Insurtech funding up $100 million in Q1

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A total of $724 million was invested in insurtech in the first quarter of 2018, according to Willis Towers Watson and CB Insights' latest Quarterly Insurtech Briefing. That is up $100 million from the final quarter of 2017 and $460 million from the first quarter of that year.

The funding was spread out over 66 total transactions, representing the most total transactions of any quarter since the companies began tracking in 2013. The previous high of 59 was in the first quarter of 2016.

There has been a trend toward incumbent insurers becoming more active in the insurtech investment space, according to previous iterations of the briefing. While insurers and their venture capital arms were still major players this time around, independent firms placed some large bets, especially on early-stage companies.

"Investors are clearly willing to make increased bets on InsurTech and funding rounds are becoming larger," writes Rafal Walkiewicz, CEO of Willis Towers Watson Securities. "Perhaps the stakes are becoming too high for insurers, especially if they are mostly investing in order to learn how to improve their existing processes."

Investors' mindset

Along with the standard data on deal volume and cost, Willis and CB Insights ran a secondary survey of 100 insurtech investors to get an idea of how the market is viewed on average.

The participants mostly were comprised of independent venture capital firms (38%) and insurance-corporate side (28%). Growth equity firms clocked in at 9% while the rest said they didn't want to categorize themselves.

The primary sectors of investment focus were data and analytics (31%) and product and distribution (27%). While 20% said they were primarily invested in claims handling as well, only 8% said it was the "most attractive" sector for investment.

Most firms say they prefer to make minority investments (50% vs. 8% for majority; 42% were agnostic). In terms of geographic areas of focus, about a third said they looked more at the U.S. and North America or the U.K. and Europe. Asia was the third-most investment focus area (17%).

"Outside capital tends to focus on customer pressure points: cost of the product, ease of access and new or underserved markets," Walkiewicz writes. "Independent VCs are solely driven by investment return and have access to technologies and investment themes that may not be on the top of mind for the insurance industry. This is why they are exploring broader themes such as the impact of quantum computing on technology while incumbents tend to invest in insurance-focused applications of big data and AI."

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Insurtech Start-up funding Analytics Willis Towers Watson CB Insights