This will be a quick note this week because I've been on vacation with family and then moved my younger daughter out of her apartment now that she's finished law school and taken the bar exam, but I still hope to leave you with something to ponder.
That would be the quarterly Willis Towers Watson report on insurtech, which is always interesting but which I think is especially important now because insurtech seems to be moving into a new phase.
As you can see in detail in the report, the winners and losers of the first big wave of insurtech seem to have become clear. Nearly 200 insurtechs have gone out of business, while a few big winners such as Lemonade have emerged.
The maturing of the sector has pushed startups to go beyond a focus just on a technology -- "We're powered by AI... or blockchain ... or whatever" -- and to zero in on solving a real, specific problem for established companies. That switch to pragmatism is a good thing.
And much more is coming: Insurtechs raised more money in the first half of 2021 than they did in all of 2020.
The money flooding into startups has raised concerns that valuations may be too high and that much of the money will be wasted. I've certainly seen that happen before. During the first internet boom, in the late 1990s, I saw lots of smart investor friends convince themselves that they should avoid selling their startups for just a few months more, because prices kept soaring -- only to lose big when the bubble burst. The one friend who really made out saw the trouble coming and liquidated his fund ahead of it.
I'm not predicting that insurtech will suffer the sort of cataclysm that affected internet stocks in 2000, but I do think this is a time to be thoughtful. There are certainly loads of opportunities, but they'll look different than the first round did, and there may well need to be a resetting of expectations and valuations. So, if you're at all interested in the insurtech phenomenon, I'd suggest curling up with the Willis Towers Watson report for a while.
More next week.
Cheers,
Paul
