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Who Are The Successful Insurance Startups?

Innovative insurance-tech startups are disrupting an age-old industry

23Mar

Insurance startups have been one of the stories of 2016 so far. Young companies are grappling with alternative ways of offering insurance across the multitude of options - life, contents, car, business, and so on. With insurance viewed as a nothing more than a necessary evil, and with the popularity of providers hardly booming, these energetic companies are giving consumers the chance to be - as much as is possible - excited about their policies.

The stereotype of the stodgy insurance brokerage filled with disinterested drones is being offset by the rise of peer to peer insurance and insurance-tech offerings, and investors are chasing these companies at an impressive rate. Tech is set to revolutionize insurance, just as it has almost every other industry. And, though underrepresented at London Tech Week last year, insurance-tech companies are growing in both number and influence. The industry is already well represented by unicorns and multi-billion dollar startups, and one feels this is only the beginning; conferences and events are popping up across the US to bring together insurance-tech startups with potential investors.

‘If you tried to create a system to bring out the worst in humans, it would look a lot like the insurance of today,’ Behavioural expert Dan Ariely - who has been brought in by Lemonade, an insurance startup - said in a statement. ‘We’ve spent recent years deepening our understanding of honesty and trust, and our conclusion is that insurance is crying out for a makeover.’ And insurance startups have given the image a shake-up. 2015 was by far the biggest year on record for insurance tech; between $2 billion and $3 billion has now been invested in insurance startups, with over 290 different investors completing deals within the insurance-tech ecosystem.

Health IT startups have dominated recent years, and with insurance startups heading in the same direction, it is no surprise that health insurance has seen a huge amount of investment. The US is a particularly ripe market for both, given the necessity for expansive insurance policies and the clunky introduction of Obamacare. Insurance, more generally, is viewed as a safe bet for investment, thanks to the fact that the Finance/Insurance sector has the highest success percentage - the success of not folding within the first year - of all startups, standing at 58% according to a report by the Statistic Brain Research Institute. This is compared to just 37% in the information sector, so the flood of investment into insurance is as unsurprising as it is necessary.

And healthcare is not the only industry harbouring insurance innovation. The $180 billion auto insurance industry is also being primed for new avenues, and a number of promising startups are receiving incredible backing. New York’s Lemonade - ‘the world’s first peer to peer insurance carrier’ - recently sourced millions, for example. ‘It is very unusual for a company to receive $13 million in an initial round of funding,’ Sequoia Capital partner, Haim Sadger, said. ‘But it is rarer still to find such accomplished founders tackling such a sizeable industry with such a compelling solution. We’re betting Lemonade will transform the insurance landscape beyond recognition. It is one to watch.’ The startup has revealed little about the details of its upcoming insurance offering, but the initial impression is that it will bring together people looking for group insurance and investors with capital to back them.

San Francisco’s Metromile, too, has entered the insurance landscape with some fanfare - they offer coverage by the mile as an alternative to the traditional year-round, 24/7 packages. Metromile has taken a whopping $14 million in funding already, and uses technology developed by Apple - called iBeacon - to measure the distance driven and calculate insurance accordingly. In what is a successful marketing move, the company will fit the device to the customer’s car free of charge, and offers just a $100 charge to keep the device should the insurance be discontinued - not to mention it currently offers the only pay-per-mile insurance in the US. In an industry that has been relatively resistant to reform, these burgeoning auto insurance startups are bringing innovation to an already profitable party.

The likes of business insurance and life insurance have also welcomed newcomers, with Embroker - ‘the modern way to buy, manage and understand insurance for your business’ - one to watch in 2016, and Ladder life insurance building their early access clientele. With such sizeable investment and a relatively secure landscape to wade into, there should be a number of successful insurance startups making inroads in 2016. From health cover to business insurance, everyones least favourite - but ultimately necessary - outgoing could be due some radical change. 

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