Our recent insurance technology quarterly highlights provided a state of the sector summary. Now we’re performing a deep dive examination of insurtech exits to see how things are shaping up on the M&A and IPO front.
Based on analysis on our insurance technology research platform, we see that exit activity in the first half of 2018 is trending down from the previous two years.
2018 Mid-Year Insurance Technology Exit Activity Lower Than 2017 And 2016
Let’s take a closer look at the number of insurance technology exit events by year.
The above graphic shows 13 exits in the first half of 2018. For the past three years, Q3 and Q4 accounted for 53% of total exit events on average. If that trend holds, 2018 exits will finish the year lower than 2017 and 2016, but higher than 2015. We’ll see if the second half of the year changes this trend!
Last quarter we discovered that the insurance technology sector is showing early signs of maturation. This quarter we are delving deeper on our insurtech report and research platform to examine funding by category. From this analysis, we conclude that the Insurance Comparison and Health Insurance categories lead the sector in category funding.
This conclusion comes from three key observations:
Insurance Comparison leads the sector in Q2 funding
Health Insurance dominates all-time insurtech category funding
Insurance Comparison has the highest funding growth percentage
We’ll explain these key observations with some graphics and discussions below.
Insurance Comparison Leads Insurtech in Q2 Funding
To start off, let’s study the insurance technology funding amounts by category in Q2.
The above graphic shows that Insurance Comparison leads the sector in Q2 2018 funding. Insurance Comparison raised the most funding last quarter with $323M. Health Insurance came in second with $294M.
So we’ve witnessed how different insurtech categories stack up in their Q2 funding. But how do these categories’ funding compare with each other historically? Let’s investigate that in the next section.
Health Insurance Dominates All-Time Funding; Insurance Comparison Grew the Fastest
The graph below summarizes the all-time funding in insurtech categories as well as their funding growth percentages.
Without a doubt, the bar graph demonstrates that Health Insurance leads in all-time funding with $11B. It’s also notable that its funding is 130% more than the next category–Life, Home, P&C Insurance–which has over $8B.
The line graph in the above graphic indicates that Insurance Comparison funding grew the fastest quarter over quarter with a growth percentage of 18%.
Conclusion: Insurance Comparison and Health Insurance Are At Forefront of Insurtech Funding
In summary, we have analyzed the insurtech funding amounts in different insurtech categories. Insurance Comparison leads in last quarter’s funding. We also observed that Health Insurance dominates the sector in all-time funding, while Insurance Comparison funding had the highest growth percentage in Q2. It’ll be interesting to see if any other insurtech categories will catch up and take the lead in the rest of 2018.
The insurance technology sector has seen an abundance of activity over the past few years. As we previously analyzed, insurtech funding has shown early signs of maturation and its exit events have seen robust growth.
We will now do a deeper dive of the different components of insurance technology and how they make up this startup ecosystem. We have classified the companies into 14 categories. This blog post will illustrate what these categories are and which categories have the most companies. We will also look at how these categories compare with one another in terms of their funding and maturity.
Insurance Marketplace Is the Largest Insurance Technology Category
Let’s start off by looking at the Sector Map for the insurance technology sector. As of March 2018, we have classified 1503 insurance technology startups into 14 categories that have raised $22 billion. The Sector Map highlights the number of companies in each category. It also shows a random sampling of companies in each category.
We see that Insurance Comparison/Marketplace is the largest category with 420 companies. These companies enable consumers to compare different insurance providers, or buy insurance of any kind (car to home to health). Some example companies are Goji, Policygenius, CoverHound, and Coverfox.
We have seen what the different categories making up this sector are and the number of companies in each. What about their funding and maturity in relation to one another? Let’s look at our Innovation Quadrant to find out.
Reinsurance Is the Heavyweight Category in Insurance Technology
Our Innovation Quadrant divides the insurance technology categories into four different quadrants.
We see that the Pioneers quadrant has the most insurance technology categories with 10. The Pioneer categories are in the earlier stages of funding and maturity. The Disruptors quadrant includes Health Insurance, Auto Insurance, and Life, Home, P&C Insurance. These three categories have acquired significant financings at a young age. The Heavyweights quadrant contains the Reinsurance category. This category has reached maturity with significant financing. Reinsurance companies provide insurance products to other insurance companies to help them hedge their bets and streamline their costs. Some example companies are AnalyzeRe, PlaceRe, PeakRe, and EazyRe.
We’ve seen the insurance technology categories and their relative stages of innovation. Let’s now look at how they stack up against one another in terms of their total funding versus company counts.
Health Insurance Startups Have the Most Funding
The graph below shows the total amount of venture funding and company count in each category.
As noted earlier, Health Insurance, Auto Insurance, and Life, Home, P&C Insurance have the highest average funding per company. The above graphic highlights that these three categories also have the highest total funding in insurtech. Among the three categories, Health Insurance leads the sector with over $10 billion in total funding.
Health Insurance contains companies that offer health-related insurance products for consumers and businesses. Some of the best-funded companies in this category are Oscar Health ($893M), Zenefits ($584M), and Clover Health ($425M). It’s also noteworthy that the funding in Health Insurance is 28% higher than the funding in the next category, Life, Home, P&C Insurance.
Conclusion: Insurance Marketplace and Health Insurance Categories Lead Insurtech
From the above analysis, we can see that the Insurance Marketplace category leads the sector in total companies. The Health Insurance category leads the sector in total funding. On the other hand, the Reinsurance category stands out as the Heavyweight category in our Innovation Quadrant. It has reached maturity with significant average funding per company versus other categories. It’ll be interesting to see how the insurance technology landscape will change and develop throughout the rest of 2018.
This conclusion was derived from two key data points:
The Insurance Backend category leads in the number of exits
The Auto Insurance category leads in acquisition amount
We’ll explore these takeaways in some more detail below.
To help set the stage, the graphic below shows insurtech exit activity over time. As you can see, the sector’s exit activity grew significantly over the past few years with a slight drop in 2017 from 2016.
Insurance Backend Leads Insurtech in the Number of Exits
The below graph highlights the number of insurtech exit events by category.
This graph shows that the Insurance Backend category leads the sector with 50 exit events. Its exit activity is more than 1.5 times the next category, Insurance Marketplace, which has 32 exit events.
Insurance Backend contains companies that help insurance companies with their day-to-day operations. They include CRMs for insurance agents, communication tools for insurance companies, and claim filing tools for customers. Some example companies are CHSI Connections, ClaimKit, Shift Technology, and Unirisx.
Let’s now see how insurtech categories compare with one another by acquisition amount.
Auto Insurance Leads Insurtech in Acquisition Amount
The graph below shows the acquisition amounts in different insurtech categories.
We can see from this graph that the Auto Insurance category leads insurtech in total acquisition amount with over $16 billion. Auto Insurance companies offer car insurance and car telematics products. These products generally detect your mileage and driving behavior to customize your insurance plan. Some example companies in this category include Metromile, The Zebra, Clearcover, and Cuvva.
Auto Insurance has seen some large acquisitions in recent years. Esurance was acquired by the Allstate Corporation in May 2011 for $1 billion. DriveFactor was acquired by CCC Information Services in May 2015 for $22 million. Tempcover was acquired by Connection Capital in January 2018 for $16 million.
The acquisition amount in Auto Insurance represents 30% of all insurtech acquisition activity. It’s noteworthy that its acquisition amount is more than 1.7 times the next category, Enterprise Insurance, which has just under $10 billion.
Conclusion: Insurance Backend and Auto Insurance Lead Insurtech Exit Activity
In summary, we have examined insurtech exit activity by the number of exit events and acquisition amount. The Insurance Backend category leads the sector in the number of exit events. The Auto Insurance category leads in acquisition amount.
We’ll start off by examining the annual insurtech funding amounts. The below graph shows recent insurtech funding amounts in different rounds.
Insurtech funding peaked in 2015, and has recovered slightly since. From this graph it’s clear that total insurtech funding for these rounds is up over the past 5 years.
Let’s look at the insurtech funding amount by round as a percentage, which shows changes independent of the total size.
As we can see, there is some rather noisy turbulence within insurtech funding over the past few years. Each funding stage took turns experiencing ups and downs.
These two graphics show that the insurtech funding amounts are shifting all over the place without any clear trends. Therefore we can conclude that there is variable innovation within the sector.
So we have seen the funding amounts graphs indicate variable innovation. Would the funding event count graphs show the same picture? Let’s examine them in the next section to find out.
Insurtech Funding Counts Shifting to Mid-Stage Events
Let’s now look at the annual insurtech funding event counts. The below graph shows the insurtech funding counts in different rounds over recent years.
The above graph shows that insurtech funding counts in all rounds saw steady growth from 2012 to 2017. This corresponds with the general upward trend seen in the insurtech funding amounts graph.
Let’s now look at the insurtech funding count by round as a percentage, which can show shifts more clearly.
This graph shows that from 2012-2017, the Seed round funding count percentage dropped. To compensate for that decrease, the funding count percentages for Series B and Series C increased.
Specifically, the Seed round funding count dropped from 65% to 55% from 2012 to 2017. In contrast, the Series B funding count increased from 5% to 11%. The Series C funding count increased from 2% to 7%. The changes in all the other rounds were small enough to be negligible.
Combining these two graphics, we can see that insurtech funding counts shifted slightly from the Seed round to mid-stage from 2012 to 2017.
Conclusion: The Insurtech Sector Is Starting to Mature Slightly
In conclusion, we see that insurtech funding amounts are showing variable innovation in all directions. Meanwhile, insurtech funding counts saw an increase in mid-stage events. These observations led us to conclude that the insurtech sector is showing early signs of maturation. Overall funding counts continue to show growth, but investors are finding more mid-stage companies to bet on.
What are your thoughts on this? Let us know in the comments section below.