. Insurance giant PingAn has launched PingAn Good Doctor to enable people to arrange doctor appointments online or get telemedicine services (it has 77M clients and 250K doctors on board). Quartet allows people to consult with a community of therapists and automatically analyzes their symptoms. DocPlanner and Doctoralia also allow patients to make an appointment with a doctor online– the first has 8M clients in 25 countries, the latter – 9M in 20 countries.
Services of the new generation grow at an ever-increasing pace by relying not only on organic growth but also on merging with each other – DocPlanner has just acquired Doctoralia and Metromile has recently purchased insurance carrier Mosaic Insurance to handle the underwriting of its policies itself.
More and more investors are being attracted to InsurTech/HealthTech segment. It turns out that insurance companies are more active in InsurTech than banks used to be in FinTech; it seems that they have learned from the unsuccessful experience of the latter to not to resist changes or ignore them.
To see how Elafris Virtual Insurance Agents can help your company click her
e to schedule a free online demo.