LONDON — Investors from around the world were asked what the hottest area for investment in fintech is right now at a conference on Wednesday. The same sector kept coming up again and again: insurance.
At the Economist Finance Disrupted conference in London this week, three out of the four VCs on the panel “Unicorns vs. Unicorpses” named insurance specifically when asked what was of most interest to them as an area for investment.
The sector was name-checked by: Yann Ranchere, a Geneva-based partner at fintech VC Anthemis; Reshma Sohoni, the CEO and cofounder of early stage UK fund Seedcamp; and Timo Dreger, a managing director at Berlin-based Apeiron Investment Group.
The other investor on the panel — Technology Crossover Ventures general partner John Rosenberg — had a get out of jail free card. His Silicon Valley-based fund focuses on “growth” investment: funding for proven businesses that are scaling. Most insurance startups are far too early stage to sit in his wheelhouse.
All the panellists offered up other areas of interest, such as optimising banking backends and artificial intelligence, but somehow the conversation kept returning to insurance.
Dreger summed up it up well, telling the audience:
“Right now we are looking at InsurTech. It’s for sure the hottest thing in 2016 and for sure the hottest thing this year too. The answer is pretty easy why. In the whole insurance industry, there’s a lack of innovation and the user experience is pretty horrible.”
While everything from loans to wealth management has been “disrupted” by technology over the last few years, insurance remains one of the few areas of finance that is still stubbornly old-fashioned. Insurers mostly operate through brokers and an embarrassingly high percentage of business is done on paper.
Products seem outdated too: home insurance hasn’t adapted to the era of Airbnb and car insurance is even more hopeless when it comes to Uber and the sharing economy. The industry seems an obvious area for a tech-savvy startup to “disrupt.”
So far most of the innovation and momentum around “InsurTech”, as its known, has been in the US, where the health insurance market presents a huge opportunity. The flag-bearer is Oscar, an online health insurer based in New York that has raised over $700 million from investors such as Goldman Sachs, Google, and Fidelity. (Oscar’s cofounder is Josh Kushner, brother of Donald Trump’s son-in-law and advisor Jared Kushner.)
However, InsurTech is gaining a foothold in Europe. Silicon Valley’s Trov recently launched in the UK and Sohoni highlighted Seedcamp’s investment in Cuvva, which offers pay-as-you-go car insurance. Founded in 2014, the startup has already insured 150,000 hours worth of driving covering 2 million miles and this week raised £1.5 million from London fund LocalGlobe. Germany also has a particularly thriving InsurTech scene, with notable companies such as Friendsurance and FinanceFox.
Still, the InsurTech revolution may not have arrived just yet. VCs told me insurance was the hottest area of fintech back in 2015 when I took the industry’s temperature. The pace of change is slow and not always straightforward.
The signs are positive, however. Back in 2015 VCs complained to me that, while insurance was ripe for disruption, there weren’t many entrepreneurs who wanted to tackle it. “Not many startups self-identify as insurance startups,” Nektarios Liolios, the managing director of accelerator Startupbootcamp Insurance, told me back then.
Startups are appearing in the space now, a step in the right direction. Dreger told the conference crowd in London this week: “InsurTech right now is where fintech was a couple of years ago. First, startups will focus on distribution but hopefully, in the future, we will see more things.”
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