Maturing Auto Insurtech Segment Looks to Highlight Shopping Options, Education to Grow
AM Best: A positive outlook on innovation in the auto insurtech space is reinforced by a continued record-breaking flow of funding.
- Renée Kiriluk-Hill
- October 2021
Delivering fast, cheap pricing for automobile insurance isn't the end game for players in the burgeoning insurtech industry. Rather, awareness of shopping options and consumer education are emerging as two important new opportunities, said Marty Sansone, The Zebra's vice president of insurance.
“As consumers increasingly gravitate toward the 'one-stop shop' model they get from other industries, insurtechs and carriers must approach the customer experience journey beyond the pure insurance shopping to bring new segments of shoppers through their door,” he said.
Like a spate of insurtechs in recent years, The Zebra, an auto insurance aggregator, has expanded, in part, through capital raises. In April, it raised $150 million in Series D fundraising rounds, moving its valuation past $1 billion.
The auto insurtech ecosystem is very diverse, with many different players catering to many unmet needs. While providing an outlook for such a diverse set of players is hard, it is fair to say that overall, AM Best has a positive outlook on innovation in the space.
AM Best Associate Director Edin Imsirovic said ultimately, insurtechs and their investors learning just plain “tech” isn't going to get them to profitability, particularly as they tread into a space where incumbent players are already leveraging technology to a greater degree than the overall insurance industry.
“The auto insurtech ecosystem is very diverse, with many different players catering to many unmet needs. While providing an outlook for such a diverse set of players is hard, it is fair to say that overall, AM Best has a positive outlook on innovation in the space,” Imsirovic said. “The positive outlook is reinforced by continued record-breaking flow of funding.”
Equity funds have invested heavily in insurtech, along with incumbents such as Munich Re. Longtime carriers have created companies, such as Allstate with Arity or USAA's plan for telematics-based Noblr Inc.
Auto insurtech underwriters have raised the bar, but they set it at a level that's pretty easily attainable by legacy writers, said Risk Information Inc. Editor Brian Sullivan. “The name of the game is how they interact with the customers,” rather than building a better model, the way Netflix did in film and TV content distribution, he said.
These are some of the companies moving forward in the insurtech space:
What they do: Allstate established the mobility data and analytics subsidiary to operate its connected car business and generate third-party business.
Parent/President: The subsidiary of publicly traded Allstate is led by President Gary Hallgren.
Funding: Arity produced $64 million of revenue in the second quarter of 2021, compared with $26 million in the prior-year period. Net income of $1 million in the second quarter compared with a $3 million net loss a year earlier.
Cambridge Mobile Telematics
Headquarters: Cambridge, Massachusetts
What they do: The mobile telematics provider powers 79 programs globally with insurers, automotive manufacturers and mobile network operators. Its technology touches several million drivers daily through partnerships with 21 of the 25 largest U.S. auto insurers and globally.
Founders/CEO: Founder and CEO Bill Powers and founders and MIT professors Hari Balakrishnan, also Cambridge chief technology officer, and Sam Madden, Cambridge chief scientist, lead the company.
Key Investors/Funding: SoftBank Vision Fund invested $500 million in late 2018.
Headquarters: San Francisco
What they do: The pay-per-mile carrier also has Metromile Enterprise, which licenses its technology platform to insurers globally.
Founders/CEO: Founded by David Friedberg and Steve Pretre. The current CEO is Dan Preston.
Key Investors: Metromile became a public company in a February 2021 special purpose acquisition company merger with INSU Acquisition Corp. (NASDAQ: MILE).
Funding: The business combination was funded by INSU II's approximately $230 million cash-in-trust and $170 million of proceeds on previous INSU II shares private placement.
Headquarters: Columbus, Ohio
What they do: Root started with mobile-only auto coverage. It now offers auto insurance in 31 states, renters in nine states and homeowners in 13. It is partnering with used-car seller Carvana on an embedded product.
Founders/CEO: CEO Alex Timm and Dan Manges founded the carrier.
Funding: Root went public with an October 2020 initial public offering (NASDAQ: ROOT). It raised about $724 million in the IPO.
Headquarters: Jersey City, New Jersey
What they do: Sigo is a Spanish-first, fully bilingual agency that expanded to MGA services, started in Texas in August 2021.
Founders/CEO: The company was founded by CEO Nestor Hugo Solari, COO Julio Erdos and engineering Vice President Ivan Arambula.
Funding/key investors: Amicle Capital, Bonded Capital Ventures, Demeter Capital, Financial Solutions Lab, Park City Angels and gANGELS participated in a $1.5 million seed round.
South Korea Carrot General Insurance Corp.
What they do: Carrot is a full-stack insurer that can underwrite business.
Parent/CEO: The Hanwha General Insurance subsidiary was established through a joint partnership between Hanwha, SK Telecom, Hyundai Motor Group, Altos Ventures and Stic Investments and is led by CEO Paul Jung.
Funding: Has nearly $200 million in capital after raising $88.2 million in a recent rights offering.
What they do: The computer vision—a segment of artificial intelligence in which computers interpret digital images—financial services company said its AI analyzes auto claims in real time and can predict whether a vehicle is repairable, or evaluate needed repairs. It offers claims and other services for carriers and others including fleets, rental companies and manufacturers and recently started working with a Japanese insurer on typhoon property damage.
Founders/CEO: Co-founders are CEO Alex Dalyac, Chief Technology Officer Razvan Ranca and President Adrien Cohen.
Key Investors: Insight Partners and Georgian led the most recent fundraise; other investors include Ignition.
Insurance Partners: The company works with more than 20 major auto insurers globally, Tractable said, including Geico, Tokio Marine Nichido, Mitsui Sumitomo, Aioi Nissay Dowa, Sompo Japan, Covéa, Admiral Seguros and Ageas.
Total Funding: Raised $115 million and is valued at more than $1 billion.
Founded: 2015 as One
What they do: A digital insurer, active in five countries.
Founders/CEO: CEO Julian Teicke, Wefox Holding AG CFO Fabian Wesemann and CRO Dario Fazlic.
Key investors/funding: A $650 million Series C round was led by Target Global; Mubadala Ventures led a $235 million Series B round; Horizons Ventures and Target Global ran a $30 million Series A round; and Salesforce Ventures took the lead in a $5.5 million seed round.
Headquarters: Austin, Texas
What they do: The aggregator started with auto insurance quoting, recently expanded to homeowners and plans to add more personal lines.
Founders/CEO: Keith Melnick succeeded co-founder Adam Lyons as CEO in 2017. Lyons founded The Zebra with Joshua Dziabiak.
Key Investors: Accel and Weatherford Capital are the most recent of 13 investors. Others include Ballast Point Ventures and Silverton Partners.
Funding: Raised $256.5 million in seven rounds since 2013.