We looked at the 30 biggest VC deals in Fintech for 2016 (courtesy of CB Insights Pulse of Fintech Report) to see where the InsurTech puck is going to. The answer is blindingly obvious when you look at the 3 out of 30 that we tagged as primarily Insurance focused:
- Oscar Health
- Clover Health
- Bright Health
Yes, big VC money is being invested to fix Health Insurance
Only 3 out of 30 deals does not sound much (10%), but they are all big deals and the total invested in those 3 is $640m and that is nearly 50% of the total that went into North American deals (the amount going into Asia was nearly 2x that going into America, but that is another story). This amount of VC money is a good indicator of traction, so it is worth looking at what they are doing.
The reasons why VCs love investing in Health Insurance is pretty obvious – it is a massive market and very broken i.e. customers urgently need something better (ask any consumer what they think of Health Insurance or look at Net Promoter Scores). However it is very hard to fix. You can say that curing cancer is a big market and customers want something better but that does not mean it is easy to find a cure for cancer.
You cannot change Health Insurance in any significant way unless you can also change the Provider side. That is where VCs have an advantage. They can see that the innovation in digital health is for real. Funding for digital health is on a tear. So that will make innovation on the Health Insurance side more likely.
We already looked at Oscar Health, which scores as the biggest HealthTech round and fortunately Amy Radin has taken on the challenge of analysing the massive complexity of the US Health Insurance business in two posts (here and here).
Bright Health is interesting because this was an $80m Series A. That is a lot of money for a first institutional round. There are two VCs (NEA and Bessemer) and both are top tier and have deep pockets; one assumes big follow on rounds will be needed for them to have an impact on such a massive market with big entrenched incumbents. This is not a garage startup with some young techies with a Minimum Viable Product. The CEO, Bob Sheehy, is the the former CEO of United Healthcare. The best analysis is in Modern Healthcare magazine. This is a full stack regulated venture aiming to be an alternative to existing insurance companies.
Clover Health is also a full stack regulated insurance startup. Consumers can buy Health insurance today (as long as you are in New Jersey, Health insurance has to grow state by state). Their round was Series C, so they are more developed than Bright Health, but this is a market where a top team with plenty of capital can do well by learning from those who were early in the market – it is not necessarily a game with first mover’s advantage. Clover Health has an interesting focus on the doctor. The idea seems to be that if doctors have an easier time on the paperwork front the best doctors will want to work with Clover, which will benefit consumers.
Another full stack regulated insurance startup is ZoomCare, but there is no evidence of recent funding.