🔒Through venture funds, insurers bet hundreds of millions of dollars on new technologies, insurtech companies

Two major insurers with strong ties to Connecticut — Bloomfield-based health services conglomerate Cigna and Munich Re, the German parent company of specialty insurer Hartford Steam Boiler — have upped their venture capital capacity in recent months, channeling resources to smaller, newer firms that can and already have helped the investor companies navigate an evolving and increasingly tech-centered marketplace.

The two insurance giants have different approaches to risk capital and have recently allocated hundreds of millions of dollars in fresh venture funding to seek out new investments.

Cigna, through its Cigna Ventures wing, is interested mainly in helping develop tools and products it can fold into its health offerings to clients, while Munich Re’s investment group, Munich Re Ventures, is focusing on “risk-transfer,” or evaluating and predicting risk in the market and real world.

Recent developments at both companies underscore the increasing importance of strategic venture investments in the healthcare and insurance sectors, which are being turned on their head by artificial intelligence, automation, telehealth and other emerging technologies.

While some insurers dabbled in the venture world as early as 2000, the rise of insurtech and healthcare delivery technology and analytics means that few players can afford to sit on the sidelines anymore.

Aside from Cigna and Munich Re, property and casualty insurer The Hartford makes investments through its finance and strategy department, and Rhode Island-based CVS Health, parent company of Hartford health insurer Aetna, operates a dedicated VC segment, CVS Ventures, which focuses on promising, early-stage companies.

Nassau Financial Group has a Hartford insurtech incubator program called Nassau Re/Imagine.

Jacqueline LeSage, managing director of Munich Re Ventures, helped launch The Hartford’s venture operations, and prior to 2008, she said the venture capital world and insurance sector hadn’t fully connected.

That changed, she said, in 2013, when agribusiness conglomerate Monsanto acquired Climate Corp., which was developing data science tools to help farmers manage their crops and predict weather events. Venture capital began flowing to similar businesses, including insurance-related startups, putting the insurtech sector on the map.

Within a few years, insurance companies began getting into the act.

“Once you’re in the sights of venture capital, it makes sense to engage with that ecosystem,” LeSage said. “There are opportunities because there’s a lot of tech and business model innovation. But there’s also risk, because you don’t want to be creating your own competitor.”

The city of Hartford has made a push to become an insurtech hub, although the pandemic set those efforts back.

Several local insurers — including Cigna, Travelers Cos. and The Hartford — provided funding to help launch the Hartford InsurTech Hub accelerator, which attracted dozens of startup companies from across the globe to Hartford, to participate in three-month business development programs.

The accelerator ended in 2020 after funding dried up.

Earlier this month, Connecticut and the United Kingdom announced a cooperative agreement to form the so-called InsurTech Corridor, which aims to foster closer business ties between the partners and help build up their respective insurance technology industries. They’ve pledged to share knowledge and resources that would enable insurers in both territories to explore and expand into each other’s markets.

Next month, InsurTech Hartford, an industry trade group, will be hosting a two-day insurtech symposium at the Connecticut Convention Center.

New partnerships

Cigna launched Cigna Ventures in 2018 with an initial $250 million investment.

Since then, the business has helped guide young partner companies and paved the way toward acquisitions for some of them, while also providing Cigna with a stream of new products and resources. With its work paying off, Cigna in February committed a fresh $450 million to venture capital operations.

“The reason we exist is to help clients and customers have a much better, simpler, more predictable, more affordable healthcare experience,” said Tom Richards, Cigna’s global lead of strategy and business development, and overseer of Cigna Ventures.

The unit is healthcare-centric, focusing on three areas: insights and analytics; digital health and experience, which centers on improving customers’ interactions with health services; and care delivery and enablement, which covers telehealth and digital health and looks for ways to deploy care more efficiently and effectively.

“We are very much tied to Cigna’s strategy,” Richards said. “In the vast majority of our investments, Cigna is also a customer. We’re not just investing because something looks interesting. All the companies we work with are doing interesting things, but it’s very much tied to the value we can bring back to clients, customers and providers.”

Richards described Cigna Ventures’ investments as partnerships, in which the insurer provides companies with expertise and insights to help them grow.

He offered the example of MDLIVE, a telehealth company that Cigna began using in 2013. Cigna Ventures invested in MDLIVE in 2018, taking on a board-observer role and actively assisting with product development; three years later Cigna’s health services arm Evernorth acquired MDLIVE outright.

The buyout has helped Cigna further develop and refine its telehealth offerings, which it was building up long before the COVID-19 pandemic made virtual care a necessity for doctors’ offices, clinics and hospitals across the country.

Another success story is Buoy, which Cigna has invested in since 2019. When the pandemic hit, Buoy came up with a tool to help users self-diagnose COVID-19, and Cigna got the application up and running across its different platforms and portals, where hundreds of thousands of customers had access to it.

Richards said the new capital infusion will help Cigna speed up its work in the venture world.

“I’d say what we’re looking to do is just accelerate,” he said. “There’s so much opportunity. In health care, we do a lot of innovation ourselves, but we think there’s a lot of value in helping these new companies.”

Controlling risk

Munich Re late last year closed a new $500 million venture fund, known as Munich Re Fund II, which will invest in areas such as climate technology, transportation, insurtech and cybersecurity. The addition brings the venture segment’s total assets under management to over $1 billion.

LeSage said Munich Re’s venture activities started in 2014. At the time, they were only focused on Hartford Steam Boiler’s core lines, such as industrial and commercial equipment insurance and cybersecurity, but eventually the entire company saw the value and got onboard, switching to a traditional fund structure supported by all of Munich Re’s different subsidiary companies.

Munich Re now has several different funds, centered on sectors such as insurtech, industrial and commercial equipment, transportation and — of ever-increasing importance — cybersecurity and climate technology.

“The focus is not only what’s going on in insurtech, but what’s going on in the world, to help mitigate those risks,” LeSage said.

On the cyber front, Munich Re has invested in At-Bay, a cyber insurance provider that underwrites insurance policies through Hartford Steam Boiler. Both entities are seeing new demand for their services as damaging cyber attacks continue to strike U.S. and European firms, and governments try to incentivize companies to adopt safeguards.

LeSage said major insurers will likely continue to pour resources into their venture strategies to fuel growth.

“It’s been a success story for the venture sector and the insurance industry,” she said.