(Image credit: Dollar Photo Club.)
Earlier this year, global insurer AXA (Paris) founded AXA Strategic Ventures (ASV), a €200 million venture capital (VC) fund that evaluates emerging strategic innovations relevant to insurance, asset management, financial technology and healthcare service industries. AXA describes ASV a dedicated to fostering entrepreneurial discovery and improving customer experience. ASV is headquartered in Paris, but has offices in San Francisco, New York, London, Zurich, Berlin and Hong Kong.
The founding of ASV reflects one of the most important trends in insurance technology today—carriers’ investment in startups or other entities on the cusp of technological developments, especially those in consumer-facing capabilities, the Internet of Things and data analytics. Whether through dedicated entities such as ASV or through internal departments, carriers are seeking to access emerging capabilities through companies that are pushing the innovation envelope. Nearly half of respondents to Accenture’s 2014 Digital Innovation Survey reported to be either planning to acquire a startup or having completed such an acquisition. Earlier this year CB Insights reported a 460 percent increase in insurers’ startup deal activity.
Insurance Innovation Reporter had the opportunity to speak with Manish Agarwal, general partner of ASV on AXA’s thinking about investing in innovative technology companies. Agarwal has held various senior positions at AXA, including head of Financial Protection of AXA, responsible for the major units of the company’s life insurance business. He earlier ran Business Development and Strategy for AXA Equitable and oversaw sales support and strategy for AXA Advisors, the company’s retail distribution channel. He joined AXA in 2005 as VP of its newly formed Strategic Initiatives Group.
Insurance Innovation Reporter: Tell us about the thinking behind the founding of ASV. What were its origins at AXA?
Manish Agarwal, AXA Strategic Ventures: I think if you look at technology innovation in the insurance space, it’s behind some other industries, including financial services. There are certainly examples of innovation, but not as much as in other industries. That’s not to say that in the insurance industry we don’t spend a great deal of money on digital capabilities. We do, but the investments we make tend to have a fairly short-term return, say, one or two years. At AXA we realized that we can benefit from more far-reaching innovation that is more in the three- to five-year term. There’s a whole ecosystem of companies that we’re not getting access to, and we thought a VC approach would be a way to do so. We also saw benefit in getting involved with companies early enough in their lifecycle that we could learn from them and hopefully help them. The insurance space is complicated, from a regulatory perspective, so they could benefit from our expertise in that regard. And certainly we could benefit from their ideas four or five years earlier than otherwise.
IIR: How would you describe the need to invest in technology companies, such as we’re increasingly seeing across the insurance industry? Is Innovation happening too fast for insurers to keep up with organic internal efforts?
MA: Innovation is certainly happening fast, but it may be more accurate to say that the challenge is that innovation is happening in so many different places. If it were just a matter of speed, we could keep pace internally, but because it’s happening in so many places it makes sense to partner with others.
IIR: How does ASV function relative to the parent company? To what degree is it managed by AXA corporate, and to what extent does it function more as a consultant in AXA’s benefit?
MA: ASV is a separate VC fund and AXA is the sole limited partner. Of course we want to make sure that our investments have some tie to AXA’s corporate objectives, but we do not need explicit business area support or sign-off. Also, if a business area wants us to make an investment, it’s not automatic that we would do so. So I wouldn’t consider ASV a direct extension of our corporate structure. We want our companies to work with AXA’s businesses, but the two things run parallel.
IIR: What kind of communication or cooperation typically happens between ASV and AXA’s operations?
MA: We connect our portfolio companies, where it makes sense, with AXA corporate. When we believe one of our portfolio companies will benefit, we certainly connect them to AXA—that’s a role we play. But we retain our independence so that we can act in the best interest of our portfolio companies. We do act in the benefit of both parties. We believe that our value to our investment portfolio companies is bringing expertise from AXA to help those companies grow.
IIR: AXA announced in July that ASV had invested in Limelight Health, a San Francisco-based company that provides mobile, cloud-based technology aimed at helping companies to simplify employee health benefits information and streamline the proposal, decision and renewal process. We could describe that as an investment in mobile technology, but in a fairly small niche. Tells us about the “whys and wherefores” of that investment.
MA: In the employee and health benefits space, when agents work to put plans in place, the process is not streamlined. Consequently, there’s a great deal of back-and-forth, with the insurer on one side, the employer on the other, and the agent in the middle. Limelight has created what we believe is a unique technology-driven solution that streamlines the quoting process. They have automated features, such as the way deductibles impact premiums. We believe that the solution will dramatically streamline that sales process. We want to use that, as well as see how the company develops and evolves.
IIR: Tell us about other investments ASV has made since its founding in February.
MA: We’ve announced one other investment, PolicyGenius, an online site that sells various insurance products—including term life, long-term disability, renters and pet insurance—that are not targeted by traditional advisors because of smaller policy value. They have an interesting approach to marketing that addresses people much more prone to buying online.
IIR: Give us some background on AXA’s and ASV’s view of investments has evolved and what that means for future investments.
MA: In Europe AXA had been running AXA Seed Factory, a venture fund focused on early-stage companies. We rolled that into ASV to create a unified investment platform. AXA Seed Factory had invested in about seven companies in Europe in areas such as big data and analytics. Those are areas we’re also looking at here in the U.S. Another big area of focus is anything broadly in the insurance stack that either streamlines processes or creates new products and offerings. We’re looking at the whole Internet of Things space, whether connected home or car or wearables. We’re also looking at marketing companies that will help our advisors market themselves better, and we’re looking at the robo-advisor space.