Given the recent run of concerned headlines that insurtech companies have generated, you’d be forgiven for anticipating that the startup category would find itself in dire straits. Not a bit of it.
As The Exchange explored recently, insurtech fundraising was strong in 2021 despite some notable public-market misfires from the sector in the year. After a strong fundraising period, a number of U.S.-based insurtech startups went public in 2020 and 2021. After some initially strong trading, the cohort has since been decimated by valuation declines.
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In the wake of the mess, we anticipated that startups building insurance products would dry up somewhat, while upstart tech companies targeting the back end of the global insurance market would prove more active. And yet. The latest Y Combinator cohort featured a number of insurance-focused technology companies, and some of them want to actually write policies.
Not all, of course. Our hunch about where insurtech startups are working on the mechanics of the existing insurance industry is coming good. We were just too pessimistic about the rest of the insurtech category.
Can’t stop, won’t stop
That the insurtech startup category is not dead should not be a surprise at this point. In the wake of 2021’s surprisingly strong data, there’s reason to believe that 2022 could bring more of the same. Using a Crunchbase query initially compiled by its News team, updated to constrain it to just Q1 2021 and Q1 2022 data, here’s the lay of the land for insurtech startups in capital terms:
- Q1 2021: $3.209 billion in recorded fundraising
- Q1 2022: $2.796 billion in recorded fundraising
If you are looking at the two numbers and wondering why we’re not shouting about a roughly $400 million decline on a year-over-year basis, let us help. Venture capital data collected by groups like Crunchbase, PitchBook, and CB Insights has to deal with the pace and depth of private-market disclosures, which are different from what public companies drop. They are laggier and less complete. So we expect the Q1 2022 number to “fill in” some as time passes, bringing it closer to its year-ago comp.
What matters more than any wiggle in the dollar amount is the simple fact that insurtech fundraising has not fallen apart. Indeed, it’s still chugging along. Good news, we reckon, for the startups building in the space today. Let’s talk about what they are focused on.
Insurtech aplenty in Y Combinator’s W22 batch
We identified 10 companies in YC’s latest batch that have insurtech either as their core or as a strong component. Here’s who they are and what they do:
Agency
Location: New York, U.S.
What they’re building: Managed cybersecurity for individuals, professionals, and teams
Aigis
Location: Jakarta, Indonesia
What they’re building: Digital health insurance provider
Clupp
Location: Mexico City, Mexico
What they’re building: Online insurer with affordable insurance for low-risk drivers
Curacel
Location: Lagos, Nigeria
What they’re building: An API to sell and process insurance in emerging markets, with an emphasis on Africa
InsureMyTeam
Location: Mumbai, India
What they’re building: An employee healthcare platform for companies in India
Momento
Location: Mexico City, Mexico
What they’re building: Full-stack auto insurer for the underserved in LatAm
Plover Parametrics
Location: San Francisco, U.S.
What they’re building: Climate change insurance
PolicyFly
Location: New York, U.S.
What they’re building: Modernizing specialty insurance
Samos Insurance
Location: Kitchener, Canada
What they’re building: Accidental death insurance for individuals undergoing surgery
SaveIN
Location: New Delhi, India
What they’re building: Buy now, pay later for healthcare in India
Different dynamics
It’s impossible to read the list of insurtech companies in YC’s latest batch without noticing that most of them are based in emerging markets – India, Africa, and Latin America. This, we think, is the key to understanding the apparent disconnect between how public markets and YC feel about companies in this sector.
It’s not just YC that remains bullish about insurtech outside of the U.S. VC fund Magma Partners, for instance, has made a number of insurtech investments in Latin America. According to managing partner Nathan Lustig, “Latin America and the U.S. are different markets.” While U.S. companies might only find room for more innovative solutions, Lustig said, “in Latin America, it’s about catching up to get insurance in the hands of people.”
It’s no accident that several YC batch companies specifically focus on selling insurance to underserved populations, including through products that traditional insurers in the region don’t offer. This also explains why startups hoping to write their own policies shouldn’t be dismissed too quickly after all — if they are focusing on emerging markets and improving access to insurance.
“One of the reasons why Magma invests so much in insurance is that it is key to living a middle-class lifestyle,” Lustig said. This is true in Latin America, but also in Asia and Africa. This creates very strong tailwinds for insurtech across the emerging world, just as it has for fintech. From that perspective, what’s happening to public companies in the U.S. seems very remote from the dynamics at play – we are simply looking at two different situations.
To test this, we’ll look at Q1 2022 insurtech venture capital data when it lands from a geographic perspective; if we see declines in the U.S. market and gains elsewhere, market dynamics will be clearer. Today, however, it’s plain that insurtech is far from dead as a startup category on a global basis.