Funding for insurtechs hit record levels in 2019 on the back of a spike in mega deals

Advertisement
Funding for insurtechs hit record levels in 2019 on the back of a spike in mega deals
Advertisement

Across the year, insurance investment globally hit $6.37 billion, according to data from Willis Towers Watson. Such was the scale of investment, 2019's figures account for 33.9% of the historical total raised in the industry.

Quarterly Global Insurtech Funding

All told, 2019 saw a 63%, year-over-year (YoY) increase in funding, with much of the record-breaking funding concentrated in Q4, when $1.99 billion was raised - the highest single quarter raise ever recorded.

While 2019 was a highly lucrative year for larger insurtech players, investment in smaller players declined.

  • Insurtech funding was largely fueled by a number of mega raises. Of the 10 insurtech unicorns globally, five were minted in 2019 - Wefox, Lemonade, Hippo, Next Insurance, and Bright Health. In fact, 2019 saw a 90% increase in the size of investment rounds that exceeded $40 million, and nine rounds recorded transaction values of over $100 million. This suggests larger insurtechs are now increasingly becoming front-runners in their respective coverage areas and geographies.
  • Early stage funding, in contrast, took a significant hit across the year. Between 2012 and 2019, seed and angel rounds accounted for 40% of total insurtech funding. However, when looking at Q4 2019 funding in isolation, there's a significant decline in investments at these stages, accounting for only 19% of deals - less than half of the historical average. This suggests investors are increasingly wary of backing players that have yet to build out their business. The trepidation is perhaps unsurprising, given that over the past three years, more than 180 insurtechs have failed.

That larger insurtechs are snagging the lion's share of funding suggests the space is beginning to mature - but it will also likely force smaller players to turn to new niche coverage areas.

  • Players responsible for some of the largest raises in 2019 have increasingly begun to scale their operations. In some instances, this is evidenced in geographical expansion: For example, US-based Lemonade has made its first international foray with a launch in Germany. In other cases, the insurtechs are seeing a notable rise in revenue: Root earned $133.4 million in insurance premiums in the first half of 2019, a twelvefold increase from the same period in 2018. These upstarts are a long way from dethroning their incumbent peers, but the progress they showed and funding they secured in 2019 suggests they could pose an increasing threat to legacy players.
  • But the success of these larger players is making it harder for new startups to enter the space. In fact, the number of startups entering the space has fallen dramatically since 2016, a record year that saw 208 new entrants, with only three new insurtechs launching in the first three quarters of 2019. This dramatic decline suggests that players looking to enter the space going forward need to identify new niche segments that have yet to become saturated. Otherwise, they'll likely struggle to cut through the noise and gain investor interest.

Want to read more stories like this one? Here's how to get access:

Advertisement

  1. Sign up for Fintech Pro, Business Insider Intelligence's expert product suite tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started
  2. Check to see if you already have access to Business Insider Intelligence through your company, or inquire about access if you don't. >> Check If You Have Enterprise Access
  3. Explore related topics in more depth. >> Visit Our Report Store
  4. Current subscribers can log in to read the briefing here.

Exclusive FREE Slide Deck: 10 Up and Coming Fintechs by Business Insider Intelligence

{{}}