The insurance technology industry as one of the fastest growing FINTECH verticals

Original author: Igor Pesin
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imageInsurance technologies - Insurtech is a relatively new industry. Nevertheless, the growth rate makes it possible to call it one of the most active segments of the FINTECH market. Even despite the 34% decline in 2017, the number of transactions in the field of insurance technologies nevertheless increased by 25%. As for the abnormal growth in 2015, it was caused mainly by unusually expensive Chinese transactions, including an investment of $ 1 billion in one of the largest insurance startups Zhong An.

Today, there are about 1,400 companies on the insurance market. However, the growth of this indicator has slowed. If in 2015 there were about 300 companies registered, then last year there was a 40% drop (about 180 new startups). Last year was the peak, mainly due to the largest acquisition segment in the history of the acquisition of the Chinese company Zhong An. Investments in it amounted to almost 40% of financing received by all players of the insurance companies market. In any case, the number of investment transactions continued to grow steadily: in 2014, 54 contracts were concluded, in 2015 - 125, in 2016 this figure increased by another 25% (compared to 2015), reaching 157 transactions.

The United States remains the leading insurance technology market: almost 50% of all investments were made by American companies. The segment is surprisingly fast gaining popularity in India, and China behaved very quietly last year compared to the 2015 boom.

Most of the IPOs were carried out by companies that are, in fact, classic insurers who are striving for a thorough transformation of their business:

The largest transaction was made by Oscar (USA). In one round of financing, she managed to raise $ 400 million. It is also indicative that the largest contribution to this round was made by one of the most conservative funds in the industry, Fidelity Investments. The value of the company as a result of the transaction was estimated at $ 2.7 billion (No. 2 on the list of "insurance unicorns" after Zhong An). An even more impressive amount of $ 500 million (at a cost of $ 3 billion) was succeeded in attracting another Chinese company, PingAn Good Doctor, during the next round. Metromile received $ 34 million ($ 60 million in total), FinanceFox - $ 5.5 million ($ 28 million in total), Huize Insurance - $ 30.8 million, Zebra - $ 17 million (out of a total of $ 21 million), Trov - $ 25.5 million, DocPlanner - $ 20 million ($ 34 million in total), FriendSurance - $ 15.3 million, PolicyGenius - $ 15 million ($ 21 million in total),

In 2017, several interesting mergers and acquisitions from traditional insurance companies are expected. The latter, in comparison with banks, have become very active in relation to innovations, trying to cooperate with representatives of the insurance technology market and interact even at the early stages of their development. That is why the conclusion of new investment contracts, mergers and acquisitions in the market is just a matter of time.

Online insurance is one of the fastest growing FINTECH areas, which, over the next few years, will undoubtedly become a separate and distinctive sector. Meanwhile, PingAn, Zhong An and other Chinese insurance companies, as well as Hong Kong investors Horizon Ventures couldgive odds to other players in terms of practical results. According to the usual habit, American and Chinese companies focus only on their own home markets (Lemonade and Metromile planned to cover the whole country with their services by 2017) and only European players think from the standpoint of growth and expansion. So, FriendSurance and Trov launched their services in the Australian market, FinanceFox added Switzerland and Austria to its coverage area, and DocPlanner has operations in 25 markets.

Now, when the formation of the online insurance market is coming to an end, price comparison services, product aggregators and brokers (Zebra, PolicyGenius, Bunker, FinanceFox, Alan, CoverFox) together occupy the largest market share. Nevertheless, based on the tendencies typical for Fintech as a whole, it can be said that such services that are flourishing nowadays will fade into the background in the future, giving way to players who can provide the end customer with an advanced and qualitatively new set of services. Those who do not want to go this way to save customers and businesses will have to cover the related sectors of the FINTECH market with their activities. For example, Oscar Health is now very active in many areas

In general, if earlier insurance companies preferred to work with large businesses, modern insurers begin to pay more and more attention to cooperation with small and medium businesses. Obviously, this trend is associated with the growth of " hygonomics " (freelancers, participants in intermediary markets and on-demand services, as its main elements). Slice, Stride, Bunker and CoverFox offer fairly new in their essence Uber-like services for new types of employees and customers. The availability of services that sell insurance services in accordance with the “pay for every mile” (Metromile) and “pay for every use” (Slice) models are vivid examples of on-demand service and purposeful satisfaction of the needs of drivers who spend little time on the road.

Another interesting example, also borrowed from a pool of current economic trends, is collective insurance. Services such as Lemonade and FriendSurance allow you, instead of acquiring an individual policy, to join an insurance group consisting of similar needs and circumstances, and also, possibly, personal acquaintances, people. If the insured event does not occur, customers receive their contributions back less the platform commission.

The rapid development of consumer online lending leads to an increased demand for online insurance services: insurance for electronics, sports equipment, and even musical instruments (available, for example, in Trov). The high sales volume of fitness trackers and the growing popularity of fitness applications creates favorable conditions for the emergence of companies that collect and analyze this kind of information about your physical activity (FitSense). Innovations in the field of artificial intelligence and the invention of chatbot leads to the emergence of services that can offer products automatically (Clark) or predict critical situations (Quartet).

The segments of insurance and medical technologies are rapidly moving towards a common denominator, and this development seems logical. Insurance giant PingAn launched PingAn Good Doctor to provide its clients with the ability to schedule appointments with a doctor online and receive telemedicine services. At the moment, the service is already used by 77 million clients receiving medical care from 250 thousand doctors. Quartet allows people to consult with a wide range of therapists, as well as automatically analyze their symptoms. DocPlanner and Doctoralia also provide online services for making appointments with a doctor online. The first service serves 8 million people in 25 countries, the second - 9 million in 20 countries.

The growth rate of services of a new generation is gaining momentum, and this happens not only organically, but also due to their merging with each other. So, DocPlanner recently completed the acquisition of Doctoralia, and Metromile acquired Mosaic Insurance in order to be able to independently carry out the assessment of insurance risks and the cost of policies.

Insurance and medical technology markets are attracting more and more investor attention. The events of recent years show that insurance companies are more active in relation to new technologies than banks have previously reacted to innovations in the field of fintech. And apparently, the former learned from the failures of the latter and decided not to resist technological changes and not to ignore them.

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