Insurance tech start-up investment surges

Investment in insurance tech start-ups more than tripled last year as a previously sleepy corner of the market begins to draw a surge of interest. While areas of fintech such as payments have boomed in recent years, so-called insurtech has been slower to develop. According to a new report by Oliver Ralph on www.FT.com, That all changed last year, thanks to some of the world’s biggest insurers. Investments in insurtech rose from $800m in 2014 to more than $2.6bn in 2015, according to data from Accenture, the management consultancy. While much of the money has come from traditional sources such as venture capital and private equity groups, established insurance companies have also been big investors.

“We are seeing a growing focus from insurance companies on insurtech,” said John Cusano, head of Accenture’s global insurance practice. “They see it as a ripe place to invest their capital and they also see it strategically as a place to invest in distribution, the internet of things, automating the back office, and data and analytics.”

Many of the world’s largest insurers, including Aviva, Axa, Allianz, AIG, MetLife and XL Catlin, have established their own in-house venture capital funds and insurers have committed more than $1bn to investments in start-ups in an effort to find new ways to grow and head off potentially disruptive threats.

“There is an increasing view that insurance companies need to transform, become digital and make use of the technology, especially the big players,” said Mr Cusano.

Deals completed last year included the acquisition of LearnVest, a financial planning provider, by Northwestern Mutual of the US and an investment in Limelight Health, a health insurance quote platform by MassMutual Ventures and Axa Strategic Ventures.

The investment boom shows little sign of easing in 2016. According to data from CB Insights, the first quarter of the year was the second largest ever for investment in insurance technology with more than 45 deals raising $650m.

The US took the lion’s share of the market in the first quarter with 60 per cent of the deals, including a $400m funding round for Oscar, a US health insurer.

However, interest is also growing quickly elsewhere. At a start-up boot-camp event this month held in a church in London’s Spitalfields, 600 people turned up to see 10 insurance technology companies demonstrate their wares. They included Fitsense, which helps health insurance companies to use data from wearable devices, and SPIXII, which helps people to choose the right insurance cover.

Instech London, an initiative to link start-ups, investors and insurers, has been attracting crowds of up to 250 people to its meetings.

“We’ve got an awful lot of people coming along from the insurance industry who are trying to understand what is changing,” said Paolo Cuomo, co-founder of the group.