Insurtech Market Analysis
Traditionally, the insurance industry has been regarded as one of the most conservative industries in the business world. Insurers are still concentrating on in-person, face-to-face sales channel, and hesitate to adopt technologies for innovating internal operational procedures. However, with an upcoming trend of digital transformation, players in the insurance industry started to recognize the need for fundamental changes. This was the beginning of insurtech which is a combination of words insurance and technology. Startups in the insurtech industry provide diverse business models for innovating incumbent insurance industry, and existing leading multinational insurance companies are changing their stance to the insurtech startups by initiating various types of collaborations, including corporate venture investment and open innovation.
Market Size & Fundraising Trend
Grand View Research announced that the overall revenue size of the insurtech market in 2020 is $2.72 billion and the number is expected to be $3.78 billion in 2021. The revenues size will continue to grow for years and Grand View Research predicted that, in 2027, the total revenue of the market would be up to $60.98 billion.
Fundraising trend is also noteworthy. According to Willis Towers Watson, total funds invested to insurtech startups was $1.74 billion and the number increased to $4.17 billion in 2018. Funds raised by insurtech startups recorded $7.11 billion in 2020. Amid the COVID-19 pandemic, insurtech startups have been successful in raising money for their business expansion, as both insurance customers and service providers thoroughly feel the importance of digitized insurance services.
Business Model Categories
Oliver Wyman explains that there are three types of business models in the insurtech industry: proposition, distribution, and operation. First, insurtech can be utilized in developing new insurance services & products. Neocarriers enabling digital process/product innovation and Insurance-as-a-Service (IaaS) providers are representative examples of this category. Secondly, insurtech contributes to digital transformation of insurance sales channel. Inurtech startups providing digital insurance manager (DIM) services and operating price comparison websites (PCW) are distribution channel innovators. Finally, insurtech supports process innovation of existing insurance service providers. Tech companies belonging to this category enable insurers to efficienate financial management, claim or underwriting procedures, and digital sales.
Key Players: Corporate Venture Capital Arms of Multinational Insurers
In analyzing the insurtech industry, we need to focus on the role of incumbent insurance giants. Multinational insurance groups, including AXA, Allianz, and Munich Re, operate their own tech investment arms and actively collaborate with insurtech startups. AXA Group has AXA Venture Partners with $842.9 million funds, and Allianz Group also possesses Allianz X, a digital investment unit of the group with €1 billion funds. Munich Re Group, a leading reinsurance company, is managing Munich Re Ventures. For instance, Lemonade, an AI-based insurtech startup listed last year, is backed by Allianz X, and Policygenius, an operator of a digitized insurance platform, raised Series A funding from AXA Venture Partners.
Source: Grand View Research, Willis Towers Watson, Oliver Wyman, Media Research
