Insurtech funding levels, reaching almost $4.4 billion in worldwide funding commitments through three quarters of the year, has already surpassed the 2018 full-year total, Willis Towers Watson announced Wednesday.
According to the new Quarterly InsurTech Briefing published by the global advisory, broking and solutions company, the $4.4 billion total deployed to insurtech companies across 239 transactions, marks a 5 percent increase from the total dollar amount of investment in all of 2018.
In addition, global funding eclipsed $1.2 billion for the fifth consecutive quarter during the third-quarter of 2019, Willis Towers Watson reported.
In the quarter, 83 deals with a total value of $1.5 billion were announced, up 6 percent over second-quarter 2019. Among the biggest deals, were “three “mammoth deals backing Root Insurance, Hippo, and PolicyBazaar,” the report said, highlighting continued interest in the property/casualty insurance sector. The report includes a “Transaction Spotlight” section, which examines recent fundraising rounds by Hippo, the California-based home insurance provider, and Root, the American app-based motor insurer.
Also contained in the report are counts of deals by type. With the overall deal count of 83 representing a 20 percent jump over second-quarter 2019 and a 46 percent leap above third-quarter 2018, the report also notes that while funding dollars are still largely going to digital distribution and full-stack carrier startups, Willis Towers Watson is increasingly counting deals that they classify as “B2B startups”—tech startups that sell software and technology to reinsurers or brokers. In fact, in the third quarter, half of all P/C deals were for B2B startups.
Separating Hype From Reality
The report begins with commentary on the use of the term “unicorn” to describe startups in the software or technology industry that are valued in excess of $1 billion. “If some market reports are to be believed, there could be dozens of insurtechs making unicorn status in the next 12 months,” the report states. “This begs the question, when something is no longer rare or even uncommon, at what point does the term ‘unicorn’ become misleading?”
“Rare as they are in the mythical world, we seem to be finding hordes of them roaming around in the InsurTech world,” commented Dr. Andrew Johnston, global head of Insurtech at Willis Re, on a video introducing the report, which raise questions about the terms “unicorn” and “insurtech” within its pages.
“An increasing number of insurtechs are amassing substantial valuations, and yet we are seeing relatively little value being added to our industry at scale, across the board,” Johnston wrote in the foreward of the report. He went on to question whether “a future herd of insurtech unicorns” will represent “a stellar cast of insurtech businesses, or an industry that is overvalued by transient capital [and] driven by a naivety of the potential impact of certain technologies.”
In short, he’s asks whether “we may well observe a widespread insurtech bust before long.”
Johnston said that a rigorous definition might require a company to employ “technology designed to squeeze out savings and efficiencies from an existing insurance model” in order to be called an insurtech. By that measure, many of the 2,500 now typically counted among insurtechs would not meet the criteria.
He said that the insurance industry now has “a serious case of magpie syndrome,” referencing a definition that associates chattering crows with individuals who collect indiscriminately. In short, he says, the industry is “chasing anything that glitters [and] not calling out poor insurtech businesses when we see them.”
“What we must…understand is that insurtech as it is today is as much about hype and entrepreneurial culture as it is about appropriate technology for the re/insurance industry,” he wrote…