Australian insurtech startup Honey Insurance has raised AU$108m (US$71.3m) in a Series A round. As the third-largest funding for a startup in Australia, it signifies opportunity in the home insurance sector amidst increasing natural disasters.
The three-year-old Honey Insurance, underwritten by RACQ Insurance, has captured around 1% of Australia’s home insurance market. It utilises smart home sensors from US Internet of Things (IoT) startup Notion to monitor risks like fires, water leaks and theft. Offered for free with policies, the sensors provide an 8% premium discount for improved risk data.
Gallatin Point Capital led the funding, reported Startup Daily. The US-based private investment firm has backed several emerging insurers, including US tech-enabled workers’ compensation insurer Pie Insurance and US-based reciprocal insurer Trusted Resource Underwriters Exchange.
Rising natural catastrophe risk is driving unsustainable home insurance premium increases in Australia. Premiums rose an average of 28% in 2023 and 12% of households now face affordability stress, reported the Actuaries Institute.
Yet despite premium hikes, Australian insurers have posted over AU$650 million (US$429.2m) in losses over the past four years.
Extreme weather accounts for only half of all home insurance claims, Honey Insurance’s co-founder and chief executive Richard Joffe told the Australian Financial Review.
Honey Insurance has been able to reduce premiums and payouts for the other avoidable half of the claims through preventative measures, said Joffe. The company uses its own AI software, public property data and satellite imagery to assess individual risks and offer lower rates to homeowners with newer or well-maintained features like roofs.
“Honey is sensitive to the affordability of home insurance in Australia, and as a result, is doing numerous things to try and work with customers to reduce risk and claims,” Joffe told the Australian Financial Review.
The company claimed strong growth, with revenue tripling to a recorded annual recurring rate of around AU$40m (US$26.4m). It is forecasted that revenue will triple again in the next 18 months and Joffe is confident the firm will hit the unicorn $1b valuation within three years.
Investor Gallatin Point Capital said Honey Insurance’s founding team, impressive growth and customer solutions were a “compelling combination”.
“We came to the conclusion that a genuine challenger like Honey Insurance is well overdue in the Australian homeowners’ insurance industry, and we are excited to be supporting their journey,” said Gallatin Point’s managing director Lance Toler.
Honey was recognised as one of Australia’s most innovative companies by the Australian Financial Review and named a finalist for the FinTech Australia Finnie awards in 2023.
