Greenberg’s stake in CoverWallet doesn’t end insurtech’s fundraising
CoverWallet will need more capital to scale, drive deeper user engagement, and possibly enter new markets and new business lines.
New York-based CoverWallet will likely seek another round of funding to support its growing business, despite having just secured a venture round of financing from Starr Companies, an insurance and investment firm owned by Maurice “Hank” Greenberg.
Rashmi Melgiri, co-founder and COO, says the startup, which offers a digital alternative to insurance brokerage, says additional capital will go to scaling the business, which might include expanding the platform’s focus on property and casualty insurance for small- and medium-sized businesses.
The company has so far raised more than $9.8 million in equity funding from seed and a Series A round, including investment from Union Square Ventures, according to Crunchbase. CoverWallet declined to disclose the terms of size of Starr’s investment, announced earlier this month, but it is a strategic stake.
Melgiri did not detail specific fundraising needs, but says the business is growing rapidly. It now employs over 70 people. Half are in sales and the other half are engineers, product designers and customer-acquisition specialists.
Small can be beautiful
She founded the company in 2015 with entrepreneur Inaki Berenguer on the premise that the insurance industry was not sufficiently friendly to smaller customers.
In the U.S., small businesses buy a variety of insurance products from carriers via their agents, but big insurers and top-tier brokers find it expensive to service small customers, so pricing and service levels are poor, and incumbents haven’t bothered to invest in technology to improve the experience.
CoverWallet launched its online platform to provide better customer experience for small businesses. “Carriers still underwrite risk, but we do customer experience,” she said. Companies using its app can access quotes and make purchases, as well as manage ongoing covenants in their policies.
The U.S. boasts a P&C insurance industry worth $100 billion in annual premiums, fragmented across around 500,000 independent agents and advisors. Even the biggest carriers have only a tiny market share, Melgiri says; meanwhile, the average age of these agents is now 57 years, most of whom operate via fax and physical mail.
The biggest challenge for CoverWallet has been to get carriers to agree to collaborate and make their policies available on the electronic platform. But Melgiri says that has changed in the past year, as more insurance companies are racing to digitalize their business.
There are similar companies in Asia that provide online comparison apps for insurance, such as CompareGlobal, GoBear and PolicyPal, but these are aimed at consumers, not businesses. They also tend to offer a broader array of insurance, whereas for now CoverWallet just does P&C.
The company faces direct competition in the U.S., however, including startups such as Insureon as well as directly from carriers trying to digitalize their P&C offering, such as Berkshire Hathaway Speciality Insurance.
All of these companies are competing to conquer the newly emergent space of digital sales. The U.S. offers a large, fragmented market mostly reliant on traditional, low-tech business processes. They are all adding new industry groups and policies that specialize in catering to their needs, from covering property to workers’ compensation to directors’ liability.
Melgiri says possible areas of expansion CoverWallet are to go international; to add benefits-related insurance (health and life) to its product set, which would require additional licensing; and to white-label its services for insurance brokers.
She told DigFin that there were no immediate plans to do any of these. The company’s focus for now is on better integrating the service. Most customers use it for getting quotes, but not yet for buying policies or to manage policies over their lifecycle. “We want to grow the percentage of customers that purchase policies online,” she said.
A digital approach allows customers to do a lot more by themselves. Algorithms can measure the risk a company will face and the type and level of insurance they should consider. CoverWallet’s app also shows users the average premiums such policies command in the market.
That said, the company’s experience is that most customers still want to speak to a human being before they buy. The same goes for managing their existing policies, which require intervention when a company’s circumstances or employment profile changes. That’s why half of CoverWallet’s staff consists of licensed agents. Improving the customer experience is meant to make this process smoother, so that customers wean themselves off the need for human interaction.