Israeli Earnix hits unicorn status following finance round
The company's current investors, Israeli Growth Partners, Jerusalem Venture Partners and Vintage Investment Partners also took part in the round, which raised $75m - driving Earnix to achieve unicorn status. The event was the insurtech's first funding round since 2017 and brings its total raised capital to $100m.
Launched in 2001, Earnix provides its customers with personalised rates and products using artificial intelligence (AI) and analytics. The company announced that the new injection of funds will be used to grow the insurtech internationally, as well as developing new products and support partnerships.
With offices in North America, Europe, Asia Pacific and Israel, Earnix has concentrated on growing its global presence following the increased demand in the marketplace.
Earnix AI technology
Motivated by advanced Israeli technology, Earnix plans to accelerate new product innovation while facilitating the fast development of its agile, open platform.
, the founder of Jerusalem Venture Partners who is set to become Earnix chairman, explained, "The company is growing to a point where this was a pre-IPO round. This is an industry that's been waiting for the disruption. It's been waiting for a platform that is both AI and very dynamic."
According to reports from Start-Up Nation Central, a non-profit organisation that tracks Israel's tech industry, the Israeli sector is growing at an extraordinary rate. Israeli startups overall raised a record $1.44bn in January, with six companies announcing funding rounds of at least $100m.
Earnix is just one of many expanding companies with Israeli ties in the insurance and fintech space. The list already includes Lemonade Inc., Hippo Insurance and Next Insurance.
Udi Ziv, Earnix's CEO, said the insurtech counts major clients such as NatWest Group Plc and Liberty Mutual, and that it would grow its workforce from approximately 200 at the start of 2021 to 350 by the start of 2023.
"We have been growing very fast and we're going to accelerate that very fast growth in terms of employees globally," Ziv said.
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.