COVID-19 has drastically affected the world as we know it. However, insurtechs continue to bring innovation across the insurance value chain. As such, incumbents can’t stand still as these nimble, digitally conscious startups disrupt insurance marketplaces and bring capabilities that drive business efficiency. Forrester regularly reviews startup funding through its partnership with Venture Scanner to show you which insurtechs are getting attention, where the money is going, and what to do next. Below, we highlight key takeaways from our Q2 2020 report.
Insurtech Funding Bounced Back In Q2 2020
While insurtech funding waned in Q1 2020 with the onset of COVID-19, funding bounced back in Q2 2020, rising to $1.2 billion from $884 million in Q1, a 36% improvement. Despite the coronavirus’s adverse effect on global markets, the increase in Q2 2020 funding suggests that investors continue to see opportunities in insurtechs, which are bringing new products and solutions to the insurance sector. Nearly 90% of the investments in 2020 have been early-stage rounds of funding, with health-focused insurtechs obtaining the most funding during the period.
Digital Insurers Continued To Attract The Most Funding
Digital insurers, such as Pie Insurance (small commercial insurance) and Bought By Many (pet insurance), apply digital-first capabilities to transform how consumers and small businesses experience insurance throughout their buying journeys. Investors and insurers have recognized the opportunity that these startups present — digital insurers have been the key drivers of insurtech funding since tracking began in 2010. This theme persisted in Q2, as 62% of all investments were in digital insurers, 33% went to enablers of operational improvement such as Betterview (geospatial analytics) and Planck (AI), and 5% went to comparison marketplaces such as Coverfox and yallacompare.
Insurers Showed Interest In Digital Insurance Agencies And AI Solutions
Insurers continued to invest in startups that provide the touchpoints and features customers expect. But focus shifted from comparison marketplaces, which help consumers find insurers, to digital agencies, which help insurers service consumers across their buying journeys. AXA and New York Life invested in the digital agency Wellth. The application of AI in underwriting and risk management also appealed to Nationwide Mutual Insurance, as it invested $16 million in Planck.
Ahead, Insurers Will Find Opportunity In The Midst Of Chaos
The onset of COVID-19 was sudden and socially and economically severe. Its implications will continue to be felt through 2021. As we work through COVID-19, we adjust to a new normal, and life as we know it may never be the same. We expected that funding would wane in Q2 due to the challenging macroeconomic environment. But funding improved, and Lemonade’s strong IPO revealed robust investor interest in insurtech. This interest will continue to fuel investments through the remainder of 2020.
To read our recent research on insurtech trends in Q2 2020, click here.
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