VCs love insurance, even if you don't
2017-07-23
VCs love insurance, even if you don't




Most people hate shopping for insurance, and they don’t enjoy talking about it either. That’s probably why you’re unlikely to hear about the industry’s current transformation in conversation, even in startup circles.

But make no mistake, there are vast sums of venture dollars going into insurance deals. Investment has risen dramatically, with VCs betting that, in the coming years, we’ll see major shifts in both how we buy insurance and what types of items we insure with it.

So far this year, insurance-focused startups (excluding the Asian continent*) have raised more than $700 million, almost as much as they raised in all of 2016, which was itself an especially busy year for the space. Much of the funding boom comes from big insurers themselves, who are backing and leading more rounds for insurance startups, as well as companies in related areas like financial services.
Insurance investment totals are heavily driven by a few large rounds. Over the past year, the two biggest funding recipients are tech-enabled health insurer Bright Health and pay-by-the-mile auto insurer Metromile, which raised $160 million and $153 million, respectively. In 2016, health insurance provider Oscar Health took in $400 million in growth funding, more than 40 percent of all insurance startup investment.

At first blush it may seem like insurance and venture capital make an odd couple.
 

There are plenty of smaller and mid-sized rounds getting done, too. Over the past year, at least 75 companies in the insurance space have raised rounds of $1 million or more, and about a quarter of those were for $20 million or more. They cover a big range of business models, as well, including new insurance categories, online platforms for comparing and purchasing coverage and tools for providers to better assess risk.

One might be inclined to call these startups industry disruptors — except that their biggest supporters seem to be long-established players in the space.

We hear you like insurance

As mentioned, a sizeable chunk of the financing comes from insurance companies themselves, many of whom have dedicated venture arms. The most active by round count looks to be AXA Strategic Ventures, the VC arm of French multinational insurer AXA. The two-year-old fund has invested in two dozen companies over the past two years, including a $6.5 million round it led this month for QLoo, a celebrity-backed developer of AI-powered tools for mapping cultural tastes. MassMutual Ventures, the VC arm of insurance giant MassMutual, has also been keeping busy, backing 16 companies over the past three years.