Insurtech Is Bloodied, But Refuses to Die

Plus, the Wealthfront merger is off.

Number of the Week: $1.4 billion (explanation below)

Insurtech Is Bloodied, But Refuses to Die

It’s exceedingly difficult today to recall just how much excitement there was in 2020 around insurtech. In July 2020, the New York-based insurer Lemonade, which boasts that it uses artificial intelligence to maximize efficiency, went public. Its stock had a neck-snapping 140% gain on the first day. Lemonade ended up being, by some yardsticks, the best-performing IPO of 2020, among very stiff competition, including Airbnb and Snowflake. Three months later, the insurtech fairy dust also lifted the IPO of app-based car insurer Root, which on its first day of trading hit a market capitalization of more than $6 billion; this was for a money-losing company that had $290 million in revenue in 2019.

Insurtech fever spread well beyond the public markets. There are different ways to measure the billions that went into insurtech; one method used by Boston Consulting Group shows that it took seven years, from 2012 to 2018, for $15 billion in equity funding to be invested in the insurtech. But in the single year 2019 alone, $15 billion was plowed into insurtech, only to increase in 2020 and 2021:

But the insurtech bubble burst, and importantly it began bursting even before late 2021, when everything from tech stocks to cryptocurrency prices began tumbling.