Over $3 billion was invested in InsurTech companies in 2018
The capital invested in InsurTech startups and scale-ups reached $3.18 bn worldwide in 2018, almost double the $1.65 bn invested in 2017, according to data from the FinTech Global database.
InsurTech companies are clearly forcing the redesign of the insurance industry landscape by applying technology innovation to processes along the entire value chain.
Venture investors have recognized the scale of the opportunity being addressed and are allocating larger sums to invest in rapidly growing InsurTech solution providers. At the same time, incumbent insurance companies have joined the scramble to back companies that are developing and integrating new technologies in ways that could either threaten – or enhance – incumbent business models.
The result has been a dramatic growth in investments: over $8.5 billion was raised by InsurTech companies over the last five years, in 600 deals.
Average deal size has increased across all investment intervals above $1m
The actual number of deals completed last year dropped slightly from 142 in 2017 to 138 in 2018, as the average deal size increased.
An interval analysis of all InsurTech investments reveals a significant shift in deal size across the spectrum. Deals of ticket size less than $1m dropped from 41.6% share of the total number of deals in 2014 to 5.1% in 2018. Over the same period, deals between $10-25m increased from 11.3% to 28.2%, whilst deals above $25m doubled in share from 9.4% to 18.8%. At the top end, eight transactions were valued at over $100m last year.
Nearly a third of InsurTech investments were in European companies
North America has dominated investment activity in InsurTech over the last five years but last year saw the rest of the world claim more than half the global total for the first time. North American share of deals (by number) dropped from 58% in 2014 to 49.2% in 2018.
Investment in European InsurTech innovation increased steadily during this period, from 23.2% to 31.2%. Asia’s share of deals remained relatively stable, varying between a high of 16% in 2015 and a low of 13.8% in 2018. Investment growth in Europe is being led by InsurTech hubs in Germany, UK and France, but InsurTech innovation is flourishing in other hotspots throughout the continent. Half of the ten largest InsurTech deals in 2018 were in companies based in Berlin.
Venture firms still lead the way in InsurTech investments
As a group, venture capital firms are the most prolific investors in InsurTech companies. Of all the unique investor entities that participated in InsurTech deals in 2018, venture firms made up the largest category of investor type, a share of 57.7% of the total.
The next category of investors are financial institutions (primarily insurance companies), which account for 12.9% of investors. Non-financial corporates were also very active, making up 10% of the investor universe, as they look to back opportunities to utilize big data applications, AI and machine learning technology, without the obstacle of legacy IT systems. The insurance companies and non-financial corporates are, of course, larger investors in terms of capital per deal, and more prevalent in later-stage investments. (See FinTech Global database for details).
Venture investors are actively committing capital to InsurTechs that provide solutions to enhance the distribution process and extend the reach to customers. There is also substantial interest in companies that impact the pricing function or help to lower the costs of claims administration and policy distribution.
Meanwhile, major insurance companies are actively scouting for InsurTechs that can help to access currently unobtainable or uneconomic markets by providing entry to niches or by personalizing small ticket opportunities. These distribution-focused InsurTechs are most prevalent in the P&C, health and life segments. Other main areas for investment are InsurTechs that advance automation to reduce costs, or enhance the use of data for superior decision-making and insights.
Our discussions with venture capital investors and CXOs at insurance companies confirm a consensus that the industry is still very early in the digital transformation cycle and expectations are that investments into InsurTech will continue to grow at a dramatic pace.
If you would like to see the details of all deals, partnerships, and industry developments, along with profiles of every InsurTech company in the world; they are available to subscribers from the FinTech Global data and research platform.
If you would like to meet the InsurTech innovators, the active investors and the CXOs from insurance companies who are redefining the industry, join us at the Global InsurTech Summit in London, 4-6 March 2019.