In the Insurtech IPO and SPAC boom, none of the newly-public companies have been focused on commercial lines: Of the 7 insurtech listings in the public markets, 4 were personal lines (Lemonade, Root, Metromile, Hippo) and 3 health insurers (Oscar, Clover, Bright Health). But evidence from the MTech Capital portfolio shows growth stage venture firms are betting that the next wave of public offerings will come from companies in the commercial insurance sector.
In 2021 YTD MTech’s portfolio has seen 3 commercial lines focused companies complete large follow-on financings (Corvus, Embroker and Inshur) and one acquisition (Bold Penguin). While valuation was only disclosed in the Corvus transaction, all four financings were conducted at a significant premium to their previous round.
Three themes that have resonated with new investors:
1.) Improve the quote-to-bind experience for brokers / agents
Leading commercial lines startups have had great success by delivering a slick digital experience to the independent agent channel, which still accounts for 84% of commercial lines distribution (15% captive, less than 1% direct)[1]. Most incumbent carriers still offer clunky quoting experiences and binding takes weeks. Brokers have embraced the improved UX and rapid quoting offered by disruptors like Corvus, Embroker and Bold Penguin.
2.) Focus on high-growth lines of business
Most of these companies are serving end markets in a state of flux or transition. Case in point:
- The rise of the gig economy has driven enormous demand for more flexible insurance products and companies like Inshur have been the beneficiary
- The pandemic and almost universal work-from-home initiatives brought cyber risk to the fore and demand for cyber insurance has skyrocketed, benefitting Corvus
- Tech driven start-up companies represent a growing share of the overall economy and Embroker has a proposition that resonates strongly with this audience.
3.) Category leaders attract most capital
Venture investors know that the returns to category leaders can eclipse the results achieved by other companies in a space. Top-tier venture funds are betting that these 3 startups in the MTech portfolio will be among the future market leaders in cyber, specialty commercial, and auto for gig workers.
