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PitchBook Fintech Analyst Note: Insurance

2Q 2017

PitchBook Fintech Analyst Note: Insurance

June 21, 2017

PitchBook Fintech Analyst Note: Insurance
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Here's the latest entry in PitchBook's continuing research of the fintech space, with this analyst note providing an update on the most important trends within insurance. In spite of premiums accounting for 7% of US GDP, the operational expertise required to launch a venture in the insurance space remains far higher than that required for other applied technology platforms. The insurance industry in general has bought itself time with huge economies of scale and massive balance sheets due to the favorable quirks of their accounting treatment and business models. Lately, insurers have begun to use their balance sheets to fund corporate venture arms to lead the charge on funding potential disrupters. This phenomenon has emerged as corporate VCs serve as a focal point of innovation between traditional VCs partnering with insurance giants to provide capital, and startups providing innovative technology and ideas to the industry.

Key takeaways: 

  • Investor interest around insurtech has remained strong amid an overall slowdown in venture capital and fintech-specific funding activity. The operational and technological expertise required to operate an insurance-focused tech startup pushed many of these business models to later in the cycle.
  • Given the diversity of niches along the value chain, insurtech has come to include various applications of nascent technology including artificial intelligence, IoT and drones.
  • Corporate VC arms have been more active in insurance than other industries. One driver of this trend has been recognition of the need for innovation, as well as the fact insurance companies boast large balance sheets, which are already used to make investments to fund claims.