InsurTech is on the rise

InsurTech is transforming the insurance industry with new technology to improve customer experience, simplify policy management, and increase competition. And it’s growing. New market entrants are using their know-how in digital technologies to get hold of market shares in areas so far targeted by traditional insurance companies. And the strategic advantage created by digital developments brings with it disruptive innovation laden with opportunity.

Willis Towers Watson’s Quarterly InsurTech Briefing for Q2 2018, puts it like this, “Technology can help build customized products that are economically viable, better align sales incentives and solve compliance issues challenging the industry. It can also help to build more effective distribution channels.”

So, it’s not surprising that there is growing evidence that insurance market incumbents are increasingly engaging with the disruptors globally. But, their focus is very much on later stage funding. This has left great opportunities for other investors at the seed and early stages, where the potential for rapid increases in value is at its highest:

• The 71 transactions in the quarter represents the highest number of transactions ever recorded.
• Funding transactions outside of the U.S. account for 58% of total transactions since 2013 and 62% in Q2.
• 34 of the transactions were sponsored by (re)insurers, a new record for the volume of incumbent participation in InsurTech investment.
• (Re)insurers generally invested in later rounds, with seed investments contributing to only 3% of transactions.
• Early stage investments remain strong; Seed and Series A account for 64% of total transactions since 2013 and 70% in Q2.

The briefing recognises that, despite the attention of industry incumbents, “ InsurTech funding rounds have increasingly become larger over time and that non-incumbent investors are willing to make increased bets on InsurTech that specifically address customer pain points: cost of the product, ease of access and serving new or underserved markets.”

According to Greg Solomon, Head of Life & Health Reinsurance at Willis Re International, “Around 70% of InsurTech fundraising has been focused on distribution and customer engagement.”

It was factors like these that led to Oxford Capital’s interest in the InsurTech sector and to our Ventures Team investing in Wrisk. Wrisk develops smartphone-based insurance products. Their aim is to help consumers obtain cover for cars, house contents, gadgets and other possessions, using a slickly presented and easy-to-use app. The app is focused on engaging mobile device users, particularly the growing and influential millennials market and making the customer journey more user-friendly.

Oxford Capital led a £3m funding round in August 2017. Oxford Capital invested £700,000 and Seedrs co-invested. The company now has strategic and collaborative relationships with the likes of Hiscox and BMW and we are excited by its progress and future prospects.

As Wrisk qualifies as EIS under our EIS fund, an investment can also carry significant tax advantages.*

*Tax treatment depends on the individual circumstances of each client and may be subject to change in future.