Want VC Investment? Take a Cue From the Unglamorous: The Rise of InsurTech
Emily Hunt, Byte Academy

“Sexy” is probably one of the last words that comes to mind in relation to insurance. However, as the Baby Boomers age and traditional insurers look for technologies in order to respond to the evolving demands of millennials, the perception of insurance is changing. Insurance combined with tech: InsurTech (Insurance + Technology) has become a “hot” area. It falls under the more general FinTech (financial technology) umbrella. The FinTech industry has been in the spotlight over the past few years. This includes areas such as roboadvisory (Betterment), payments (Venmo) and lending (OnDeck). During this time InsurTech has taken a back seat. However, now VC’s, startups, tech trendsetters and corporates have begun to recognize InsurTech’s importance and its “cool” factor - insurance has had a makeover.

VC’s at the sold-out Empire Startups FinTech conference, an event annually held at Webster Hall concert venue, showed strong interest in InsurTech. This is in despite of other areas of FinTech “cooling off”. Amy Nauiokas, Founder and President of Anthemis, a leading FinTech VC, stressed the importance of InsurTech in her keynote speech (Ms. Nauiokas’ seems to have a keen sense of FinTech trends given that her fund made early investments in Betterment, Stocktwits and other well-known FinTech brands). Separately, speakers on the “The InsurTech Hibernation is Over” panel noted the 4x increase in industry investment.

Excitement over InsurTech was infectious for the crowd. At bars afterward, attendees raved over their favorite “Hot Startups” demo. Lemonade, a digital home insurance provider, was the crowd pleaser. The company presented Maya, its charming artificial intelligence bot.

Given this, it may come as no surprise that VC’s had already caught onto Lemonade’s appeal. In 2016, the company raised $47 million in funding. An additional “undisclosed” amount was raised in April 2017, the month of its Hot Startups demo. Trov, another digital insurance provider, also raised $45 million the same month. Nauiokas’ fund Anthemis had already invested $6.5 million into Trov in 2015.

Outside Lemonade and Trov, other InsurTech companies have benefited from increased VC interest. The $400 million capital raise for Oscar Health was among the largest venture deals of 2016. Oscar, founded in 2013 and valued at $2.7 billion, strives to streamline how people sign-up for insurance plans and navigate the American health system. With Oscar taking the lead, 2016 InsurTech venture funding more than doubled from the previous year (KPMG). Investments rose from approximately $590 million to $1.2 billion. Prior to this there had been a pickup in momentum with the number of deals more than quadrupling since 2011.

Following the VC’s, corporate investment in InsurTech has also begun to rise. Traditional insurers are beginning to recognize the cross-industry technologies that can be applied to the insurance sector – such as healthtech, automotive telematics, and more. Last year Fidelity led Oscar’s February funding round. This year publicly-traded Allianz provided Lemonade’s April undisclosed funding.

Governmental policy and healthcare reform have further put the insurance industry under the microscope. President Trump has long discussed repealing Obamacare (aka the Affordable Care Act) and putting a new plan into place. Moving towards this goal, his proposed alternative, “Trumpcare” has already passed the House of Representative and is awaiting approval from the Senate. Particularly if the bill receives final approval, the current business of insurers, especially those founded around Obamacare (like Oscar) will be interrupted and more of the industry as a whole will be primed for change.

Byte Academy, headquartered in New York City is a FinTech coding school giving InsurTech education a shot.