Andreas Iten is the CEO and co-founder of Tenity. Andreas originally worked as the Chief Information Officer for the division of financial information at SIX, where Tenity was born. He also co-founded SIXHackathon (Europe’s largest fintech coding contest) and today holds several board seats at fast-growing fintech companies.
2023 has been a tough year for insurtech. Funding is down by 50%, compared to the last half of 20221. Valuations have decreased as much as 62% from the peak. Both public and private markets have been hit hard.
Although we’re now back to 2018 - 19 funding levels with insurtech, startups are focusing on getting the most of their runway, reaching profitability and being efficient.
But it’s not all bad news: several private insurtechs have raised funding rounds and seen their valuations increase, and overall, the insurtech sector is performing better than the average globally.2
The one thing that is certain, however, is that insurtech is still an industry that is underfunded and represents a huge opportunity ($7 trillion, according to Dealroom’s Global Insurtech report). Compared to other industries of similar size like Food and Health, insurtech doesn’t get nearly as much funding.
At Tenity, insurtech companies take part in our yearly incubator programs. We’ve also ran an insurtech incubation program for the Isle of Man and we currently work with Generali Switzerland to help find them insurtech startups to collaborate with.
As the CEO of Tenity and someone who’s been on the ground in the world of insurtech, I’ve witnessed a myriad of shifts in the industry. In this article I’ll talk about:
Note: Tenity is an open innovation ecosystem and early-stage investor in fintech and insurtech. Looking to invest in insurtech? Reach out to us to see how we could help you.
Like many other sectors, insurtech saw a decrease in venture capital investment in 2022. The sector peaked at $4.8 billion in Q2 of 2021, and since then deal sizes have only decreased, reaching $2.4 billion in the first half of 20231. Insurtech investment has slowed down in both public and private markets, with the biggest decrease has been in late-stage Series C, Series D deals and beyond. Insurtech M&A activity has also dropped 58% year over year.
Interestingly, the slowdown has affected all types of insurtechs, including digital insurers, technology providers, brokers and MGAs:
Currently, insurtech fundraising is now back to 2018 - 2019 levels. In 2023, insurance distribution and brokerage seems to be attracting most of the funding, while challenger and MGAs are getting the least amount1. In Q1 of 2023, insurtech funding hit $1.4B, with the focus being on early-stage deals, and the three largest raises coming from Superscript’s Series B and Usher’s and Fairmatic’s Series A.
How are investors reacting to the markets? Public insurtech valuations have also decreased substantially and only recently recovered. Investors are choosing to be more careful with their investments and doing much more in-depth due diligence compared to last year. Based on what’s going on in the public markets, investors in private insurtechs are asking portfolio companies to focus on conserving cash, remaining efficient and extending their runway.
The insurtech market still represents a huge opportunity, larger than other industries like Mobility which gets 5x the funding1. As a whole, the industry has been lagging behind fintech for a while. This is likely because of how regulated the industry is and how hard it is for new entrants and startups to work with a sustainable business model.
Because of the lag, very few VCs focus specifically on insurtech. Instead, it’s a lot more common to have large insurance companies like Allianz, AXA and Zurich set up their own VC arm to do strategic investments.
In the insurance and insurtech industry, collaboration between large corporates and startups is more important than ever before. As a company that operates at the intersection of those two company types, we’ve seen to be even more true in the insurance space.
At Tenity, we’ve been investing in insurtech companies and working with large insurance companies like Generali since 2016. Based on my experience working with insurtechs and large corporates, here’s what I’m seeing are the current trends in insurtech:
The premise with embedded insurance is straightforward: insurance is packaged in with the purchase. For example, when you buy a Tesla or use a car sharing platform like Bolt, insurance is automatically included.
I believe we’re going to see insurance embedded more and more into online shops and retail. Historically, embedded insurance was manual and expensive for insurers to implement: “on the spot underwriting” meant a lot of bureaucracy got in the way of offering a fully embedded proposition.
But with APIs and data sharing legislation like PSD2, embedded insurance is actually possible now. Insurers are able to collect a lot more data about the customer, which then allows them to get a more accurate profile of the customer and therefore offer more accurate pricing.
Embedded insurance is a lot more customer-centric, since it’s convenient and puts the customer in control. And for insurers, embedded insurance opens up another distribution channel.
Embedded insurance is an example of where insurtech startups and insurers can partner: startups have the customer centric user interface (more on that later) and insurers have the distribution.
In 2023, AI has taken off across all industries including insurance and insurtech. Due to the manual and document-heavy nature of insurance, there are a lot of applications for AI in insurance.
According to Zurich’s Chief Information and Digital Officer, Ericson Chan, AI will help support them with removing information from long documents, as well as statistical models. They’re already testing how ChatGPT and LLMs can be used to help with data-driven claims and modelling.
Insurance deals with a lot of consumer data, which makes it a perfect use case for AI. It’ll help speed up claims turnaround, improve the underwriting process and act as a great co-pilot for human employees. Companies like Zippia are predicting that by 2025, up to 25% of the insurance industry could be automated with AI.
Again, the implementation of AI is another trend where insurtechs and insurers can collaborate. Startups have the customer point of view that allows them to understand how AI can improve the customer experience. Insurers have the data. I believe we’ll see more of them working together to make the most of artificial intelligence.
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Startups have the advantage of being close to the customer point of view, allowing them to better see and understand the customer problem. They have what I call an “outside-in” approach: they first analyse customer needs, do customer research and can quickly test and experiment.
Corporates take a more “inside-out” approach, where they’ll first focus on the underwriting and claims model, and then figure out how to sell it to a customer.
Neither approach is better or worse: they both have a place in the insurance ecosystem. They are also complementary and need each other. Startups usually struggle with distribution, whereas insurers struggle with customer experience.
I think we’ll see more insurers collaborate or acquire insurtechs to improve their user interface.
At Tenity, we operate as a global innovation ecosystem that supports corporates and startups via open innovation. We run our own startup incubators twice a year, we run accelerators and incubators for corporates and have our own early stage fintech fund.
We specialise in fintech and financial services, which includes insurtech. So far, we’ve worked with Generali Switzerland, Isle of Man and a few other insurance companies on insurtech.
Here’s what we’re currently doing in the insurtech space:
We run our own incubators twice a year, each lasting four months. We’ve accelerated more than 250 early stage and growth stage startups since 2016, across both fintech and insurtech.
During these incubators, hundreds of startups apply to be part of our program. During these programs, we offer dedicated coaching and support, connection with mentors, introductions to corporates and investors and a lot more. As part of our program, we’ll also invest a certain amount of funding in exchange for a small equity stake via our own early-stage fund.
In this fund, we act as the first institutional investor in the startup, giving the team early-stage funding, mentorship, hands-on support and a network to help support with business growth. Ideally these are founders who are at the idea or product development stage, are pre-market and may not have raised yet.
Corporates can also choose to invest in this fund, offering them both strategic and financial ROI. Financial, in that they get to invest in the top startups. Strategic, in that they can engage in the startups for collaboration or partnership.
We launched our first ever fintech fund in March of 2023, along with investments from UBS, SIX, Julius Baer and insurer Generali Switzerland.
Our network, fund and incubator funds have allowed us to continue to provide new funding to insurtech companies throughout the downturn.
If you’re a startup and want to learn more about our programs head to: Tenity Startups
If you’re a corporate that wants to learn more about how we can help you, reach out to us here.
Part of our services is to collaborate with large corporates to support their innovation programs. We support them in three main ways: Learn, Collaborate and Invest.
Learn: for corporates that are at an earlier stage in their innovation journey, we help them learn about innovation, startups and how to make innovation part of their cultures. We do this via:
Collaborate: for corporates that are further on in their journey and looking to get a strategic return on their innovation, we help them by finding startups to collaborate and partner with. We do this via:
Invest: as mentioned above, we also work with corporates that want skin in the game and are looking for both a strategic and financial return on their investment. We do this via:
We support corporates across financial services and insurance in these three functionalities. For example, we’re currently working with Generali Switzerland with their House of Insurtech department. For Generali, we scout for insurtech and insurance relevant companies. We then bring them to Generali’s innovation centre where they will focus on POCs and setting up collaboration between stakeholders.
As mentioned earlier, one of the key services we do is running corporate accelerator or incubator programs for our corporate partners. These are bespoke programmes that can be as short as 3 weeks or as long as 2 years and are focused on helping early-stage startups grow, use a specific technology or collaborate with a partner.
We ran one of these programs recently for the Isle of Man, with a focus on insurtech. Here’s how we did it:
The Isle of Man is already known as a good location for international insurance due to its robust regulatory framework. They were looking to develop an ecosystem for insurtech businesses and carriers as well on the island.
The goal of the program was to help accelerate promising enterprise-ready insurtech startups by enabling collaborations between leading insurance companies and insurtechs, as well as provide mentoring and coaching. The topics would be focused on wealth management, policy management and customer onboarding.
With the Isle of Man, we took care of each step of the program: scouting for the right startups, organising the masterclasses, connecting startups with mentors and running the day to day of the program. It ran from September 2022 until January 2023 and of the 70 applications we received, we picked 7 startups to participate in the accelerator.
Throughout the 12 week program, the startups worked on developing new insurtech solutions in collaboration with program partners. They received guidance and support from partners including Zurich, Utmost, Momentum International, EIP and Hansard.
Read more about the program here: Insurtech Isle of Man Acceleration program
Innovation does not recognise industry boundaries. When a startup sees a problem they want to solve, they will attempt to solve it no matter what industry it finds itself in. For innovation to happen, serendipity has to be allowed to take place
At Tenity, we’re able to encourage this because we sit at the intersection of the corporate and startup world via our ecosystem. Every corporate that invests in our fund or works with us to launch a corporate accelerator program becomes part of our ecosystem. Every startup that applies to one of our incubator or accelerator programs becomes part of our ecosystem. That includes:
When a startup or corporate joins our ecosystem, there’s many more opportunities for a startup to cross pollinate. For example, if a startup has a way to connect home insurance and mortgage, then our ecosystem would be a good place to do that. We can do more than a large insurer: we can actually connect the startups with both banks and insurance companies.
Although startups and companies can cross boundaries, we mainly focus on verticals that are complementary. So far, we are very focused on financial services and insurance, since there are industries that have a lot in common.
The benefit of only focusing on these industries is our expertise tends to be a lot more in-depth, our network and database is more comprehensive and we’ve seen what works and doesn’t work specifically in financial services (having been born of corporate innovation ourselves).
We also have on the ground hubs in Singapore, Spain, Switzerland and the Nordics. This total specialisation and boots on the ground approach makes it easier to connect the right people and enable innovation.
Although insurtech funding has suffered in 2022 and 2023, there is still a huge opportunity in the sector and we strongly believe that the best is yet to come. As we continue to invest in insurtech companies, collaborate with insurers and run programs for startups, we hope to continue to play our part in improving the insurtech funding landscape and connecting insurtechs with the right partners.
Want to learn more about we could help you? Reach out and we'll put you in touch with an innovation expert on our team.