Significant numbers of insurance startups are emerging in the market today, and many are providing brilliant tech-based solutions.
Insurtech startups have shown so much promise that venture capital firms are starting to invest heavily in them. In fact, between 2011 and 2017, VC funding for insurtech companies grew 31% annually.
Between Series B and Series D funding, $2 billion to $3 billion is being directed to insurance startups annually. Here is a look at some of the most exciting insurtech startups that are receiving significant funding.
Lemonade is a home and renters insurtech company that is making a lot of waves. The company launched in New York in 2016 but now is planning to expand into California. Lemonade uses artificial intelligence and behavioral economics to optimize accuracy and efficiency.
After its latest round of funding, Lemonade has generated $60 million in total. This makes it one of the biggest players in the insurtech startup space. Lemonade’s funding is not coming from average VC firms; it is coming from high-level sources, such as General Catalyst, GV (Google Ventures) and Sequoia.
Friendsurance received $15.3 million in its latest round of funding. The majority of the money invested in this round came from the Hong Kong-based Horizons Ventures.
Friendsurance is a sophisticated peer-to-peer insurance startup that has its headquarters in Berlin. Originally, it was only a national company, but it is now expanding internationally.
In addition to Horizons Ventures, Friendsurance has received funding from Otto Group Eventures, the European Regional Development Fund and the German Startups Group. With so much financial backing, and a steadily growing customer base, Friendsurance looks poised to succeed internationally.
Amodo is a Croatian insurtech that helps insurance companies get the most out of connected devices. The company lets customers build profiles and provide data, which helps insurance companies address the specific needs of each customer much better.
For example, with Amodo’s Connected Customer Platform, insurance customers can use their smartphones to prove that they spent time at the gym, to earn lower premiums on health insurance.
Like Lemonade and Friendsurance, Amodo has also attracted the interest of some major VC companies. In 2016, Amodo received 450,000 euros of seed funding from an Austrian VC, SpeedInvest.
Also like Lemonade and Friendsurance, Amodo is in the process of expanding. The company is trying to break out of the local Croatian market and spread across the world.
In the past few years, technology finally appears to have become as useful for insurance as it has for many other industries, such as finance, social networking, and media.
This is because insurance companies thrive on data, the compiling of which has become much more advanced.
Lemonade, Friendsurance and Amodo are but a few examples of the excitement VCs have for insurtech. As more and more of these startups improve the insurance world for insurers and customers alike, the list of VC-funded insurtech startups will grow exponentially in the coming years.
In a meticulously planned operation, we filed for a license in 47 states simultaneously. We’ll be revealing the first states in which Lemonade will become available in a couple of months. One thing’s for certain, 2017 is going to be an interesting ride! Stay up to date with news about our progress here…
Now that I got this off my chest, I can add some color to why we’re doing this.
Many tech startups go through the famous Local vs. Global debate as they start to plan a market penetration strategy. This dilemma was born with the arrival of modern internet commerce and became even more prevalent with the emergence of SaaS companies that provide global coverage right out of the box.
When you’re selling a digital product, going global may seem like small overhead. Reality is a bit different, though, and, more often than not, small startups that take a bigger bite than they can swallow get into trouble.
When feasible, startups should consider aiming their launch beams at a single city or even a town with population that represents their typical customer.
1. Know thy users, and design for them
It always amazes me how often startups overlook usability testing during the initial design phase. Having videos of random people playing with your (barely working) mockup is priceless. We learned more in a couple of days of testing than we did in months working in our office.
The cool thing is that you only need about five testers to get value out of a session like that, so there’s really no excuse to not doing it. The smaller the area you launch in, the better the chance of getting valuable data in a user testing session.
We spent hours in WeWork and Starbucks with our early stage, smoke-and-mirrors version of the Lemonade app. We would show it to people, ask for their feedback, ask them some questions and record the entire session. We would then sit in the office and analyze the videos to figure out what worked and what didn’t.
Our early Starbucks user testing sessions allowed us to launch a relatively mature product into the market and achieve faster adoption by our New York customers.
Product launches require spending some money. To improve the chances of success, it is recommended to fuel the organic interest generated by social noise and PR efforts with some paid channels. Got a story in TechCrunch? Bloomberg? It will probably die down quicker than you think.
A nice trick is to use content recommendation tools like Outbrain and Taboola to promote content to users who may be interested in it. Google Ads are another obvious choice. Choosing the right outlets is one thing, but there’s a huge difference in costs between a global campaign and a local one.
This becomes much more dramatic when your company requires additional resources to operate in each region like Groupon and Uber. Lemonade recently closed its third round of financing ($60 million in one year of operation) from top VCs such as Google Ventures, General Catalyst, Thrive, Sequoia, Aleph and XL Innovate. We’re going to use this money to drive our expansion throughout the country and activate specific markets the way we did in New York.
3. Surgical use of media coverage
Getting great media coverage takes a lot of attention and time. Whether you can afford an agency or not, you’ll have to choose your battles well. Launching in a specific city allows you to focus on the outlets that are most relevant and will simplify your pitch to journalists.
If you’re creating something exclusive for a certain region, reporters who cover that region usually have a hunger for tech stuff that is happening, or launching in their hometown before everywhere else. BTW, there’s a case for launching in unexpected places like Portland or Philadelphia, which usually don’t get much attention from the tech and consumer industry for new products. There’s a good chance that media reach (which expands far beyond just the place you’re starting from) will be much stronger.
We chose New York for Lemonade’s home. We see NY’ers as an ideal representation of our target demographic and personality. So we invested our efforts in a select few outlets that are read by our first wave of early adopters of the city’s financial workers and young professionals — NY Post, Bloomberg and Wall Street Journal.
4 . Brand and messaging
Building a great brand involves a lot of consumer psychology. You spend weeks trying to figure out the best tagline, the perfect ad and the right illustrator to do your art. If you get this right, you have a real chance at grabbing your customers’ attention.
The first few months of brand activation are critical. Limiting yourself to a select region or demographic allows you to be laser-focused on framing and positioning.
Building an insurance company from scratch, in New York, one of the toughest regulatory environments in the country, is a huge undertaking. The sheer complexity and investment required to get to the starting point includes raising a lot of capital and hiring the right people to be able to get licensed by the state’s Department of Financial Services.
This is the life of a company that operates in a highly regulated industry, and it’s unlike anything I’ve ever seen in the tech space. For Daniel and me, the decision to start in one state was simple. There’s no other way. Insurance carriers have to choose a state. Just one. And then maybe, if you play nice, regulators will let you go for more.
We wanted to launch Lemonade in one state — NY, and even more so when we realized we had no choice 🙂
In the last three months since our New York launch, we’ve had overwhelming demand coming in from all over the country to open up for business in more states. This was very encouraging because it showed us hints of initial demand and product market fit to people and age groups that we never thought would be our early adopters.
But what surprised us most was the excitement coming from unexpected places, such as government offices and regulators. Having a favorable regulatory environment is a great opportunity to bring an honest, affordable, transparent and fun insurance experience to everyone in the U.S.!
Be the first to know how we’re making progress with our nationwide expansion.
Here’s the list of states where we will gradually launch in the coming year or so:
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, Wisconsin
* States in bold represent the ones most requests to launch came from
This article originally appeared here, and you can find more about Lemonade here.