The Insurtech Sector Shows No Signs of Slowing Down
Just when it seemed 2020 couldn’t deliver more milestones for insurtech, the sector surprised us again. Following Root’s high-profile IPO and Lemonade’s successful public debut, two more major players—Metromile and Hippo—made waves with significant financial moves.
Key Developments in Insurtech
- Metromile announced plans to go public via a SPAC merger, targeting a $1.3 billion valuation.
- Hippo secured an additional $350 million in funding, doubling down on its expansion strategy.
- Lemonade and Root set early benchmarks for public market performance, with mixed results post-IPO.
Why Growth Metrics Matter in Insurtech
Public and private investors are laser-focused on growth, and insurtech startups are delivering. Lemonade’s stellar performance—99% year-over-year growth in Q3 2020—proved that rapid expansion trumps short-term profitability in today’s market. Root, while still growing, saw its stock dip due to slower premium growth (34-41% YoY) compared to Lemonade’s triple-digit increases.
Hippo’s Strategic Funding Move
Hippo’s latest $350 million raise, led by Mitsui Sumitomo Insurance, underscores its aggressive growth plans:
- National expansion: Targeting near-universal U.S. coverage by 2021.
- Reinsurance bolstering: Strengthening its capital reserves to underwrite more policies.
- Convertible note structure: Enables faster execution without immediate dilution.
With gross written premiums growing 140% YoY in 2020, Hippo exemplifies the high-growth profile investors crave.
Metromile’s SPAC Play: A Growth Story in the Making
Though detailed financials remain under wraps, Metromile’s SPAC merger highlights include:
- 76% average annual premium growth (2015-2019): A strong historical track record.
- Nationwide ambitions: Plans to operate in 21 states by 2021 and 49 by 2022.
- Software revenue pivot: Projecting $48M in enterprise software revenue by 2024.
The $294 million cash infusion positions Metromile to compete with Root and other pay-per-mile auto insurers.
The Bigger Picture: Why Insurtech Thrives in 2020’s Market
Three factors are fueling insurtech’s momentum:
- Investor appetite for growth: In a low-yield environment, high-growth companies attract premium valuations.
- Digital transformation: COVID-19 accelerated demand for tech-driven insurance solutions.
- Proven public exits: Lemonade’s post-IPO surge validated the sector’s potential.
What’s Next for Insurtech?
With cheap capital and relentless demand for innovation, expect:
- More mega-rounds for late-stage insurtech firms.
- Increased SPAC activity as startups seek faster paths to public markets.
- Intensified competition in auto, home, and niche insurance categories.
As Metromile’s SPAC and Hippo’s funding demonstrate, the insurtech revolution is just getting started.
