Emerging Tech Research: Insurtech

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The insurtech sector raised $6.1 billion in VC funding in 2020, down from the $6.3 billion in the prior year. Health and life insurtechs drove a significant share of deal value, accounting for roughly 40% of the total invested capital.

Several startups hit unicorn status as the pandemic accelerated a shift to digital insurance sales. Although deal activity was restrained after the COVID-19 crisis hit, the second half of the year saw strong funding activity, a trend that is expected to carry over into 2021. Other takeaways from the report:

• As of Q4, there were 10 unicorns in the global insurtech space, seven of which were minted in 2019, and three (Lemonade, Root Insurance, and Clover Health) have just recently gone public.
• Many insurtech companies have opted of late to become independent carriers to integrate operations and improve product and service levels.
• While numerous insurtech solutions that are currently in the market have incrementally improved insurers’ underwriting capabilities, we believe that insurance underwriting technology is still in its early stages.
• Reinsurers are forging ahead with insurtech innovation plans despite slow adoption rates among carrier partners.
• Similar to banking as a service (BaaS), insurance providers are increasingly distributing insurance via APIs and platforms, allowing customers to purchase policies at any point of sale.
• While insurance sales have gradually shifted online during the past decade, in-person and broker/agent channels remain the primary channels across all insurance lines.