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US-based insurtech Oscar Health has secured a $165 million funding round led by Brian Singerman and Founders Fund, with participation from 8VC, Verily Life Sciences, and Fidelity, among others.
This brings the company’s total funding to $892.5 million, and it now has a reported valuation of $3.2 billion, according to sources who spoke with CNBC. Oscar is known for offering individual coverage under the Affordable Care Act (ACA). The funding will be used to form new partnerships with insurers including Cleveland Clinic, Humana, and AXA. Additionally, Oscar wants to expand into four to five cities every year, with destinations selected in Texas, Ohio, and New Jersey for 2018.
The funding comes as Oscar Health is evolving its business model. The current US administration has made updates to legislation and regulation that have forced many insurance players, including Aetna, Anthem, and UnitedHealth Group, to make changes and scale back their ACA business.
Oscar is no exception to this, and has also made alterations to its operations recently, by moving away from focusing on individual plans to directly integrating with doctors and hospitals, as well as offering group plans through employers and raising premium rates. These changes likely contributed to the insurtech reporting its first underwriting profit of $4 million in Q3 2017, versus a $36 million loss in the 2016 quarter, and probably encouraged investors to contribute in this latest funding round.
Staying flexible in a changing environment will help Oscar to stay successful. Given the ongoing debate over how to handle health insurance legislation in the US, Oscar is wise to stay flexible and evolve its business model to ensure that it stays relevant in the country. Being flexible is likely more of a possibility for Oscar than for bigger players like AXA, which might make it easier for the insurtech to find more legacy partners in the future, as they will be able to offer new and more suitable products quicker.
Additionally, raising this large funding round from a variety of different investors suggests that there is still a lot of trust in Oscar’s future success.
Business Insider Intelligence, Business Insider’s premium research service, has compiled a report that will briefly review major changes in the insurtech segment over the past year. It will then examine how startups and legacy players across the insurance value chain are using technology to develop new business models that cut costs or boost revenue, and, in some cases, both. Additionally, we will provide our take on the future of insurance as insurtech continues to proliferate.
Here are some of the key takeaways:
- Funding is flowing into startups and helping them scale, while legacy players have moved beyond initial experiments and are starting to implement new technology throughout their businesses.
- Distribution, the area of the insurance value chain that was first to be disrupted, continues to evolve.
- The fundamentals of insurance — policy creation, underwriting, and claims management — are starting to experience true disruption, while innovation in reinsurance has also continued at pace.
- Insurtechs are using new business models that are enabled by a variety of technologies. In particular, they’re using automation, data analytics, connected devices, and machine learning to build holistic policies for consumers that can be switched on and off on-demand.
- Legacy insurers, as opposed to brokers, now have the most to lose — but those that move swiftly still have time to ensure they stay in the game.
In full, the report:
- Reviews major changes in the insurtech segment over the past year.
- Examines how startups and legacy players across distribution, insurance, and reinsurance are using technology to develop new business models.
- Provides our view on what the future of the insurance industry looks like, which Business Insider Intelligence calls Insurtech 2.0.
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