It’s a big new digital world, and insurers are building more innovative ways to become a part of it. One approach to meeting customer demands in creative new ways is to build ecosystem partnerships with non-insurance businesses. And one way to reach those businesses is by investing in startups.
Research shows that since 2010, insurers, spurred by the digital revolution, have become increasingly aggressive in this area. A good illustration can be found in a recent study by CB Insights, a venture capital and angel investor database firm that tracks private companies and their investors and acquirers.
CB Insights finds that since 2010, insurers have participated in $1.78 billion in funding to tech companies, ranging from ride-sharing service Uber to Betterment (an automated investment tool) to Coinbase (a bitcoin wallet). Tech startup deal activity by insurers and their corporate venture arms rose by a stunning 460 percent year over year in 2014, the study finds.
Insurance tech startups—ranging from policy-comparison engines to tech-enabled health coverage and insurance tools—are rapidly invading the multi-trillion-dollar insurance industry. Companies in the insurance tech space raised $2.12 billion since 2010—a whopping $1.39 billion of which has been since the start of 2014. And so far, 2015 has been the biggest on record, with investor interest in the space increasing nine times over last year. The hottest areas of investment are price comparison, lending and robo-advisors.
Not surprisingly, the biggest area of funded startups since 2010—more than all other insurance types combined—involves health insurance, comprising more than 56 percent of all insurance tech startups. This is attributable in large part to the U.S. Affordable Care Act of 2010, which created new opportunities for consumer health-insurance providers.
Although most of the insurers on CB Insights’ list of the largest deals from 2010 to 2015 are U.S.-based (including USAA, TransAmerica Ventures, and American Family Ventures), European-based companies like AXA Strategic Ventures are also active.
And though most insurance startup investments cited in the study are also U.S-based, two of its “six insurance startups to watch” are rooted in Brazil and Germany:
- CityMile, in Rio de Janeiro, is developing a usage-based insurance solution comprising an onboard diagnostic system device and a mobile app. The goal is to help insurers kick-start their UBI programs and encourage better driving behavior.
- Pablow, based in Berlin, is developing a technology platform that will connect large travel insurers and small travel retailers and distribute targeted travel insurance at point of sale.
Other interesting insurance-tech companies to watch are Intrasurance from The Netherlands, SituatiVe GmbH from Germany, and the series of start-ups coming from my home country of Switzerland like Knip, Anivo, SMARTIE, FinanceFox, esurance.ch, as well as more established players like smile.direct.
Although these strategic insurance investments in startups are a great example of Digital Transformers, the downside of this trend is the bad news it could be spelling for the Digital Followers.
Next week I’ll take a look at another study that examines just that.
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