EXCLUSIVE: Venture Capital and the Mitigation of Risk in InsurTech

2021 was a record-breaking year for UK insurtech investment. Europe-based businesses as a whole raised a total of €2.5 billion last year – that’s a 308% increase in funding from 2020. €882 million of that funding, and most of the rounds (30 deals), went to the UK. With this, four UK insurtechs reached Unicorn status: Bought By Many, Zego, Tractable, and Marshmallow. 

The UK is rapidly catching up to the insurtech giants in the US like Lemonade and Bright Health, attracting investors across the globe and expanding their business lines beyond borders. Projections for 2022 promise a further increase in the digital automation of online services. CEO of pay-as-you-go travel and motor insurance insurtech Cuvva, Freddy Macnamara explained, “we’ll see more AI, machine learning and internet of things (IoT) across the journey, from hyper-personalised policies to claims handling and fraud detection.”

An Emerging Trend For Venture Capital Funds Is The Growing Attention To Niche Insurers

Marshmallow, which raised €116 million last year, is a motor insurtech catered to an immigrant and ex-pat customer base. Observing how the one-size-fits-all approach of legacy insurers did not fit the needs of drivers who may not have a UK drivers license or a credit history, the industry challenger developed an algorithm that aimed to lower premiums and find competitive quotes. The insurtech managed to excel to Unicorn status in its Series B round of funding, attracting investors Passion Capital, Investec, and Scor. 

Eileen Burbidge, a partner at Passion Capital, said, “the traction the team has achieved demonstrates the demand for a new kind of insurance provider, one that focuses more on consumer experience and uses the latest technology and data to give fair prices.”

Adjacent to vehicle insurance, and credit to the shipping boom of COVID-19, insurtechs are paving the way for automated insurance solutions. Anansi provides global businesses with goods-in-transit, shippers’ interests, and cargo insurance. Their data-backed API packages can be embedded directly into marketplaces, and e-commerce and logistics platforms, cutting admin out entirely. Late last year, Anansi raised £1.5 million in their seed funding round, led by Octopus Ventures. It caught the attention of the same angel investors who backed insurtech Unicorn, Bought By Many, including ex-Bupa CEO Evelyn Bourke and ex-Munich Re Digital Partners CEO Andrew Rear. 

An investor at Octopus Ventures, Nick Sando said, “Embedded insurance, where all covers and protections are bundled into one service, is set to transform the way people and businesses purchase insurance. By offering insurance in an affordable, relevant and personalised manner, Megan and Ana (Founders of Anansi) are transforming the landscape for goods-in-transit protection. We are excited to be working with them and the broader Anansi team as they build the first embedded goods-in-transit insurance product.”

Another heavyweight in the pandemic SME crisis is Nimbla. The company offers invoice insurance that covers small businesses when they experience disruption in their cash flow. During the pandemic, the company processed £2.5 billion worth of invoices. Nimbla also raised £5.1 million in their recent funding round led by Silicon Valley venture fund FinVC. 

Insurtechs Are Taking Things A Step Further – Integrating Health and Risk Management Solutions Into Their Policies, Moving From Protection To Prevention

Sam Evans, a partner at Eos Venture Partners, spoke recently to FF News on the current insurtech landscape, “one of the most exciting opportunities offered by the use of technology is the ability to transition insurance from a protection based product to a dynamic, prevention-based solution. The ability to engage with customers in real-time, leveraging IoT and sensor data combined with machine learning allows insurers to provide active risk management to help prevent or mitigate potential events. 

“In the commercial insurance arena, insurers can engage with customers to identify pain points in the supply chain or proactively respond to weather conditions to reduce frequency and severity of claims. In personal lines, connected policies allow insurers to improve driving behaviours or reduce property damage.”

The fund exclusively backs insurtechs and boasts an extensive portfolio. This catalogue includes connected motor insurer Ticker, and Player’s Health, a risk management platform and insurer for sports athletes, coaches and staff. Evans represents the role of specialist InsurTech investors, who can facilitate the flow of capital into new start-ups, fully aware of the complexity and regulation involved with that investment. 

UK pet and life insurers are making this move to insurance prevention. Pet Protect partnered with PitPat, developers of a dog GPS tracker and fitness monitor, and offers the latter with their insurance policy. The monitor follows and maintains a dog’s health, reducing the chance of them being unhealthy and having to see the vet, as well as offering insurance.

A focus on wellness has also taken hold of life insurance provider YuLife, which uses gamification to promote physical and mental health. With an app that reminds people and employees to take a brisk walk or meditate for 5 to 10 minutes, YuLife aims to mitigate the chance of a customer making a claim. In their Series B funding round, the company raised $70 million (around £51.6 million), the largest an insurtech has ever raised in a Series B round in Europe. The round was led by Target Global and included Eurazeo and Latitude. 

CEO and Founder of YuLife Sammy Rubin spoke to TechCrunch about the goal of their app, “Our insurance is about helping people live healthier and longer lives […] if we can help to reduce claims while incentivizing people to do that, it’s a win-win.”

The fervent focus on insurtechs in the venture capital world does not seem to be slowing down. Leading cyber insurtech KYND secured an investment of £3.25 million from BGF Growth Capital, one of the most active VC funds in the UK. VC funds are foregrounding insurtechs which are taking the opportunity to digitize insurance.