Insurance-Focused Startups Take Funding Lead
Money is pouring into the financial services startup community, and insurance-focused companies are benefiting.
So far this year, the insurtech sector, which includes companies creating new underwriting, claims, distribution and brokerage platforms, as well as enhanced insurance-specific, customer-experience offerings, has seen 47 venture capital investment deals totaling $1 billion, compared to 74 deals totaling $2.5 billion in all of 2015, according to “Pulse of Fintech,” a quarterly global report from KPMG International and CB Insights that explores equity transactions to venture capital-backed financial-technology companies.
That’s despite the fact that for the fintech sector as a whole, deal activity actually fell in Q2, hitting a five-quarter low in the United States with just 97 deals, compared to 130 in Q1. Fintech startups also saw funding decline to $1.3 billion in Q2 2016 — compared to $2.4 billion for the same quarter last year — and drop 24% compared to $1.7 billion in Q1.
“We are seeing a lot of alignment between insurtech companies and the carriers,” says Gary Plotkin, principal of KPMG’s insurance management consulting practice.
Insurers think that startups can help them sidestep the risk and expense associated with large-scale legacy-modernization projects, Plotkin adds.
“The biggest concern insurers have is the ability to capture the customer. These insurtechs offer light-weight capability to move forward,” he explains.