InsurTechs achieved a record-breaking $3B in investments in first-half 2019
Global fundraising for InsurTechs is transforming business models and opening new markets, says a new report from Hampleton Partners.
Global fundraising for InsurTechs neared a record-breaking $3 billion in the first six months of 2019 and is on track to reach $6 billion by year-end, says “The InsurTech M&A Market Report,” a new report from Hampleton Partners, an international mergers and acquisitions (M&A) advisor. In 2018, InsurTech investments reached $4.2 billion for the entire year, which was a 27% increase over 2017.
Of the investments made this year, nearly one-third targeted European companies, with half of the ten largest investments going to Berlin-based InsurTech firms. The U.K. and France also serve as InsurTech hubs on the continent and are helping drive Europe’s global investment share growth.
Hampleton’s report also found that there have been 132 M&A transactions in the segment since 2016, with private equity acquisitions accounting for 15% of deals.
“In this high-growth sector, we have seen more VC funding being funneled into larger- and higher-valuation deals that have already shown success,” Miro Parizek, founder of Hampleton Partners, said in a release. “Emerging technologies offer solutions to underserved markets, enhance business models, or create new markets altogether. For example, InsurTechs are taking advantage of global trends in smart home device tech to shift towards proactive risk management for homeowners, rather than reactive risk assessment, in this new disruptive business model.”
Key findings
The report identified the three emerging technologies that are fueling investor and buyer interest:
- Telematics: Data gathered from connected devices in the home, car or through a smartphone can help insurers create a profile around a consumer’s habits. This allows them to tailor insurance policies for every individual. One example of this is how life insurers are using wearable technology to monitor an insured’s health and physical activity. As a result, an insurer can lower the premium of an insured who exercises and/or maintains a healthy lifestyle. Hampleton notes, however, that insurers’ biggest strategic priority regarding telematics is in smartphone usage-based insurance (UBI) space.
- Drones: Drones are helping insurers gather claims information in ways that were not possible before, such as assessing wildfire destruction or evaluating roof damage on a compromised structure. Drones are also providing a complete picture of a situation faster than ever, especially after weather events or a natural disaster.
- Mobile-first platforms: Mobile-first disruptors are changing how consumers interact with the insurance industry and are becoming rising stars in the insurance industry. Root Insurance, a mobile insurer, uses smartphone technology and data to evaluate a driver’s behavior to set auto insurance rates — and in August 2019, the business was valued at $3.65 billion. Lemonade, a mobile-first service for renters and homeowners insurance, raised a funding round of $300 million earlier this year
The future of InsurTech M&A
While M&A activity remains stable in the InsurTech space, Hampleton expects the market will pick up speed as more startups mature and become more viable investment targets for insurers and solutions providers.
“A very small number of the startups will eventually IPO. A number, of course, will fail,” explained Parizek. “A good chunk of the rest will find a new home at companies with broader product or service portfolios, or in the hands of innovative insurers who wish to own and control the technologies they use.”
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