State Auto Labs Corp., the innovation arm of Columbus, Ohio-based State Automobile Mutual Insurance Co., has launched a $25 million corporate venture fund to support entrepreneurs and innovations in the insurance industry.
State Auto Labs said it is collaborating with Rev1 Ventures, a fund that is active in the Great Lakes region, to support insurtech and fintech startups with capital, technologists and insurance industry experts.
The insurer hopes to be able to identify and become an early adopter of new technologies through the effort.
“The insurance industry is in the midst of an enormous transformation and is poised for a bigger disruption over the next five years than its undergone over the past 50 years,” said Kim Garland, managing director of State Auto Labs, who also heads the company’s Personal Lines operation. “This next progression will come from both inside and outside of the insurance industry. The insurance companies that will be successful in the future are those that leverage innovations from a variety of sources.”
The venture fund will focus on four key areas of investment: Internet of Things, machine learning and artificial intelligence, distribution technologies and new products such as those for the sharing economy, insurance-on-demand and claims management.
“This is a critical time for the insurance industry, and we recognize that there is a better way to support the development of innovations that will fuel business success for startups and deliver cutting-edge technologies for enterprises,” said Tom Walker, CEO of Rev1 Ventures.
Rev1’s current portfolio features companies in medical, education, manufacturing, social media and other business fields including VES, a virtual education system; ScriptDrop, a prescription delivery service; PriorAuthNow, a prior authorization app; and Complion, a clinical research compliance service.
State Auto Labs was established last November.
State Auto Labs is far from the only insurer looking to invest in new technologies.
The Midwest is home to the three-year old Iowa-based Global Insurance Accelerator, which is backed by several insurers including Grinnell Mutual Markel, EMC, Farm Mutual and Farmers Bureau. It connects insurtech entrepreneurs with insurers for capital and mentoring.
In February, David Miles, owner of the insurance carrier asset management firm Miles Capital, and Matt Kinley, a Pappajohn Capital Resources investor, launched ManchesterStory Group, a venture capital firm backed by insurance companies from across the country. The fund has yet to reveal the carriers that are backing it.
The Hartford, Conn. area also now has its own insurtech accelerator with support from Cigna, The Hartford, Travelers, USAA and White Mountains.
Other insurers and reinsurers have gone the route of State Auto Labs in setting up their own investment funds. They include XL, Munich Re/HSB, Markel, Liberty Mutual and Starr Companies.
Insurtech funding totaled close to $1 billion in the 2017 second quarter, nearly 150 percent higher than the same period a year ago, according to a quarterly report on the sector from Willis Towers Watson and CB Insights. There were 31 private technology investments by insurers and reinsurers during Q2, according to the report.
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