InsurTech venture funding plunged 64 percent in the 2017 first quarter compared to the previous year, but the reason for the drop may actually be quite positive, according to a new Willis Towers Watson Report.
“The decline in funding likely results from startups moving from fundraising to [the] product launch stage,” according to the report.
InsurTech funding reached $283 million during Q1. Willis Towers Watson noted the number is 64 percent lower than the $783 million raised during the 2016 first quarter, but 4 percent higher than the $271 million that came in during the 2016 fourth quarter.
Digging deeper, 23 P/C transactions were funded in the 2014 first quarter, down 45 percent from the 42 P/C transactions tracked in the 201 first quarter. The Q1 results in terms of P/C transactions are also down 15 percent from 27 P/C transactions booked in the 2016 fourth quarter.
As Willis Towers Watson noted, Slice Labs has recently expanded the availability of its on-demand homeshare preview release to Colorado, Maryland, Massachusetts, Texas and Washington, after an initial debut in Iowa. In March, the startup also launched a preview release of its on-demand per use insurance product for select ridesharing drivers. Meanwhile, Trov and its individual personal item insurance platform is set for a 2017 U.S. launch.
Among other InsurTech findings in the report:
- Funding is going international. The U.S. accounted for 67 percent of InsurTech funding transactions since 2012, but only 24 percent in the 2017 first quarter.
- Most financing remains at the seed/Series A level. Early stage funding amounted to 66 percent of total funding transactions in Q1.
- InsurTech startups are increasingly focusing on distribution, with 74 percent of P/C financings and 53 percent of life/health fundings involving distribution-focused startups. Since 2012, the number had been 61 percent and 42 percent, respectively.
- Large companies re still investing in InsurTech startups. There were 25 private company investments from insurers/reinsurers in the 2017 first quarter, 4 percent higher than the 24 companies who invested over the same period a year ago. That’s down 4 percent from the 26 companies that committed to InsurTech investments in the 2016 fourth quarter.
- Partnerships remain a big focus. Willis Towers Watson noted that insurers and reinsurers continue to partner with technology companies to explore areas including connected car, alternative distribution, smart home and other areas. Those partnerships include Generali, which partnered with Google Next to provide home thermostats to Generali policyholders. Nationwide launched a distribution partnership with startup Sure involving a renters insurance product.
Willis Towers Watson’s Quarterly InsurTech Briefing highlights the activity and potential for insurtech disruption in the small business insurance market. A number of carriers—AIG and Hamilton (Attune), Berkshire Hathaway (CoverHound, Biberk), Chubb (CoverHound), Hiscox (Next Insurance, CoverHound, Bunker), Liberty Mutual (Next Insurance, CoverHound), Markel (Next Insurance), Munich Re (Slice, Next Insurance) have already made investments in the digital small business sector. Also in the first quarter, Travelers acquired Simply Business, a small business digital broker in the UK, for $490 million.
Those ventures are in addition coverwallet, decisley and Embroker that also target the small business sector.
According to Willis Towers Watson Securities, the small business insurance sector could begin to look more like the personal lines insurance market, where direct-to-consumer carriers like GEICO, Allstate and Progressive have gained increasing market share over the past 20 years on the strength of their technology.
Source: Willis Towers Watson