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Quarterly InsurTech Briefing Q2 2019

Insurance Consulting and Technology|Reinsurance

July 25, 2019

In this briefing we examine the different technologies and InsurTech businesses influencing the process of Quote, Bind, Issue, as we navigate our way through the process that supports the matching of capital and risk around product.

In Q1 of this year, we reported that over US$1 billion had been invested into InsurTech-related businesses globally for the third consecutive quarter. Furthermore, we noted that InsurTech investors worldwide executed the highest number of transactions, the highest number of property/casualty transactions, and the highest volume of Series B and Series C funding rounds during the first three months of 2019. Additionally, we reported 29 Life and Health transactions, which represented the second highest number of investments since Q2 2017.

In Q2 of this year, we are reporting a very similar message. Despite an overall 2% reduction of total global InsurTech investment when compared with Q1 2019, this quarter we are reporting an investment total of US$1.41 billion. This makes Q2 2019 the fourth consecutive quarter of global InsurTech investment that surpasses the US$1.2 billion mark. This quarter's funding has come from a number of later-stage investments, four of which total an excess of US$100 million.

The shift toward later-stage investments has seen a concurrent reduction in overall transaction volume to the tune of 21%. In fact, if we look at early-stage investment as a whole, this quarter marks the lowest point since Q3 2017. Seed and Series A funding into global InsurTech start-ups fell to US$147 million in Q2 2019 (we reported US$121 million in Q3 2017). In Q2 2019, 59% of early-stage deals went into InsurTechs primarily focused on distribution. It is also worth noting that 54% of early-stage InsurTech deals went to start-ups outside of the U.S. and the U.K. This investment arena is truly global.

While Q2 2018 recorded more deals than Q2 2019 (71 and 69 respectively), Q2 received 273% more funding in 2019 than in 2018.

Strategic tech investments by (re)insurers has hit a record high. Investments by (re)insurers into private tech companies reached 36 in Q2 2019, the highest quarterly total since Q1 2012 (when data tracking of InsurTech really began). Among the larger deals by insurers are a US$75 million round into online investment management platform Wealthsimple by Allianz X and a US$74 million investment into online health management firm More Health by China Pacific Insurance.

When we compare this quarter with the same quarter last year, we observe some significant changes in the global InsurTech universe. While Q2 2018 recorded more deals than Q2 2019 (71 and 69 respectively), Q2 received 273% more funding in 2019 than in 2018. Year on year, property & casualty (P&C) investment totals rose by 283% and life & health (L&H) rose by a massive 259%, despite the 2018 quarter recording seven more L&H deals.

The three largest deals in Q2 2019 by dollar amount — Lemonade, Collective Health and PolicyBazaar — all involved Softbank as a lead investor.

While we rarely highlight individual investors, Softbank’s investment involvement in this latest quarter has been truly seismic and is noteworthy. The three largest deals in Q2 2019 by dollar amount — Lemonade, Collective Health and PolicyBazaar — all involved Softbank as a lead investor. Without those three deals, global InsurTech funding would have totalled US$757 million. While Softbank was not the only investor in these large deals, its presence in this space is undeniable.

In addition to some of the monumental funding observed this quarter, we are also seeing InsurTechs (note the plural) being valued at some billions of dollars. Chinese InsurTech Zhong An went public in late 2017 and was immediately valued at more than a billion USD. At the time, this was a truly seismic statement about the expected impact digital insurers and InsurTechs could have in certain parts of the globe. While there were already a lot of large valuations of InsurTech companies, this valuation was considered to be not only enormous but also somewhat of an anomaly that might only be possible in a country as large as China, and for a company as well supported by PingAn as Zhong An. Fast-forward one and a half years and the billion dollar club lounge is looking a little fuller.

This quarter, U.S. renters and homeowners insurance "start-up" Lemonade was priced at a pre-money valuation of over US$2 billion after raising US$300 million from Allianz X, General Catalyst, Google Ventures, OurCrowd, Softbank Group and Thrive Capital. Lemonade has long been held up as the poster child for InsurTech-related disruption, and as a business, it has made little secret of its general disdain for the current state of the global (re)insurance industry. Similarly Indian aggregator site PolicyBazaar, (investment details to be disclosed in this Quarter’s Transaction Spotlight), is valued in excess of US$1 billion. It is quite possible that in the slipstream of these InsurTech unicorns, the likes of MetroMile, Slice, and Oscar will also attract billion-dollar-plus valuations.

These are significant milestones for those of us living in this space. But there have also been some subtle (and some not so subtle) InsurTech shifts. Somewhat ironically, one of Lemonade's earlier "industry" investors, XL Catlin’s XL Innovate InsurTech investment fund, was frozen this quarter by its parent company, French-insurer AXA. Allianz X, Allianz's €1 billion technology investment arm, has now shifted its strategy away from early-stage investments toward later-stage investments into companies that ft within the group's broader strategic objectives, for example, the aforementioned participation in Lemonade's latest raise. Aviva is another industry participant that is looking to realign its InsurTech focus. Once one of the most vocal proponents of technology investment and development, Aviva has announced a "more disciplined" approach with its technology venture, integrating more closely with its existing business. Is this all a sign of things to come more generally? We suspect a little bit of yes and a little bit of no.

"Technology" as a strategic vertical is now commonplace in nearly every single insurer and reinsurer across the globe, but the technology from the incoming InsurTech pastures may not be quite as green or as impacting as many incumbents had hoped – or at least anticipated. While we remain resolute in our position about the value created by some InsurTechs, we are also maintaining our position of realistic pragmatism.

'Quote, Bind, Issue' in focus

As discussed in the foreword of our previous quarterly, this year we are performing a long-term review of technology's relevance and applicability to the four major cornerstones of the (re)insurance functional chain. In Q1 we looked at how certain technologies have demonstrably improved the process of pricing and underwriting. In this briefing we examine the different technologies and InsurTech businesses influencing the process of Quote, Bind, Issue, as we navigate our way through the process that supports the matching of capital and risk around product.

The InsurTech businesses featured in this quarter are U.K.-based Simply Business, U.S.-based Bindable, Germanybased massUp and U.K.-based Confused.com. All of these companies are delivering their own unique approach, supported by innovative (and appropriate) technology, to all of, or part of, the Quote, Bind, Issue process.

In this edition's "fireside chat", Willis Re's Global Chairman Paddy Jago speaks with John Chambers. John is the director of Innovation and Corporate Development of AEGIS London and is the pioneer of Opal – AEGIS London’s own Quote, Bind, Issue tool.

We will also be featuring Willis Towers Watson's own software, Brovada – a product that specializes in linking insurance and agent systems to improve workflow efficiency and accuracy.

This quarter's Thought Leadership comes from Ben Nicholls, leader of Willis Re's Alternative Distribution Operations (ADO). Ben focuses his attention on the use of Quote, Bind, Issue technology into the Lloyd’s market and other global insurance markets via binding authorities.

Our transaction spotlight examines the recent raise by PolicyBazaar, which saw the Indian aggregator site reach unicorn status with a US$152 million Series F round.

Finally, we conclude the report with a review of InsurTech market trends and transactions in the InsurTech Data Center.

As ever, we welcome your feedback, and we wish to thank you again for your continued support.

Image showing the process of the insurance function chain. Step 1 = Pricing and underwriting. Step 2 = Quote, Bind, Issue. Step 3 = Policy administration and central systems. Step 4 = Claims and settlement.
The insurance function chain

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Annie Roberts
Public Relations Lead,
Investment, Risk & Reinsurance

Content inquiries

Andrew Johnston
Global Head of InsurTech, Willis Re

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