Insurance used to be sexy.
If you go way back to the 40s, there were a number of classic film noirs in which the central romantic hero is an insurance salesman. The most famous case of this (and my favorite) is Billy Wilder’s Double Indemnity, so named for a clause still used in life insurance policies today.
"If she thinks she's gonna live long enough, she's a fool," insurance man Walter Neff says of a femme fatale deliciously played by Barbara Stanwyck. "That's the one thing about insurance you can always bank on—people die when they least expect it."
That’s also true of sector-specific booms that frequently die in ways unanticipated but inevitable. If we flash forward to the late 2010s, insurance became sexy again (at least, to investors) in the guise of insurtech, as companies like Lemonade, Kin, and Hippo attracted billions in venture backing. That all began crashing down in 2021, as the zero interest-rate policy, or ZIRP, era ended and the insurtech darlings that hit the public markets got slammed.
Today, the insurtech sector is still attracting investment, albeit pulled-back and with asterisks. In the second quarter of 2024, $1.2 billion in VC money was invested across 106 insurtech deals, a recent PitchBook report showed. On the face of it, this number marks some nice increases for the sector, like a 27.1% quarter-over-quarter spike in deal value and an almost 4% quarter-over-quarter increase in deal count. But when it comes to insurtech, we’re far from “we’re so back” territory.
"While the increase in both numbers is a positive sign for insurtech startups, we believe investors remain cautious as the public insurtech companies are still recovering from a steep decline in market value between February 2021 to January 2023," Robert Le, PitchBook emerging technology analyst, said via email.
And it’s hard to blame investors, given how poorly some of those companies have fared in recent years on the public markets. Consider Lemonade, known for providing easy, digitally native renters’ insurance. The company, which raised more than $1 billion from investors like General Catalyst and G Squared, went public in 2020 and saw its stock hit an all-time high in early 2021. Since then, Lemonade’s share price has declined by nearly 90%.
Moving forward, growth has been and is likely to remain slow in insurtech, according to Le, who says that sub-areas like cyber and climate insurance have attracted some attention this year. Additionally, the AI boom has meant that there are a number of up-and-comers looking at using AI to improve underwriting processes with some promise. Nevertheless, the industry overall has an unenviable set of challenges, from the expected issues that come with a generationally entrenched sector to insurance-specific concerns. Incumbents in insurance—the ones with star-studded commercials and jingles you know—are both slow-going in adopting new technologies and have been affected negatively and spectacularly by climate change. The growing number of unprecedented weather events and natural disasters has put many insurers’ business models on the ropes.
At the height of the insurtech boom, the promise of insurtech was that these startups could revamp a tired but essential industry. The idea was compelling and elegant: that the size of the insurance market and depth of opportunity could set up a situation where insurtechs could be valued and treated like other tech startups. If there’s one thing PitchBook’s Le believes, it’s that we’re not going back in that direction.
"We don’t expect to see investments into insurtech to reach its previous cycle’s high-water mark," he told Fortune via email. "Investors have learned that insurtech companies still operate within the notoriously slow-moving insurance industry. Thus, the growth and scale of startups in this space would not be able to match that of the broader tech market."
It’s unlikely that insurance is going to be film noir-sexy again anytime soon, or even hot tech startup-alluring. But if the film noirs are a reminder of anything, it’s that insurance is, in a world of new things, truly longstanding—in insurance time, Billy Wilder, Barbara Stanwyck, and the 1940s are recent. After all, the first insurance policies as we conceptualize them date back to Genoa in the 1300s—as backers struggled to assess the risks of calamitous voyages.
So, insurers (and those trying to disrupt them) aren’t going anywhere, sexy or not.
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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