Total funding increased 12% from $6.35 billion in 2019, while deal volume increased 20% from 314. Despite an initial hard dip in Q1 2020, when investors likely braced for the pandemic’s impact, insurtech funding quickly bounced back and then overtook 2019 levels as investors rallied to insurtech winners.
Much like for overall fintech funding, late-stage mega-rounds drove the momentum as investors backed established insurtechs that met pandemic challenges. Insurtechs catering to changing demands during the pandemic experienced high investor interest in particular.
Health insurtech Bright Health took home the largest insurtech funding round of the year at $500 million, per WTS, likely due to its online platform meeting rising consumer demand for taking out insurance digitally. Home insurtech Hippo, meanwhile, scored $150 million in Q3 and an additional $350 million in Q4—the largest fintech round of Q4. This followed its 60% year-over-year sales growth in Q2, which can likely be attributed to home and renters insurance being top of mind for consumers, as they were confined to their homes during the pandemic.
With many of these insurtech unicorns going public, investors will need to find the next winners in 2021, with Life & Health (L&H) insurtechs the most popular to be scooped up. Insurtech unicorns Lemonade and Root launched IPOs this year, while Metromile and Hippo are expected to do so in the coming months. Thus, investors will need to seek out new startups to back and grow to a successful exit.
Now that society has come to terms with the effects of the pandemic and the start of the vaccine rollout, there likely won’t be a dip in Q1 2021 akin to the year prior, meaning insurtech funding in 2021 will be well placed to break 2020’s record.
The L&H insurance sector in particular will likely take center stage this year, with the Biden administration bolstering the Affordable Care Act (ACA) to help more US consumers access health coverage. This will encourage more consumers to turn to health insurtech offerings in turn, which tend to be cheaper and have a more transparent pricing structure—as seen with Sidecar Health, which recently secured $125 million in funding.
Source: Business Insider
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