understanding the insurance tech...
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UNDERSTANDING THE INSURANCE TECH LANDSCAPEPrepared for LendIt USA 2017
The technology market intelligence platform.
CB Insights software lets you predict, discuss and
communicate emerging technology trends using data in ways that are beyond human cognition.
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The most publicly reference-able customers of anyone in the industry
A FEW OF OUR HAPPY CUSTOMERS
Pat Grady
Sequoia Capital, Partner
“Think of the fundamental value chain of venture capital … If we play the clock forward, the finding and assessing of investments will be almost entirely done by technology, not human beings. And the company that is today positioned to be the market leader in that evolution is CB Insights."
www.cbinsights.com
Matthew Wong
@mlcwong
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ABOUT ME
Senior Research Analyst, CB Insights
Launched the CB Insights insurance tech newsletter, which covers startup and tech trends in the global insurance industry and reaches 15,000 (re)insurance execs, strategy professionals, investors and
startup founders: cbinsights.com/research-insurance-tech-newsletter
Graduate of Northwestern University, magna cum laude.
www.cbinsights.com
THESE STARTUPS ARE OUT TODISRUPT A $1T INDUSTRY
June 10, 2016
INSURANCE TECH: MAKING THE HEADLINES
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WHY NOW?
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STARTUP FORMATION & VC INTEREST:WHY NOW?
www.cbinsights.com 7
Source: ACLI 2016 Fact Book
LACK OF ENGAGEMENT
FROM TODAY’S BUYERS
Insurance products aren’t
resonating with the changing demographic and psychographic profiles
of today’s buyers.
9000
10000
11000
12000
13000
14000
15000
16000
17000
18000
19000
INDIVIDUAL LIFE INSURANCE POLICIES SOLD BY YEARIn millions, 1985-2015
www.cbinsights.com 8
CHALLENGES IN
PRODUCT INNOVATION
A 2014 RGA study found
that life insurance new product development generally suffers from long
lead times required to generate new product ideas and go to market
and widespread dissatisfaction with the quality of innovation in the
current crop of new product ideas.
10.2
8.2
11.9
7.9
7.1
9.4
Savings
Risk
Living Benefit
Global Americas
AVERAGE TIME FROM IDEA TO LAUNCHIn months, Global vs. Americas
Source: RGA
www.cbinsights.com 9
FEW TOUCH POINTS =
LACK OF CUSTOMER LOYALTY
Insurers in P&C and life
have much fewer digital interactions with customers than retail
banks do, but those who are interacting see a noticeable difference in
NPS.
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26
3335
31 32 32
27
23 24 24 2523 23
2623
18 1820
63
42
32
2628 27
23
27 2725
2219
21 21
1517
20
1412
PERCENTAGE POINT DIFFERENCE IN NPSCustomers who had an interaction in the past 12 months and those who did not
Life P&C
Source: Bain & Company
LOW INTEREST RATES
HAVE INSURERS LOOKING FOR NEW MODELS
Investment earnings are
~19% below their 2007 pre-crisis peak.
P&C insurers have it easier than life insurers,
who can hold premiums for decades before paying claims.
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$38.9 $37.1 $36.7 $38.7 $39.6 $49.5 $52.3 $54.6 $51.2 $47.1 $47.6 $49.2 $48.0 $47.3 $46.4 $47.1 $44.1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
P&C INSURANCE INDUSTRY INVESTMENT INCOME$B, 2000 - 2016 (estimated)
Source: ISO, Insurance Information Institute
“Many of the necessary skills, such as
underwriting, are core for reinsurers, while the
commoditization of the reinsurance market creates
the need to begin explore new sources of revenue.
Reinsurers have the ability to learn right along
with the companies they insure, and to provide
existing clients with new insights, access to new
tools and the latest technologies for distribution,
service and product opportunities that will help
them adapt to a changing market.”
ANDREW REARChief Executive, Munich Re Digital Partners
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NOT YOUR
GRANDFATHER’S RISKS ANYMORE
A 2015 study found more
than 85% of the S&P 500’s current value could be attributed to
intangible assets (brands, intellectual property, data, etc.).
Do risk solutions for the
P&C industry reflect current realities?
www.cbinsights.com 12
83%
68%
32%
20%13%
17%
32%
68%
80%87%
1975 1985 1995 2015 2015*
COMPONENTS OF S&P 500 MARKET VALUE1975 - 2015
Tangible Assets Intangible Assets
Source: Ocean Tomo
“There were two very clear technology
inflection points happening. The rapid
advances coming in deep learning and
machine learning on imagery and a
massive proliferation of access to
space imagery as coverage and
frequency increased, while costs
decreased.”
RYAN KOTTENSTETTECEO, Cape Analytics
www.cbinsights.com 13
WHY NOW?
14www.cbinsights.com
INSURANCE STARTUP & INVESTMENT TRENDS TODAY
www.cbinsights.com 15
$1.7 $2.3 $5.2 $7.7 $5.5
286
376
422
459
422
2012 2013 2014 2015 2016
US ANNUAL FINANCING TRENDS TO VC-BACKED FINTECH COMPANIES2012 - 2016
Dollars ($B) Deals
THE EVOLUTION OF
FINTECH AS A VC INVESTING CATEGORY
2016 saw fintech
investment activity drop on a year-over-year basis.
Financial services innovation continues to be
a major theme for many VC investors and startup founders alike. But
opportunities are shifting.
www.cbinsights.com 16
21
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2014 2015 2016
TECHCRUNCH GUEST POSTS ON INSURANCE TECH2014- 2016
INVESTORS HAVE
NOTICED…
Lots of opinions and
perspectives on coming changes to the insurance industry.
www.cbinsights.com 17
VC SCALE OUTCOMES
IN INSURANCE HAVE BEEN LIMITED SO FAR
SquareTrade’s $1.4B
acquisition by Allstate came 17 years after launch, and 10 years after
pivoting into warranty.
Climate Corp. sold off its crop insurance book in2015 after Monsanto’s
acquisition.
$167
$215
$266
$435
$452
$636
$650
$674
$1,100
$1,400
Connecture
Liazon
Trupanion
Extend Health
iSelect
Guidewire
EagleView
Quinstreet
The Climate Corporation
SquareTrade
Valuation at time of exit ($M)
TOP VENTURE-BACKED INSURANCE EXITS2010 - 2016 YTD
IPOM&A
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OVER 170 INSURANCE
TECH DEALS GLOBALLY IN 2016
Deal activity to insurance
tech startups rose 518% between 2012 and 2016.
$0.14 $0.35 $0.27 $0.87 $2.67 $1.69
28
46
63
91
122
173
0
20
40
60
80
100
120
140
160
180
200
$-
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
2011 2012 2013 2014 2015 2016
INSURANCE TECH ANNUAL FINANCING TREND2011 - 2016
Amount ($B) Deals
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US TAKES NEARLY 60%
OF ALL INSURANCE TECH DEALS IN 2016
Germany, the UK and
China all counted 5%+ of insurance tech deal activity in 2016.
59%
6%
5%
5%
3%
3%
3%
2%
2%1%
1%1%1%
8%
INSURANCE TECH DEALS BY GEOGRAPHY2016
United States
Germany
United Kingdom
China
India
France
Canada
Brazil
Japan
Sweden
Spain
Australia
United Arab Emirates
Other
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Series A rounds in 2013-
2014 included Zenefits,Gusto, Oscar, Namely, and Collective Health.
US INSURANCE TECH DEAL ACTIVITY BY FOCUS AREA2013 - 2014
ACA ATTRACTS
ENTREPRENEURS TO SHAKE UP HEALTH INSURANCE
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US EARLY-STAGE
INSURANCE TECH DEALS MORE THAN DOUBLE SINCE 2012
Over 60% of all US
insurance tech deals in 2016 were at the Seed/Angel or Series A
stages.
$54 $103 $241 $157 $317
3028
38
47
62
0
10
20
30
40
50
60
70
$-
$50
$100
$150
$200
$250
$300
$350
2012 2013 2014 2015 2016
US EARLY-STAGE INSURANCE TECH FINANCING TRENDSeed/Angel/Series A, 2012 - 2016
Amount ($M) Deals
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WHO’S INVESTING IN INSURANCE TECH STARTUPS?
www.cbinsights.com
Note: Investors listed below are for illustrative purposes and are not ranked or meant to be exhaustive.
LOTS OF NEW INSURANCE
DISTRIBUTION STARTUPS
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Startups differ in the the
amount of insurance risk they bear and the control they have over certain
aspects of the insurance transaction.
www.cbinsights.com
Source: Kyle Nakatsuji
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A LOOK AT US STARTUPS RAISING EARLY-STAGE FUNDING SINCE 2016
www.cbinsights.com
SMBCommercial
Homeowners/Renters
Auto
Pet
Life
Carrier/Broker
Certain startups listed below span multiple lines. List not meant to be exhaustive.
Drone
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HOW INCUMBENTS ARE RESPONDING
MORE (RE)INSURERS
ARE LAUNCHING VC UNITS
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Insurers that formally
launched corporate VC units include Liberty Mutual and CUNA Mutual.
www.cbinsights.com
July 25, 2016August 12, 2016
August 12, 2016
2015 2016 2017 YTD
LAUNCHES OF INSURANCE CORPORATE VC UNITS2015 – 2017 YTD
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(RE)INSURERS GET
BUSY IN CORPORATE VENTURING
From 4 private tech
investments to 100 in 2016.
The number of insurance-related corporate venture
capital groups continues to grow.
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28 67 100
2012 2013 2014 2015 2016
PRIVATE TECH INVESTMENTS BY (RE)INSURERS2012 - 2016
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INVESTMENTS BY
(RE)INSURERS GROW GEOGRAPHICALLY
Between 2013 and 2014,
84% of private tech investments by (re)insurers went to US-
based companies. Between 2015 and 2016, 65% of strategic tech
investment by (re)insurers went to the US as Germany, France, the UK
and China also attracted deals.
TECH INVESTMENTS BY (RE)INSURERS BY GEOGRAPHY
www.cbinsights.com 29
WHERE INSURERS SAY
THEY WANT TO INVEST
IoT, fintech, auto, digital
health among states areas of focus
STATED FOCUS AREAS OF INSURANCE CORPORATE VCS
WHERE (RE)INSURERS
INVESTED IN 2016
Hot areas for investment
by (re)insurers included connected devices, cybersecurity and
property management in 2016.
www.cbinsights.com 30
HOT AREAS OF INVESTMENT FOR (RE)INSURERS2016
Digital Distribution Connected Devices
Cybersecurity Property/rental Management
www.cbinsights.com 31
THE ROLE OF
REINSURERS IN INSURANCE INNOVATION
In May 2016, Munich Re
established its Digital Partners program offering capacity, product
development, data analytics and more to emerging tech startups
selling insurance.
MUNICH RE PARTNERSHIPS/INVESTMENT/M&A2015 – 2017 YTD
“The emergence of new startups will force the
more traditional life insurance companies to think
about what their customer acquisition strategy
looks like, but also what their back-end
engagement looks like, which then enables some
of the up-and-coming insurance tech companies.
So I really see this whole ecosystem working in
conjunction with each other so that one starts to
force another and so they all start to move forward
together at some point.”
TONY LAUDATOVP of Partnership Solutions, Hannover Re
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SOME CORPORATES ARE
MUCH MORE ACTIVE THAN OTHERS
Some venture arms
including Ping An Ventures and AXA Strategic Ventures have been highly
active on the investing front.
INSURANCE INDUSTRY STRATEGIC INVESTMENT ACTIVITYQ1’15 – Q3’16
www.cbinsights.com 34
B3I EXPANDS TO LARGER
GROUP OF (RE)INSURERS
There are 15 members of
the B3i initiative collaborating to explore the use of blockchain to
increase efficiencies in the exchange of data between reinsurance and insurance
companies.
B3i plans to share its first results in June 2017.
21
22
2014 2015 2016
NUMBER OF BLOCKCHAIN CONSORTIA LAUNCHES2014 - 2016
www.cbinsights.com 35
ALLSTATE LAUNCHES
ARITY
The stand-alone telematics
unit launched in August 2016 collects data on drivers and plans to sell
analytics products to third parties (including potentially other insurers).
“So, it's not just the autonomous car, it's shared vehicle, it's machine-to-machine communication, it's better stoplights. There's a whole bunch of stuff that's going to change in that system. Arity is one of our efforts to take advantage of that.”
- CEO Thomas Wilson, Q3 2016 Allstate Earnings Call
SOFI PARTNERS WITH
PROTECTIVE LIFE
SoFi VP of Finance
Andrea Blankmeyer said in November 2016, “It’s a little early for us on the
product roadmap around P&C, but we’re very excited about the space
and opportunity.”
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www.cbinsights.com 37
AVIVA PARTNERS WITH
TENCENT, HILLHOUSECAPITAL TO LAUNCH DIGITAL LIFE INSURER
One of the more intriguing
deals in insurance tech pairing the investment know-how of Hillhouse, the
tech resources of Tencentand Aviva Life, which owns just 1% of the Hong Kong
insurance market.
TO PUT IN PERSPECTIVE
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Zhong An, China’s first
online-only insurer, hassold over 4 billioncumulative policies since
launching in 2013.
Lemonade was on a $1Mannual premium run-rateas of December 2016.
www.cbinsights.com
Source: Lemonade, Zhong An
“In the last weeks of 2016, we covered 1,212 homes in NY alone (estimated total of 1,350,000 sq. ft.). This translates to $186,389 of premium and an annual run-rate of over $1M.”
UNBUNDLING COMES TO
INSURANCE
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Startups focusing on
building transparent, simple products distributed digitally.
www.cbinsights.com
2017: MORE STARTUPS
GO TO MARKET
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How will consumers
respond to more transparent, digital insurance products?
www.cbinsights.com
www.cbinsights.com 41
INSURANCE IS FOR
PATIENT ENTREPRENEURS
Building the next billion-
dollar insurance tech company will not be an overnight success.
MGA STARTUP TIMELINE
Month 1: Startup is founded
Month 3: Startup is seed funded
Month 18: Startup announces Series A, reinsurance partner
Month 21: Startup launches
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