Venture capital and the future of InsurTechs: A conversation with Tiffine Wang, Partner at MS&AD Ventures
February 15, 2022
As the insurtech ecosystem continues to expand, the funding landscape has also evolved. There are more investors interested in the space, but also more startups than ever before. For insurtech founders, having a unique vision for a product may not be enough to secure capital. So what exactly are insurtech investors looking for? To answer this question, we sought advice from one of our own investors.
MS&AD Ventures is an early stage venture fund backed by a single limited partner—MS&AD (Mitsui Sumitomo & Aioi Nissay Dowa) Insurance Group, one of the largest insurance conglomerates in Japan & South East Asia with a presence in 50+ countries. With the mission to contribute to the development of a vibrant society and help secure a sound future for the world, MS&AD Ventures has made over 60 investments in three years globally, ranging from insurtech, fintech, mobility, digital health, security, sustainability, and climate. MS&AD Ventures’ focus is not on what insurance looks like today but what it potentially can be in the future; thus, its portfolio is a mix of new business models and insurtechs. Notable insurtech investments include Hippo, Next Insurance, Vouch, Energetic Insurance, Accelerant, and Vesttoo.
The Socotra team sat down with Tiffine Wang, Partner at MS&AD Ventures. Voted one of the Top Emerging Leaders in Corporate Venture Capital by GCV in 2021 and 2022, and recognized in the 40 Under 40 list by Silicon Valley Business Journal in 2021, Tiffine is looking to invest and partner with the world’s top innovators, inventors, game changers, and entrepreneurs that want to positively impact the world.
In this interview, the Socotra team asked Tiffine:
- What does MS&AD Ventures look for in a startup?
- What challenges do founders face in getting investment?
- What trends is MS&AD Ventures seeing in the industry?
What do you look for in an insurtech startup?
As an early stage VC, we tend to focus on teams. Ideas, especially early on, can dramatically change or pivot. A strong team will often have a mix of technical, business, and industry expertise. If a team only specializes in technology but doesn’t understand insurance, they often wrestle with navigating the highly regulated industry. If they only understand insurance, they struggle to hire and retain great technical talent. A team with strong expertise, tech, a unique business model, and insights will catch our attention.
We also like companies and businesses that have global ambitions. Some are global from day 1 while others may take time to go overseas. MS&AD is an international company with a presence in over 50 countries so we like founders that have a global mindset.
Tell us more about what you look for in terms of technology and insurance expertise.
The industry is evolving fast, so we like founders who are thoughtful in their approach. Sometimes it makes sense to build technology in house, but if a company takes several years to build a tech stack, it might be too late. That’s one reason why we invested in Socotra. Working with Socotra helps get you to market quicker. Insurtechs often have limited resources, including our portfolio companies with strong technical teams. Socotra helps launch and scale new products quicker.
With data and AI, tech-enabled underwriting is becoming essential to staying competitive in the market. Real-time unique data and insights are going to be consequential in the future. We’ve invested in data platforms, data providers, and API solutions like Covie, Vizion, Redkik, DATA, Jupiter Intelligence, Blackswan, and Geosite. These companies support insurtechs and businesses by providing comprehensive data sets and better ways to gather insights.
What are other considerations when evaluating an investment opportunity?
Loss ratios, CAC, and churn
With a growing number of insurtechs, and with public markets being down, mid/growth stage investors are paying closer attention to loss ratios, CAC, and churn rates. Companies are under pressure to perform so they’re coming up with smarter ways to cut cost and optimize workflow including using tech-enabled embedded models (APIs and partnerships) which can reduce the cost of acquisition and support retention.
With easier tools to integrate and embed, insurtechs are penetrating different verticals, enabling any company to touch insurance.
Prevention & mitigation
We like solutions that support prevention and mitigation of risk such as Intellect, a mental health and wellness app that’s a direct-to-consumer coaching solution, especially since they also work with insurers to bundle their solution and roll out to employers.
New risks & expertise
We are spending time with emerging risk. Energetic Insurance has unique insights into the credit and solar space. They’ve built a new product from the ground up. Traditional carriers and reinsurers often avoid new risk because data doesn’t exist for these markets. But when we met Energetic, they had unique insights on risk into a sector that many had previously been considered “high” risk. They partnered with SCOR early on for reinsurance. Similarly, the company FutureProof has a core team that possesses strong expertise in the climate space. We invested in them early, and later supported them on the insurance front.
Traditional reinsurers often won’t give capacity to startups without data. They ask for a minimum of 3 years of data, but young startups won’t have this before they launch, so we’ve invested in solutions that can address reinsurance such as Vesttoo and Accelerant. We are seeing new structures being created every day as the industry evolves. While we have not made a bet here yet, we are also looking at crypto + reinsurance.
New distribution channels
Distribution is about getting access to the right people at the right time. While they’re not an insurtech, our portfolio company Multiplier, a global employee management platform headquartered in Singapore, provides insurance for employees on the platform. They have the ability to create a great experience for their users.
You touched on the importance of the founder. What characteristics do you value most?
The team is our biggest consideration. And related to this is the founder’s ability to lead. I especially like creative thinkers, people who look for solutions outside the box. People have different styles of leadership. Some leaders are extroverted, while others are introverted. Some are more technical, and others have a sales background. It helps to be self aware so they can find the right people to enhance the team. All can be successful as long as they can communicate and manage key stakeholders, which include employees, customers, and investors. They need to be able to block, tackle, and execute plans successfully.
For an MGA, low loss ratios, big markets, and retention of “good” risk will make you popular regardless of personality (assuming you’re a decent human being).
What are the problems that you’re seeing when it comes to InsurTech?
The sector is saturated with startups providing solutions that incrementally improve a problem. This might have been interesting 5 years ago, but today it’s a lot easier to build an insurtech (partially due to platforms like Socotra). There’s plenty of tech-enabled insurance, so the bar for an investable MGA is a lot higher now.
Within insurtech, are there any types of businesses you’re most interested in? What trends are you seeing in 2022?
It can be finance and insurance, crypto and cyber, health and lending, or mobility and health. We keep an open mind and really like seeing unique models. The embedded trend is evolving. In my ideal world, I don’t want to think about car insurance, electronics insurance, cyber insurance, home insurance, etc. I just want to live. Our job is to make it easier for customers to make fewer choices but have better coverage. Most people think they want more insurance options, but the reality is most people don’t want to spend more time thinking about insurance. They want sufficient coverage and to feel empowered to live their lives.
Insurance was built to better manage risk and take care of people we care about. As the creators of the next generation of insurance, it’s our responsibility to give people an easier way to understand and consume insurance.
Thank you for taking the time to meet with us today, Tiffine. For our last question, how can interested startups get in touch with MS&AD Ventures?
QUICK START GUIDE
Get three essential steps to building an InsurTech MGA in 2022