Insurtech ventures have increasingly gained momentum as somewhat of a buzz topic where investors are concerned. As a whole, the industry is growing rapidly after a stagnant start to 2020. In the last three years alone, investors have funneled $20 billion into the space. Even then, there is still much room to grow.
Although insurance itself is an age-old industry, insurtechs are heading down the path of disruptive innovation, redesigning rather outdated methods and systems. Today there are a bevy of insurers becoming digital-first, or reaching out for AI-enabled risk measurement and screening tools. Customer-focused SaaS players are also coming up hot in the scene - all with investors prepared to provide a boost should the business be right.
Speaking on this, Mike Greene, CEO of Hi Marley, an SMS-focused insurtech startup that closed a $25 million Series B round recently shared, “We’ve never seen insurance move this fast.” Key factors he identified for the growth included a big surge in new players in the industry, as well as a successful earnings year overall in 2020.
Because of these factors, insurtech has witnessed a great start seeing an increasing and steady flow in investment kicking off Q2 2021. Despite a deeply affected first two quarters of 2020, insurtech startups still netted $18.3 billion in 2020, short $1 billion from the year prior. With technology being a primary growth driver in insurance deals worldwide, the sector is entering a very exciting period riding the huge wave that is fintech’s popularity. The COVID-19 pandemic also helped clarify for investors the importance of investing in technology and innovation, including insurtech. For insurtechs like Lemonade, Root, and Hippo, the growth to unicorn status has taken all of 5 years - rapid compared to most fintechs.
Insurtechs also appeal to investors because, although competitive, a small share of the market still offers sizeable earnings. Global insurance premiums currently calculate to total $5 trillion annually. Even just 0.1% of that is still a $5 billion slice of the pie. In this industry, even a 1% or 2% share in homeowners, auto, or life insurance is highly lucrative and appealing.
Insurtechs are cashed up and ready to innovate the technological systems needed to bring services up to speed with the demands of today’s consumers. While it’s still a relatively new market, in its infancy of development, there is significant potential for further growth.