A handful of very large insurtech funding deals in the second-quarter of 2019 helped to take the total amount of fundraising for the quarter to almost $1.4 billion, which is almost 280% up on the prior year.
Data from CB Insights shows that insurtech funding was down slightly on Q1 of this year, as it fell from almost $1.55 billion in the first-quarter, but up significantly year-on-year.
In part the rise in funding raised reflects the growing maturation of a number of the largest insurtech unicorns, their rising valuations, greatly increased burn rates as their sophistication and market penetration advances and the resulting need for more capital.
In contrast to the rise in funding, the number of insurtech venture funding deals actually fell in the quarter, with 49 in Q2 2019, down from 59 in Q1 of this year and both being below the 65 insurtech funding deals recorded by CB Insights in the second-quarter of 2018.
Here, we see evidence of the increasing shift towards financing larger deals, as well perhaps as the fact that the “spray and pray” approach to insurtech venture funding (partly from insurance and reinsurance market backers) has slowed significantly, as the realisation that many initiatives were not delivering has sunk in.
At some stage in the future there are going to be write-offs to deal with for re/insurers that deployed significant capital into insurtech start-ups in recent years, as the success rate has remained low and failure rates high.
That has improved this year, resulting in a greater concentration of the venture funding available being ploughed into larger and higher valuation deals, where some level of success has already been evidenced.
SoftBank, the Japanese technology and investment giant run by CEO Masayoshi Son, and its Vision Fund have been responsible for some of the largest insurtech funding rounds in the last quarter, including a $300 million Series D for Lemonade, a $205 million Series E round for Collective Health and a $152 million Series F for Policybazaar.
In addition, HealthIQ, a life insurance managing general agent, raised $55 million of Series D funding in May from investors led by Aquline and Andreesen Horrowitz.
The attraction to insurtech has not waned for investors, but as some of the early money from the insurance and reinsurance sector pulls back, or becomes more restrained, it has left a gap for the established venture capital class to allocate to the deals that they really see as growth multiple opportunities.
The trick going forwards is going to be in identifying the high-growth potential insurtech’s that will garner the future high valuations, as well as getting in at the right time.
