In 2020, the upward trend in financing for insurtechs changed slightly, maintaining almost the same levels as 2019, while the number of operations decreased by around 30% compared to 2019. Consequently, in 2020 the average per operation reached an all-time high (2010-2020).

There are three main variables that explain these facts:

  1. Impact of COVID-19: uncertainty and increased risks encouraged strategic investments. Direct investments in well-established insurtechs or potential new disruptors were preferred rather than opting for riskier bets.

  1. Market consolidation: the announcements of IPOs, Acquisitions and SPAC not only in the USA, but also in emerging markets were a sign of the high level of maturity of the insurtechs, at least for the first wave of innovation.

  1. Super Deals: large deals did not lose power. These investments have the greatest impact in terms of the total amount of financing obtained.

Funding by region / quarter

If we change our perspective and look at the funds raised by region and by quarter, it becomes clear that North America is the most influential region for the insurtech industry on both the investor side and the invested company side. Analyzing the three main regions, Europe, Asia and North America, we can observe that even with an increase in investment in other regions, the fall in North America, especially in the United States, had a great impact on a global level.

Specifically, in the 2019-2020 period, the European insurtech had an increase of 31% in investments received and the Asian insurtechs improved their figures by 11%. However, over those two years the data from North American organizations was reduced by 17%.

Outliers

38 companies disrupting Insurance.

Outliers still account for 70% of the total sum received, but in 2020 new clusters were created such as Cybersecurity, Microinsurance, SMEs and Brokers. The concentration of investments made Health the top line of business in this year's analysis, but when the outliers were removed from the study, the Cross line of business came out on top. Furthermore, Auto, Home and Life increased their participation in the total amount obtained, which may indicate that they are less consolidated business lines or that they represent new opportunities that emerged in 2020.

What did the insurers invested in?

COVID-19 had a moderate impact on the investment made by insurers in startups last year. In 2020, insurance companies significantly increased investments in startups compared to 2019, from $978M to 1.6B. The recovery in investment volumes in 2020 was largely due to the operations of Palantir Technologies, iCapital Network, Vazyme Biotech and Hippo, which accounted for 1.1B. The most remarkable aspect is that all these investments were led by Asian Insurance Companies such as Sompo, Ping An, China Life and Sumitomo.

The insurance industry maintained the volume of investments in insurtechs in 2020 (compared to the $450M achieved in 2019). These investments were also highly concentrated in just three insurtechs: Hippo Insurance, Acko Insurance, and Getsafe.

Overall, in 2020, insurers upheld the same position regarding their investments in insurtechs. They were inclined to invest in companies with more mature business models, powerful products leveraged on technology and directly related to its core business. But, nevertheless, as in the previous year, their investments only represented 8% of the total funds received by the insurtechs this period.

Value Chain

From a linear to a dynamic process.

In 2020, the insurance value chain was deconstructed and shifted from a linear process to a dynamic, circular, data-driven one. The new form of the value chain was led by the new habits and needs of customers, which demanded better capabilities from insurers.

The COVID-19 situation also played a relevant role, by accelerating technological transformation, digitization and the adoption of new solutions by customers. This new context, with a greater volume of data and characterized by faster digitization, freed up the arrival of new business models, new data sets, and open platforms to meet new habits, values, and consumer demands.

Product design

Prevention and prediction became stronger in 2020: IoT is an important driver for these models and has been embraced across industries, but the behavior and needs of new customers were essential to the success of these models.

Examples:

Auto

  • Usage-based car insurance through trackers.

  • Opportunities for housing tenants.

Health and Life

  • Wellness and prevention through the use of wearable technology and the addition of added services.

  • Digital health accelerated by inefficient healthcare systems.

  • Microinsurance with B2B strategic alliances.

Home and Commercial

  • Smart sensors to predict water floods, burglary attempts or potential fires through predictive analytics tools that improve customer experience and efficiency.

  • Cybersecurity and fraud detection demanded by the growth of cyber risks.

Marketing and Distribution

Hybrid distribution gained space in the Insurance market in 2020: Omnichannel, enhancement of value-added services and liquid ecosystems are the new approaches for this part of the value chain.

Examples:

  • Distribution optimization with Embedded Micro Insurance in emerging markets.

  • SMEs and digital brokers.

Underwriting & Policy Admin.

Hyper-personalized prices and individual prices based on individual user behaviors - with their most current and relevant data.

Examples

  • Usage-based insurance has attracted relevant players and investments.

  • Wellness & Health, as a service, appears to be the next venture of the insurance industry. Insurers around the world are promoting the increase of touch-points in the different interactions with their clients and are committed to expanding on the added value they offer to policyholders.

  • Data collection and processing: enhance risk premium modeling in a progressively consolidated market.

Claims management

Artificial intelligence and data processing are improving insurance capabilities to analyze, monitor, and resolve your claims. New technologies such as aerial image recognition and sensors are supporting the digitization of claims management.

Examples

  • Artificial intelligence is unlocking the potential to improve auto claims processing, fraud detection, and vehicle repairs.

  • Health data sources are increasing with new applied technologies and unique data sets, making claims management in this line of business better than ever.

Insurance Liquid Ecosystems

The connected world that is here to stay.

Go to Ecosystems


The year 2020 will probably be a turning point in many areas
, technology included, not so much due to the appearance of new solutions, but due to the increase in technological adoption, both globally and in record time.

In this scenario, it has been possible to verify how society and companies have gone from a stage of mere digitization (advanced in many cases) to another totally native digital stage: take for example, telemedicine, online drug delivery or radical changes that have begun to take place in education or in the way we understand desk work or daily urban mobility.

If we look at the investment made in insurtechs in 2020, the Healthy Living ecosystem clearly stands out, receiving 32% of the funds, which underpins the great interest that Health and financial planning have been gaining in recent years, and that will probably be enhanced in years to come.

Additionally, the small investment received by insurtechs of the Smart Mobility ecosystem is worthy of note, which only captured 6% of the total investment.

All these changes have been accelerated exponentially by COVID-19, which has massively pushed consumers to use purely digital services (contracting financial or insurance products through platforms, telephone and video calls; an increase in purchases of goods in e-commerce and digital retailer platforms). This has only served to strengthen alliances between different players in the ecosystem: millions of digitized customers, who can be impacted with offers of products and services in channels previously unimagined. Insurance distribution will be affected by all these changes and, without a doubt, new products, services and business models will emerge (as they are already doing so) within ecosystems, pushed by the new digitally minded insurers, companies from other sectors and TechGiants, regulatory changes and, of course, by insurtech companies.