More Signs of Life in Insurtech

The possibility of an "insurtech spring" that I raised in March seems to have become a full-on "insurtech summer."

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"Insurtech Summer" as designed by AI, featuring image of cell phone in a summer beach enviornment

I'll be quick this week as long as the U.S. seems to already be slipping into a looong Fourth of July weekend. I'm about to start packing my car and don't want to delay anyone else from doing so, too.

I just want to note that the "insurtech spring" possibility that I raised in a commentary in March seems to be well under way, based on recent funding rounds, a high-profile IPO and the continued stock market success of the high-profile, full-stack insurtechs. 

While I think my earlier analysis holds up pretty well, the more recent evidence points to some important trends about where insurtechs and, more broadly, innovation in insurance is heading.

First, the evidence:

  • Pitchbook reports that VC investing in insurtechs surged 65% in the first quarter. Admittedly, that's up from a rather small base, but it still reflects enthusiasm, especially for innovation in claims and underwriting, after a long series of declines. Pitchbook singles out Assured, a claims automation platform that secured $23.3 million in a Series B round.
  • Slide Insurance went public in June and quickly achieved a market cap north of $2 billion. It's a bit of a one-off, given that it's mostly picking through policies that Florida's Citizens Property Insurance wants to shed after years of having to support the state's dysfunctional homeowners market. The company is also controversial because its CEO and his wife, also a company officer, took home more than $50 million in 2024 at the startup, while Florida homeowners are struggling. Whether Slide has separated the wheat from the chaff remains to be seen, but the enthusiasm for an insurtech IPO is undeniable.
  • The marquee names among insurtech carriers continue to do well after years of struggle. Lemonade stock price is almost 2 1/2 times what it was in October. Hippo is up 86% since then. Root's price is 3.2 times where it was in October. 

As I said in March, that AI is leading the current round of innovation means VC investments don't have to be huge. While those developing the large language models for generative AI will spend some $320 billion this year on capital expenditures -- Nvidia chips aren't cheap -- the rest of us get to basically plug into AI as we would a wall socket.  

Still, even if the insurtec investment numbers aren't overwhelming, my mantra for decades has been, "Nobody is as smart as everybody," so I believe that even the biggest, smartest insurance companies shouldn't assume they're going to get everything right in this fertile stretch. Venture capitalists certainly won't assume that, so they're going to finance startups that seem to have an unusual insight into a market or a technology. The smart insurers will keep their eyes wide open and buy from, partner with, or simply acquire those with promising propositions that internal teams didn't pursue. 

Pitchbook is right to highlight claims and underwriting. Generative AI can provide huge gains there, starting with operational efficiency and moving well beyond. 

I'd add agencies and brokerages to that list. They're already using generative AI to radically improve productivity and are branching out into agent copilot sorts of scenarios, but I'm sure some smart entrepreneurs have ideas to add to the mix. 

I imagine parametric and embedded insurance will see considerable insurtech innovation, too. Some of the innovation may have to happen at the incumbents. The appeal of parametric, for instance, is often as part of a stack -- a policyholder wants to get some money immediately, knowing that working through a claim on, say, crop failure will take a long time -- and major carriers are well-positioned to offer that sort of coverage. But insurtechs will surely find ways to augment what carriers are doing both with parametric insurance and with insurance embedded into purchases that the incumbents don't currently recognize as opportunities. 

So here's to an insurtech summer -- just with less heat and humidity, please.

Now I'm off to pack my car on my way to what should be a great time with my many siblings and our families at the New Jersey shore. I hope you have a great loooong weekend, too.

Cheers,

Paul