2019 was another record year for investment into insurance technology companies, with investors putting a total of $6.3bn to work. This was up 50% from c$4.2bn in 2018, according to Willis Towers Watson.
Investor dollars have been spread unevenly however, with full-stack B2C carriers and distribution companies attracting most of the funding. A relatively minor $900m was invested into B2B insurtech.
The support for full-stack insurance startups was particularly remarkable given the challenges that model faces: Building a full-stack insurance company is an expensive business. Four companies alone raised $1.4bn in 2019 to support their transition to a fully-fledged insurance company: Clover Health ($500m), Root ($350m), Lemonade ($300m), Next Insurance ($250m).
The capital flowing into full-stack startups partly reflects the frustration of founders who want customers to have a fully-digital experience, and have been frustrated by the slowness of incumbents in adopting technology to allow for a digital customer journey from end-to-end.
We continue to believe there are significant opportunities for software companies that can solve problems for incumbent players. For now however, the venture market is betting that it's faster to build a new insurer from the ground up than undertaking wholesale renovation on incumbent core platforms.
Despite the B2B model dominating in the earlier years, it has now been rapidly outpaced by insurer and distribution-focused InsurTechs. For every US$1 invested into B2B InsurTechs, US$2.68 and US$3.31 has been invested into insurer and distribution-focused InsurTechs, respectively.