As the first half of the year comes to a close, it's an opportune moment to reflect on the investment dynamics within European InsurTech startups and assess the state of innovation in the insurance industry.
You can listen to our full review, online: https://www.linkedin.com/events/thestateof-insuranceinnovation-7209798072330047489/about/
To begin with the obvious: investments are down from a year ago. There were 33 rounds announced in the past six months, which is one more deal than in H1 2023. But the amount of money invested - €340m - dropped by 21% compared to the same period last year, indicating smaller average round sizes, especially fewer rounds in the €25-50m range.
This shift highlights a significant market trend towards more diversified and less cash-intensive business models. While D2C and full-stack startups combined accounted for 68% of all money raised at the peak of InsurTech (2019-2023), 65% of funds in the first half of this year went to alternative models. This includes B2B players, startups providing tech for brokers, embedded insurance solutions, and those addressing different parts of the value chain.
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During this period, only the claims part of the value chain was untouched. ‘Distribution’ remained the leading sector, though it dipped below half of all announced rounds for the first time. Conversely, ‘underwriting’ saw significant activity, driven by several substantial rounds. Notably, the ‘product’ section was very active, accounting for a third of all announced rounds, thanks to startups tackling special or emerging risks like climate and cyber.
The diversity also extends to business lines. B2B players made up 36% of all rounds, slightly below last year's dynamic, but all business lines were addressed—from P&C to SME insurance, health, and life. No business line was immune to innovation.
Geographically, rounds were announced across many local ecosystems in Europe. The UK led, with over 39% of all rounds, followed by France and Germany. Beyond these top three, the "rest of Europe" was notably active, particularly in Southern, Eastern, and Northern Europe. When it comes to money raised, the "rest of Europe" was the second-largest market after the UK, far ahead of France and Germany.
In addition to investment figures, several startups disclosed key performance indicators showing significant milestones: Hellas Direct has over 900k P&C contracts (1); Acheel has more than 500k customers for its health and P&C offers (2); and Descartes Underwriting has generated over €150m in GWP with its weather parametric policies (3).
The above analysis focuses on InsurTech players in a traditional sense—startups either selling technology to insurance companies or offering insurance products directly to consumers. This aligns with how the first wave of insurance innovation was structured. However, new challenges are emerging, such as climate change, cyber threats, digital assets, new work models, electric vehicles, and AI risks. These recent risks lack historical data, meaning incumbents don’t have their usual competitive advantage in these areas.
This presents an opportunity for startups to identify and utilize new data sets, apply advanced algorithms, and ultimately help incumbents manage these emerging risks. We believe this is where the next wave of insurance innovation will occur.
Notes:
(1) 03/2024 https://coverager.com/hellas-direct-raises-e30-million/
