Embedded insurance firms are raising capital to further disrupt the insurance market

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Insurance providers are driving revenue growth by embedding products into the checkout process of their retail partners. Firms such as Next Insurance have reported that embedded insurance is generating 20% of its total revenue, while Hippo claimed that 50% of its business comes from embedded partnerships. With its capabilities to offer a faster and more personalized experience, the demand among consumers has surged over the last few years and the trend is projected to further continue over the next five years, as embedded insurance disrupts the traditional insurance business model. To capitalize on the growth of the embedded insurance sector, firms are raising funding from private equity and venture capital firms.

• In December 2022, Walnut Insurance announced that the firm had raised US$4 million in a seed funding round, which was led by ATB Financial and NAventures. The firm provides the needed infrastructure for embedded insurance, thereby assisting its partner to offer products to millions of customers. Walnut Insurance has also partnered with Neo Financial, one of the leading fintech firms in Canada, to help the firm tap into the multi-billion-dollar domestic insurance market.

With its API-driven approach, PayNXT360 expects Walnut Insurance to forge more such strategic alliances with fintech firms, among others, to disrupt the traditional insurance market in Canada. The trend of forging alliances with merchants and firms across industry verticals is projected to increase dramatically around the world. This is another reason why insurtech firms are raising funding rounds.

• In December 2022, Oyster, an embedded insurance firm, announced a US$3.6 million funding round in a seed funding round. The capital round was led by New Stack Ventures and included participation from Conversion Capital and Global Founders Capital, among others. The firm is planning to use the capital to further onboard more merchants and fuel the growth of its point-of-sale insurance platform. Some of its partners include The New Wheel, Bulls Bikes, Zooz Bikes, and Jewels by Grace, among others.

Along with bikes, Oyster also provides insurance products for jewelry, collectibles, and electronics. While Oyster is differentiating its embedded insurance services by offering low-priced policies, others players such as Superscript are targeting small businesses and high-growth tech firms to drive their growth in the space.

• In January 2023, Superscript also announced that the firm had raised €51 million as it seeks to disrupt the insurance market in the B2B space. The firm is planning to use the Series B round, which was led by BHL UK, to expand its offering and drive geographical expansion.

In between its Series A and Series B rounds, the firm reported growth of 5x in its customer base. Some of its major partners include Amazon Business and Virgin Money Bank. Going forward, the firm is also planning to focus on its existing embedded insurance partnership capabilities.

Vertical Insure, Neat, and Cover Genius, are among the other embedded insurance players that have raised funding rounds from private equity and venture capital firms in Q4 2022. As the market continues to grow, amid the growing demand for embedded insurance products from consumers, PayNXT360 expects these firms to raise further capital from the short to medium-term perspective.

Furthermore, PayNXT360 also expects embedded insurance firms to forge more strategic alliances with players in the travel sector. Globally, there is a pent-up travel demand, as travelers head out with their friends and families after two-year hiatus induced by the global pandemic outbreak. Moreover, with corporate travel picking up pace in Q4 2022 and expected to record further growth in 2023, offering embedded insurance policies with travel partners can become a major revenue growth driver for these firms around the world from the short to medium-term perspective.

Cover Genius, for instance, has a strong list of partners in the travel sector, including Booking.com and more. With its global presence in the travel market, PayNXT360 expects Cover Genius to record strong growth in its revenue over the next three to four quarters, as it will benefit from the pent-up travel demand, along with the demand for embedded insurance policies, among travelers.

To know more and gain a deeper understanding of the global embedded finance market, click here.