SPOTLIGHT
Insurtech North America Spotlight

Top 5 Insurtechs in the US

Insurtech stands for insurance technology and represents a broad category of fintechs and other technologies used in the insurance industry.  Like with any fintech, Insurtech aims to solve a problem. Whether that problem is helping to lower the cost of premiums for consumers or to make it easier for them to apply in the first place, insurtech is there to just generally make the insurance industry better, enhancing operations for consumers and companies.

The insurance industry was at a standstill before the development of insurtech – now the field has been revolutionised, with old insurance companies having to digitise or fear being left behind. With that in mind, here are five of the highest valued insurtech companies in North America:

Top 5 Insurtechs in the US

5. Lemonade – Valued at $2bn

Founded: New York, NY – 2015.

Lemonade is a provider of a peer-to-peer insurance platform designed for renters and homeowners. It is powered by artificial intelligence and behavioral economics and utilizes bots and machine learning to create an insurance experience. However, as of April 2021, Lemonade has announced its plans to branch out into other insurance lanes as it aims to be a one-stop-shop. It has opened its waitlist for Lemonade Car, the new car insurance division of the company. The insurtech launched homeowners and renters insurance in 2016, followed by pet insurance in H2 2020 and term life insurance in February of 2021. Cross-selling its insurance products let Lemonade increase the premium per customer—how much each customer pays divided by the number of customers—by 20% year-over-year to reach $213 by the end of 2020, per its full-year financial results. Car insurance should further increase this premium, with Lemonade’s customers already spending about $1 billion on car insurance each year.

Lemonade has not held an investment round since the outbreak of covid-19, with the its last Series D round taking place in April of 2019. Here, Lemonade accumulated $300million – the investors including Thrive CapitalGeneral CatalystOurCrowdAllianzGVSoftBank GroupInventure Partners, eBrands.vc. Following the funding round, the post-money valuation for the company was $2billion.

4. Oscar – Valued at $2.7bn

Founded: New York, NY – 2012.

Oscar is a health insurance company that offers individual health insurance plans, both directly and through health insurance marketplaces. The plans cover doctor visits, generic drugs, routine care services, including flu shots, immunizations, pregnancy screenings, lab tests, and more. The company also provides pregnancy, surgery, or recurring illness coverage. Most recently, Oscar launched a new platform called Oscar+ a tech-driven platform designed to help healthcare clients drive improved efficiency, growth and superior engagement with their members and patients. Coded in Python, Go and React, the team is able to operate nimbly and continuously deploy new code to meet customers’ needs. The cloud-based service architecture and integrated data and analytics layer allows for teams across the +Oscar organisation to serve clients in the Individual, Medicare Advantage and Group business lines.

Specifically what Oscar+ aims to do is:

  • Lower costs through an efficient, full-stack platform and health plan infrastructure.
  • Drive growth and retention through industry-leading member experiences.
  • Power effective medical cost management through consumer-centric experiences.
  • Empower providers to manage care at scale.

In its latest funding round, Oscar announced that $140million was invested in the company. The round was led by Tiger Global Management, LLC, with participation from Dragoneer, Baillie Gifford, Coatue, Founders Fund, Khosla, Lakestar and Reinvent. This latest round brings the total funding to $1.7billion with the company being valued at $2.7billion.

3. Root Insurance – Valued at $3.7bn

Founded: Columbus, OH – 2015.

Root Insurance is a company that provides car insurance services. It uses smartphone technology and data science to understand actual driving behaviour and determines personal automobile insurance rates allowing consumers to get car insurance based on their driving habits, like hard breaking and measuring their average speed. Currently available in 29 states, Root’s use of IoT and AI have allowed it to break into other markets despite being heavily focused on car insurance: drivers with no previous insurance claims are able to save up to 52% compared with traditional insurance options.  The data is processed through machine learning (ML) and helps Root avoid high-risk drivers, decreasing the number of claims it has to pay by 45%. In 2020, Root expanded its coverage to renters and homeowner’s insurance with the aim of cross-selling these policies with auto, thus generating additional premiums without having to substantially raise marketing costs. According to TechCrunch, Root has filed for an IPO with a target valuation of $6million.

In its most recent funding round Root were able to raise $350million, which was contributed by Redpoint VenturesScale Venture PartnersDST Global, Coatue Management, Tiger Global Management, Ribbit CapitalDrive Capital. This brings the post-money valuation to $3.7billion with $527.5million in total funding across its three funding rounds.

2. Gusto – Valued at $3.8bn

Founded: San Francisco, CA – 2011.

Gusto (formerly known as ZenPayroll) is a company developing payroll, benefits, and time tracking solutions. It offers a platform that delivers health insurance, 401(k)s, HR, team management, and other tools to its customers. Covid – 19 created an economic crisis for many people especially small business owners who were not able to shift to the digital means of communication as smoothly as others. Gusto has been partnering with accountants to help secure loans for their clients under the Small Business Administration’s Payroll Protection Program, adding over 40 features to keep track of PPP applications. These include a PPP application report that has been downloaded more than 80,000 times, along with a PPP Loan Forgiveness Tracker that customers are using to track the approximately $1.5billion in approved PPP loans facilitated through the product.

In its most recent funding round Gusto raised $200million in Series D funding. The investors included Fidelity Management and amp; Research Company, Generation Investment Management and more. Gusto has raised $516.1million in total funding across eight funding rounds, and following the Series D funding, now has a valuation of $3.8billion.

  1. Next insurance – Valued at $4bn

Founded: Palo Alto, CA – 2016.

Next Insurance is an online insurance company for entrepreneurs and small businesses. It provides business, general liability, professional liability, errors and omissions, commercial auto, and workers’ compensation insurance. Next Insurance uses AI to make it more convenient for small businesses to pick their coverage and offers online quotes in a matter of minutes. This AI also filters out the idea of a one-size-fits-all coverage for insurance companies. An example is shown by Insider, who note that  Next Insurance’s workers’ compensation coverage starts at $14 per month, whereas insurtech Insureon charges $47. Next Insurance’s partnership with Juniper Labs has enabled Next Insurance to have an even greater understanding of possible risks and therefore offer even more competitive pricing. The use of AI in the insurance market and the development of insurtech means traditional insurance companies are going to have to adapt to the new digital ways or risk going bankrupt, as the sector is only going to grow with new technology. An example of this is US small business – the sector is expected to grow to $12 billion by 2025, from $3.7 billion in 2020.

In April 2021, Next Insurance held an investment round in which it raised $250million. Key investors were Battery VenturesFounders CircleCapitalGZeev VenturesG SquaredGroup 11FinTLV Ventures. This funding round almost doubled Next’s valuation from $2.3billion following its Series D funding round in September 2020, to $4billion.

Author

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

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