This headline caught my eye the other day:
“4 VCs Were Asked What the Hottest Area of Fintech is Right Now — All They Could Talk about Was Insurance.”
There is an earthquake rumbling beneath the industry, the likes that have not been seen ever.
So what’s driving all this interest? The article’s author, Oscar Williams-Grut, attended a fintech VC confab in London, noting that one VC said the answer is pretty simple: “In the whole insurance industry, there's a lack of innovation and the user experience is pretty horrible."
Not a great reflection on the industry, but that’s the prevailing perception from outsiders. As Williams-Grut observes, there’s been a lot of movement in FinTech, the insurance side has been relatively staid. “Insurers mostly operate through brokers and an embarrassingly high percentage of business is done on paper,” he writes. “Products seem outdated, too: home insurance hasn't adapted to the era of Airbnb and car insurance is even more hopeless when it comes to Uber and the sharing economy. The industry seems an obvious area for a tech-savvy startup to disrupt.”
And disruption is happening. One VC panelist, Timo Dreger, managing director at Apeiron Investment Group, observed: "InsurTech right now is where FinTech was a couple of years ago."
According to the latest data from Venture Scanner, overall InsurTech venture funding grew at an annual clip of 31% from 2011 to 2017. Growth is taking place across the globe. Leading sectors include insurance comparison marketplaces (280 startups), insurance infrastructure/backend (222 startups), automobile insurance (114 startups), health and travel insurance (108 startups), insurance data and intelligence (100 startups).
Based on funding patterns, it appears at least $2 to $3 billion a year is now going into “Series B” and “Series D” funding, meaning into existing companies that have been around for at least a couple of years. This suggests they are meeting success in their markets.