An influx of new capital into insurance-related technology ventures during 2018 did not directly translate into a material rise in the number of new full-stack carriers in the U.S.
The raw number, aggregate asset size and direct premium writings of the new insurers that commenced business* in 2018 fell to multiyear lows as startups pursued avenues other than forming fully licensed underwriting operations.
The 66 insurers that did launch last year had aggregate asset size of $1.12 billion, down from 81 new companies that boasted aggregate assets of $1.63 billion in 2017. Direct business written by the class of 2018 of $1.27 billion marked a decline from $2.76 billion from the newly launched carriers in 2017. Aggregate asset size of newly launched carriers was last lower in 2008; the combined premium writings were the lowest for similarly situated entities since at least 2007.
Insurtech-driven carriers continued to build momentum during 2018, but most of the headlines were focused on already established companies like Lemonade Inc. and Root Insurance Co. Distribution has been a particular area of emphasis, given lower perceived barriers to entry relative to the full-stack model, where companies operate as fully licensed insurance underwriting entities and are required to engage in the occasionally burdensome regulatory approval process to enter new states and launch new products.
Two of the 41 health insurers that commenced business in 2018 are state-specific subsidiaries of tech-focused Oscar Health group of companies: Oscar Insurance Corp. of Ohio and Oscar Garden State Insurance Corp. A number of the other newly launched health insurers similarly were subsidiaries of established groups that facilitated entries into new states or new markets. Many of the new health insurers, including four Spartan Plan companies and three Good Samaritan companies on the 2018 list, focus on Medicare or Medicaid business.
Centene Corp.'s Pennsylvania Health & Wellness Inc. ranked as the largest newly launched carrier in any sector. With direct premium volume of $483.4 million, it was the largest new health insurer by asset size at $126.3 million. The company began a new contract at the start of 2018 with Pennsylvania's Department of Human Services to provide Community HealthChoices services to Medicaid recipients in the state. It also participates in the federal Medicare Advantage program.
There was only one other new insurer across sectors generated in excess of $100 million in direct premium volume in 2018 — Health First Commercial Plans Inc. — a central Florida-based commercial health maintenance organization that was the successor by merger to two entities, one of which previously operated under the same name.
While 2018 was an active year for new health insurers, the P&C sector was unusually quiet. The 21 new companies matched 2014 for the lowest annual tally since at least 2007. Only two of those new insurers generated more than $10 million in direct premiums written last year.
The largest, ClearPath Mutual Insurance Co., emerged from the reorganization of KESA The Kentucky Workers' Compensation Fund. ClearPath said the mutual structure allows for greater growth and scalability, including in states outside of Kentucky, though its 2018 direct premiums written of $56.2 million represented a small decline from KESA's 2017 volume as a result of rate decreases.
The second-largest newly launched P&C writer was excess-and-surplus lines insurer Ategrity Specialty Insurance Co., based on its $10.4 million in direct premiums written. Four of the 21 new P&C insurers are newly formed members of the Ohio Farmers Insurance Co.-led Westfield group of companies. They were established to address certain product mix and geographic needs in the small business market.
Florida-domiciled carriers were notably absent from the list of newly launched companies, given that there were 43 insurers that commenced business during the 11-year period ended in 2017. Opportunities in the state's challenging personal and commercial residential property insurance market attracted numerous new companies over the years, and 2018 marked the first time since 2011 that no Florida-domiciled P&C insurers started business during a calendar year. The list for 2019 will include Journey Insurance Co., a property insurer majority owned by United Insurance Holdings Corp., which wrote its first policy in February.
Since the new entrants, in many cases, only operated for a portion of their first calendar years, their growth rates between their first and second years have oftentimes been rather high. Among those companies launched between 2013 and 2017, aggregate direct premiums written in their second years of operation have produced median growth rates in excess of 100%.
For 2019, however, the new crop of companies will be expanding off of a much smaller base.