Startups in the automobile insurance space, predominantly providing usage-based insurance using telematics devices and/or smartphone sensors.

Startups that offer homeowners and renters insurance using artificial intelligence (AI) and smart home devices to issue policies and validate claims.

Startups that provide life insurance through digital channels personalized to an individual’s circumstances and replacing traditional practices, such as medical tests, with data-driven underwriting.

Startups that offer personalized travel, bicycle, and pet insurance through digital platforms, utilizing technology such as flight tracking and online claims processing.

Providers of comparison websites and tools for carriers, agents, and insurers to compare and purchase policies.

Providers of white-label solutions that enable insurers to set up and offer their own neo-insurance products such as usage-based insurance.

Solutions that help insurers assess risk for neo insurance products, using AI and alternative data sources like telematics and satellite imagery. These platforms also help leverage this data to automate pricing for new policies and monitor their current portfolio risk.

Platforms that help automate the claims function using digital portals to collect notifications, process them using AI, detect fraud, and automate the whole claims handling process until payout.

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

Neo Insurance

Overview

<div>
 <h3>
 Novel insurance models are providing coverage for the connected consumer
 </h3>
 
 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.
 
</div>

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

Market Sizing

<div>
 <ul>
 <li>
 
 Restrictions on physical gatherings have pushed consumers toward digital alternatives with insurance being no exception.
 
 <ul>
 <li>
 
 During 2020, 
 Lemonade’s 
 gross earned premiums more than doubled from the previous year.
 
 </li>
 <li>
 
 Root Insurance’s 
 direct written premiums grew by 36.7% YoY during 2020.
 
 </li>
 <li>
 
 Bestow, 
 saw sales grow by 450% YoY from January to October 2020, driven by pandemic-induced demand.
 
 </li>
 </ul>
 </li>
 </ul>
 <ul>
 <li>
 
 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.
 
 <ul>
 <li>
 
 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. 
 
 </li>
 <li>
 
 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.
 
 </li>
 </ul>
 </li>
 </ul>
 <ul>
 <li>
 
 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.
 
 </li>
 </ul>
 
 
</div>

COVID19-IMPACT

Market Mapping

<div>
 
 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 close to USD 3.0 billion in funds as of June 2022. 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.
 
</div>

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.

Disruptor Funding History

The Incumbents

<div>
 <h3>
 Traditional insurers are opting for a mix of in-house development and partnerships to provide novel products
 </h3>
 
 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.
 
</div>

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