Silicon Valley venture capitalists are turning to a different area of finance: the trillion dollar insurance industry, where very little innovation seems to have permeated so far.
American investors recognise that the Insurance market is a massive market that remained untouched, and consider the current approach to insuring people, property and assets to be broken as it is not helping customers when they need it the most.
It is understood that capital is a major barrier to entry. A startup would need licenses in every US state to be able to trade, a time-consuming and expensive process. They would also need to hold funds to pay out any potential claims.
Broker and managing general agency models can shortcut the need for capital and managing claims.
Will insurance startups succeed to disrupt a 300 year old market?
Fundraising ended the year strong and has kept the momentum. In December 2015, Lemonade, a peer-to-peer insurance company, raised $13 million in seed funding from Sequoia Capital—the VC’s biggest seed funding round ever. Insurance comparison site PolicyGenius secured $15 million in funding in January in a Series B round, bringing its total funding to $21 million. Next Insurance—an insurance startup led by executives from Check, a mobile payments startup acquired by Intuit in 2014 for $360 million—announced it raised $13 million earlier this week (March 15). And sources say secretive insurance startup Slice Labs raised a seed round last month of around $3-$4 million. Tim Attia, Slice’s CEO, confirmed a deal to Quartz but declined to discuss specifics.