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Neo Insurance

New insurance models are disrupting a centuries-old industry with a focus on personalization and convenience.

Overview

Novel insurance models are providing coverage for the connected consumer

Neo Insurance refers to a fully digitized insurance product and service provided entirely through digital channels. These new insurance models in the personal lines insurance segment use new technologies and focus heavily on customer experience by providing personalized products that reflect individual circumstances better, allow for instant coverage, feature faster claim processing, and are delivered digitally. They aim to overcome the pain points of traditional insurance where policies are offered based on a one-size-fits-all approach.

Neo Insurance has largely been enabled by the emergence of insurance technology (insurtech) solutions, which make use of technologies such as Internet of Things (IoT) devices, artificial intelligence (AI) and machine learning to automate insurance functions and gather data in real-time, which can lead to more accurate pricing and faster claims processing. On the demand front, consumer expectations for more personalized policies and cost savings for insurers, arising from digitizing insurance functions, have created strong demand for neo insurance products and supporting infrastructure solutions, while inadequate coverage provided by traditional insurers for non-conventional industries, such as ridesharing, have paved the way for new opportunities for neo insurers.

What's driving this industry?
Market Sizing

The market size for the US neo-insurance market will reach USD 53.2-79.9 billion by 2025

Conservative case

USD 53.2 Bn

Base case

USD 66.6 Bn

Expansion case

USD 79.9 Bn

USD billion0204060802019202020212022202320242025
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COVID-19 IMPACT

  • Restrictions on physical gatherings have pushed consumers toward digital alternatives with insurance being no exception.

    • During 2020, Lemonade’s gross earned premiums more than doubled from the previous year.

    • Root Insurance’s direct written premiums grew by 36.7% YoY during 2020.

    • Bestow, saw sales grow by 450% YoY from January to October 2020, driven by pandemic-induced demand.

  • While the first half of 2020 witnessed a significant decline in venture capital funding, the second half marked a public market debut for key disruptors and a major funding round.

    • Investments in the sector amounted to USD 2.3 billion during the first half of 2020, representing only 17.2% of the full year investment amount (USD 13.4 billion) in this space during 2019. 

    • The second half of 2020, however, saw notable developments on the capital front, as Lemonade and Root Insurance went public, and Metromile followed suit via a merger with a listed special purpose acquisition company (SPAC). Hippo Insurance raised USD 350 million in funding, closing the year with one of the largest funding rounds in the industry.

  • Startups such as Slice Labs and Jetty have laid off a significant number of staff due to the pandemic recession. Premium write offs driven by US government-imposed measures have added further stress to digital insurance startup balance sheets.

Market Mapping

Neo-insurance products for the automobile, homeowners, and renters markets account for more than one-third of the companies in the Industry Hub, with more than half of the startups under analysis established after 2016, and a majority in their early or growth stages.

Solution-provider startups have attracted more than USD 2.6 billion of investment as of November 2020. These companies' profiles range from turnkey solution providers offering end-to-end infrastructure for launching digital products to companies targeting specific processes within the value chain.

Incumbents have been quick to react to changing market dynamics, especially in the automobile space where most companies have either developed solutions in house or partnered with turnkey solution providers and vehicle manufacturers to provide usage-based insurance offerings. Vehicle manufacturers such as Tesla have also ventured into this space leveraging data from their own connected vehicles.

Incumbents
Growth
Early
Seed
Pre-Seed
Automobile
?
Homeowners & Renters
?
Life
?
Turnkey Solutions
?
Value Chain Solutions
?
LifeScoreLabs
LifeScoreLabs
LifeScoreLabs
LifeScoreLabs
LifeScoreLabs
AXA
Allianz
State Farm
Liberty Mutual
Allstate
USAA
MetLife
American Family Insurance
Mercury
MAPFRE Insurance
Progressive
Berkshire Hathaway (GEICO)
CSAA
Credit Karma
Tesla
General Motors
BMW Group
Rivian
wefox
Root Insurance
Metromile
Lemonade
Clearcover
Zego
Branch Insurance
Cuvva
LeoCare
FRIDAY
Marshmallow
Getsafe
Buckle
INSHUR
By Miles
Loop
Mile Auto
optOn
Just Auto Insurance
Surround Insurance
Allianz
Liberty Mutual
HCI Group
Progressive
CSAA
RentSpree
Hippo Insurance
wefox
Root Insurance
Lemonade
Kin Insurance
Sure
Branch Insurance
LeoCare
FRIDAY
Getsafe
Luko
Hedvig
Jetty
Swyfft
Delos
Surround Insurance
Savvi Insurance
Slide
MassMutual
Lemonade
Ethos
Ladder
Bestow
Sproutt
Fabric Technologies
DeadHappy
Dayforward
Amplify
Jenny Life
Bequest
Everyday Life Insurance
Swiss Re
State Farm
EIS Group
Verizon
Cambridge Mobile Telematics
Bestow
Sure
Trov
Instanda
Sureify
Octo Telematics
Zendrive
Covr
Boost
Slice Labs
By Miles
CarVi
Wrisk
Driveway
Neos
Ometry
CoverGo
InsureScan
Munich Re
Swiss Re
AXA
Allianz
MassMutual
Verisk
Earth Networks
Azuga
Shift Technology
Metromile
Sure
Tractable
Snapsheet
Trov
FRISS
CAPE Analytics
One
Akur8
Zelros
omni:us
Hi Marley
Boost
Slice Labs
Arturo
Gradient AI
Carpe Data
Quantemplate
Omniscience Corporation
Five Sigma
Flyreel
REIN
Greater Than
Sprout.ai
Zesty.ai
LeO
Claim Genius
Bdeo
Click-Ins
Fenris
TensorFlight
Galaxy.AI
UrbanStat
Ometry
Neural Metrics
SureFyre
Mody Data Solutions
Cogitate
LifeScoreLabs
True Flood Risk
Qumata
Joshu
InsurGrid
nSurely
Gerald
Telematic
Dorothy
Nexilis
Assured Insurance Technologies
BlueNote

The Disruptors

Neo-insurance startups operate either under a carrier model, where they control all aspects of the process and underwrite their own policies, or under an agency model, where the startups act as a Managing General Agent (MGA)—selling insurance to customers and providing the underlying technology, while larger insurers underwrite the policies. Most of these startups are in early or growth stages.

While most neo-insurance startups are solution providers that enable neo-insurance products for larger underwriters, full-service insurance startups have absorbed most of the funding. The most highly funded of these solution provider startups has been Cambridge Mobile Telematics with a USD 500 million funding round from the Softbank Vision Fund in 2018.

Automobile insurer Root Insurance and renters insurance provider Lemonade filed for an Initial Public Offering (IPO) during the second half of 2020, raising USD 724.4 million and USD 319 million, respectively. The industry has also seen several startups merging with special purpose acquisition companies (SPAC) to go public. Metromile was the first neo-insurer to go public via this route, merging with INSU Acquisition Corp in February 2021. Hippo Insurance followed suit six months later by merging with Reinvent Technology Partners in August 2021. In July 2021, Kin Insurance also announced plans to go public via this route by merging with Omnichannel Acquisition Corp.

wefox has raised the most money of any still-private neo-insurer with a total of USD 919 million following a USD 650 million round led by Target Global in June 2021. Collectively, neo-insurance startups in both the automobile and property markets have exceeded USD 1.5 billion each as of August 2021.

2020 has also presented setbacks to the neo-insurance industry. A provider of on-demand insurance for the gig economy, Slice Labs, suspended its homeshare insurance offering due to the Covid-19 pandemic and had not yet launched its rideshare platform as of August 2021.

Automobile

?

Disruptors

?
Funding in USD Millions
Lemonade
Public - Market cap USD 4.0 bn
Root Insurance
Public - Market cap USD 1.3 bn
Metromile
Public - Market cap USD 462.6 mn
wefox
919
Clearcover
305
Zego
202
LeoCare
134
FRIDAY
128
Marshmallow
116
Getsafe
116
Buckle
101
Branch Insurance
83
INSHUR
37
By Miles
27
Cuvva
22
Just Auto Insurance
15
Mile Auto
13
Watchlist
?
Loop
Surround Insurance
optOn

Homeowners & Renters

?

Disruptors

?
Funding in USD Millions
Lemonade
Public - Market cap USD 4.0 bn
Hippo Insurance
Public - Market cap USD 2.6 bn
Root Insurance
Public - Market cap USD 1.3 bn
wefox
919
Kin Insurance
156
LeoCare
134
FRIDAY
128
Sure
123
Getsafe
116
Slide
100
Luko
85
Branch Insurance
83
Hedvig
68
Jetty
64
Watchlist
?
Swyfft
Delos
Surround Insurance
Savvi Insurance

Life

?

Disruptors

?
Funding in USD Millions
Lemonade
Public - Market cap USD 4.0 bn
Ethos
407
Ladder
194
Bestow
138
Sproutt
38
Fabric Technologies
31
DeadHappy
22
Dayforward
20
Amplify
15
Watchlist
?
Jenny Life
Bequest
Everyday Life Insurance

Turnkey Solutions

?

Disruptors

?
Funding in USD Millions
Cambridge Mobile Telematics
503
Bestow
138
Sure
123
Trov
99
Zendrive
57
Covr
38
Boost
37
Slice Labs
36
Instanda
28
Sureify
27
By Miles
27
CarVi
20
Wrisk
18
Driveway
12
Octo Telematics
Unknown
Watchlist
?
Neos
CoverGo
InsureScan
Ometry

Value Chain Solutions

?

Disruptors

?
Funding in USD Millions
Metromile
Public - Market cap USD 462.6 mn
Greater Than
Public - Market cap USD 147.2 mn
Shift Technology
545
Sure
123
Tractable
120
Snapsheet
100
Trov
99
FRISS
89
CAPE Analytics
75
One
52
omni:us
44
Hi Marley
42
Akur8
41
Boost
37
Slice Labs
36
Arturo
33
Gradient AI
31
Carpe Data
27
Quantemplate
26
Omniscience Corporation
23
Five Sigma
20
Flyreel
18
REIN
18
Zelros
16
Sprout.ai
15
Zesty.ai
13
Qumata
12
Watchlist
?
LeO
Claim Genius
Bdeo
Click-Ins
Fenris
TensorFlight
Joshu
Galaxy.AI
InsurGrid
nSurely
UrbanStat
Gerald
Telematic
Ometry
Neural Metrics
SureFyre
Mody Data Solutions
Dorothy
Nexilis
Cogitate
BlueNote
LifeScoreLabs
Assured Insurance Technologies
True Flood Risk

Lemonade

Lemonade is a full-stack insurer that provides a range of insurance products that include renters, homeowners, life, car and pet insurance. The company operates completely digitally, using AI-powered chatbots to onboard clients and process claims. The company’s AI runs several anti-fraud algorithms to eliminate false claims and asserts to handle 30% of claims instantly. The company’s business model is similar to peer-to-peer insurance, where Lemonade donates any unclaimed premiums to charitable causes of the customer’s choosing. Lemonade offers life insurance through its website and mobile apps in partnership with digital life insurance provider, Bestow.

The company most recently launched its own car insurance product, “Lemonade Car” in November 2021, which uses its underlying AI-based technology to process policies and claims, enabling safe drivers to obtain better rates. Lemonade Car has been specifically designed to offer lower insurance rates for low-mileage drivers and environmentally-friendly electric vehicles (EVs) and hybrid cars. The offering will use a telematics app to measure factors such as mileage and driving habits, and will also provide services such as 24/7 on-location roadside assistance. In November 2021, the company also announced its plans to acquire Metromile, a pay-per-mile automobile insurance provider, marking Lemonade’s first acquisition. The acquisition is expected to be an all-stock transaction that reflects a fully diluted equity value of around USD 500 million (around USD 200 million net of cash). The transaction is expected to close during Q2 2022, subject to regulatory approval. 

The company holds a pan-European license, which enables it to sell insurance in 31 countries across Europe, and operated in France, Germany and the Netherlands as of the same date. 

As of September 2021, the company had around 1.4 million customers. For the full year FY2020, Gross Earned Premium (GEP) amounted to USD 158.7 million, more than doubling from USD 75.5 million in FY2019. Net Earned Premium (NEP) increased by 21.2% YoY, closing at USD 77.3 million. The net loss ratio for the full year improved by only 100 basis points to 71% in FY2020. The company claims that an increasing percentage of premiums and claims from new policies and geographies (especially in Q4) is a key reason for the relatively stable loss ratio over the year. 

In July 2020, Lemonade sold 11 million shares in an Initial Public Offering (IPO), raising USD 319 million in the process at a valuation of USD 1.6 billion. Lemonade announced a secondary stock offering in January 2021, where the company offered 3 million shares for sale, with the option to purchase additional shares for underwriters to cover higher than expected demand. Lemonade also disclosed that certain existing shareholders would also be offering their own shares for sale, amounting to approximately 1.5 million shares.

Segment:
Automobile
Total funding:
USD 481.5 million
Competitors:
Hippo Insurance, Root Insurance, Jetty, Kin Insurance, Getsafe
Disruptor Funding History

Automobile:

Lemonade
Root Insurance
Metromile
wefox
Clearcover
Zego
LeoCare
FRIDAY
Marshmallow
Getsafe
Buckle
Branch Insurance
INSHUR
By Miles
Cuvva
Just Auto Insurance
Mile Auto
Loop
Surround Insurance

Homeowners & Renters:

Lemonade
Hippo Insurance
Root Insurance
wefox
Kin Insurance
LeoCare
FRIDAY
Sure
Getsafe
Slide
Luko
Branch Insurance
Hedvig
Jetty
Swyfft
Delos
Surround Insurance

Life:

The Incumbents

Traditional insurers are opting for a mix of in-house development and partnerships to provide novel products

Incumbents in this space mostly include traditional insurers who are increasingly moving towards developing their own digital, neo-insurance products. Partnerships with digital insurance technology (insurtech) startups are common in instances where incumbents want to leverage the former’s technologies to offer new insurance products or bolster their own offerings. Cross-industry partnerships are also ubiquitous, providing a venue for these traditional insurers to market their product, with common examples including partnerships with auto manufacturers and ridesharing companies.

Most incumbents also have their own venture capital arms and accelerator programmes which provide guidance and capital for promising insurtech startups.

Tesla is an example of a vehicle manufacturer developing its own insurance product which leverages the data from the vehicle's systems. This also provides Tesla with a feedback loop which can then be used to alter its vehicle designs to mitigate common repairs in the long term.

Reinsurance incumbents complement their reinsurance offerings by providing digital solutions to insurers, these include turnkey solutions to implement a new digital insurance product (such as usage-based insurance) or platforms for data analytics and risk management.

Automobile
Homeowners & Renters
Life
Turnkey Solutions
Value Chain Solutions
In House Development
M&A
Partnership
Investment

Notable Investors

No investor data is available

Funding data are powered by Crunchbase
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