As is the case in many other industries, technology is changing the way insurance-related business is done across the product spectrum – medical, property/casualty and life. Continued advances in software and data are rewriting the way we buy and experience these products by:
- Changing how insurance companies price risk
- Supporting the ongoing relationship between an insurer and the insured
- Transforming the way insurance companies pool capital
The insurance industry as a whole was caught somewhat flat-footed by the speed of these changes. “We’ve been investing a lot of time and money in process improvements and digital technologies, but the truth is we weren’t doing particularly well in getting access to new and innovative ideas in the insurance and technology spaces…We weren’t seeing the ideas that could be game-changers,” stated Manish Agarwal, general partner of AXA Strategic Ventures.
The AXA Group is not alone. In an effort to target strategically relevant emerging technologies, AXA, MunichRe, Transamerica and British multinational insurance company Aviva all launched corporate venture arms in 2015. Other active corporate venture capital (VC) investors include, among others: Allianz Digital Corporate Ventures, MassMutual Ventures, Chubb, USAA, John Hancock/ManuLife, Northwestern Mutual Capital, New York Life Insurance, American International Group and Travelers.
This new focus from corporate VCs has resulted in increased capital investments in insurance technology companies. In the first three months of 2016, corporate VCs completed nearly 20 insurance technology deals. The same set of insurers completed just eight deals over the same period last year. Some of 2016’s deals included: XL Innovate’s investment in Slice Labs, the industry’s first on-demand insurance platform; MassMutual Ventures’, Transamerica Ventures’ and AXA Strategic Ventures’ investment in insurance comparison portal PolicyGenius; and Intact’s investment in per-mile insurance provider Metromile.
Insurance technology investment isn’t just the domain of insurance companies. Venture capital firm Andreessen Horowitz, for example, counts insurance technology as one of the 16 trends it’s most excited about. Further evidence of the investability of insurance technology companies is the February 2016 $400 million financing round for Oscar Health, valuing the company at $2.7 billion. Founded in 2012, Oscar sells individual health insurance plans, both directly and through health insurance marketplaces. Participants in the financing round were a who’s who of venture investors, including General Catalyst Partners, Khosla Ventures, Founders Fund and Google Ventures. This event followed a huge second quarter of 2015, with financings to insurance technology companies Simply Insured, Stride Health and Zenefits. Zenefits, a cloud-based HR automation platform, which accounted for $513 million of the $1.8 billion of insurance technology capital raised during the quarter, valuing the company at $4.5 billion. Investors included Andreessen Horowitz, Comcast Ventures, Founders Fund, Insight Venture Partners and Khosla Ventures.
Key Takeaway: How we buy insurance in the future will likely look drastically different than the way we accessed it in the past, and much of the innovation in the space will occur outside of the offices of traditional insurance carriers. Because of the rapid rate of change occurring in the insurance industry, it has become increasingly necessary for insurance companies to dedicate resources to understanding and capitalizing on emerging insurance technologies. Not only will this potentially benefit the insurers’ investment income, but it may also help them differentiate their value propositions, products, services and operations through implementation of these technologies.
 XL Group’s corporate venture capital group.
 Formerly ING Canada. Intact is Canada's leading provider of property and casualty insurance.
The material provided here is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management.
This material is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.