Allstate, Allianz invest $265 million in insuretech startup Next Insurance

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Allstate, Allianz invest $265 million in insuretech startup Next Insurance
Credit: © Reuters.

Next Insurance, a prominent insuretech startup, has recently secured a strategic investment of $265 million from Allstate (NYSE: ALL ) and Allianz (ETR: ALVG ). The investment is expected to bolster Next's growth, risk retention, and profitability while deepening its reinsurance relationship with Allianz Re. This comes as part of Next Insurance's strategic digital transformation efforts aimed at the small business market.

With over half a million customers and nearing $1 billion in premium revenue, Next Insurance is focusing on digitizing services for the small business market, which consists of over 30 million owners in the U.S. The company offers general liability, commercial property, and workers' compensation coverage through its online platform and has partnerships with Intuit (NASDAQ: INTU ) and Gusto. Additionally, it's developing commercial auto insurance products in collaboration with Allstate.

The strategic investment is seen as crucial amid a fragmented commercial insurance market that remains heavily reliant on manual processes despite the annual growth of e-commerce sales at about 10%. This situation was further emphasized during the COVID lockdowns.

The startup crash of 2022 led to a significant decline of pre-profitability public insuretechs like Root Insurance and Lemonade by 78% in 2022 and a further 15% this year. This downturn has resulted in strategic investors playing a more prominent role in insuretech funding. Despite these challenges, Next Insurance aims to become profitable.

Insuretech funding is expected to reach approximately $1.6 billion in deals in Q3, on par with the previous year. Nonetheless, public market exits have been minimal due to investor skepticism following recent IPOs and SPACs from the insurance sector.

Nazim Cetin, CEO of Allianz X, and Guy Goldstein, CEO and co-founder of NEXT, have expressed their commitment to serving the 33 million U.S. small businesses. NEXT has received over $1.1 billion in venture capital funding and serves over 500,000 business owners. This follows successful investments by Allianz X in Pie Insurance and Coalition.

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