Small business insurance providers will soon have two new competitors from the technology world.
Next Insurance, an online shopper for small businesses, today announced a $13 million seed investment led by investors Zeev Ventures, TLV Partners and Ribbit Capital. Next Insurance plans to launch its first product in the spring.
Last week, New York-based CoverWallet launched what it calls its online insurance manager, which it said received $2 million in seed funding from Two Sigma Ventures, Highland Capital Partners, Founder Collective and other angel investors. This startup promises to provide small business owners with a concierge-like service that helps them navigate the details of commercial insurance.
CoverWallet’s entrepreneur and co-founder, Inaki Berenguer, said he sees an opportunity to leverage data, design and technology to deliver a better experience to what he estimates are the “more than 20 million underserved small businesses in the United States that struggle with managing their risk and insurance needs.”
CoverWallet aims to bring small business insurance customers the same consumer-friendly online technologies many of them already use to manage accounting, sales, payroll, banking and human resources. Its features include automatic risk analysis, document management, benchmarking and data analytics, intelligent data driven risk and insurance assessments, coverage recommendations, peer risk comparisons and claims support.
The online platform currently manages commercial insurance including general liability, commercial property, workers’ compensation, professional liability, errors and omissions and cyber liability coverages and policies. The platform provides online servicing options. It provides access to online insurance experts to answer questions and CoverWallet promises to respond via email, phone, video or online chat to “talk as much or as little as a customer wants.”
The CoverWallet founders anticipate that over the next five years every small business will need a digital insurance manager similar to the CoverWallet.
“Shopping and managing insurance policies from multiple brokers can be really painful,” said Rashmi Melgiri, CoverWallet’s chief operating officer and co-founder. “Businesses need a single, central location to rely on for everything from understanding their risks to managing their policies.”
Next Insurance was founded by tech entrepreneurs Guy Goldstein, Nissim Tapiro, and Alon Huri, who were on the executive team at mobile payments company Check, which was acquired by Intuit in 2014 for nearly $400 million.
“We are changing the market with a solution that makes it simple, fast, and transparent for small businesses to find and obtain insurance online vs. having to physically visit agents each time they need to make a change,” said Goldstein, CEO. “Starting a new small business is exciting, and setting up insurance shouldn’t be slow, cumbersome, or get in the way of what’s important.”
Zeev Ventures is the investment arm of Oren Zeev, who was among the early backers of Audible, Houzz, Chegg, Tipalti and Younow. TLV Partners is a new Israeli fund whose partners have backed Varonis, Traiana, Check, Videosurf, AppsFlyer and Skycure. Venture capitalists at Ribbit Capital have been behind Credit Karma, Robinhood, Funding Circle, LendingHome, Invoice2Go, PolicyBazaar and others startups.
Online Small Commercial Market
The small commercial lines market is both growing and increasingly competitive. A recent report from McKinsey & Co. said the competition in this market will intensify as more small business customers exhibit their openness to buying via direct and digital channels and as more large insurance carriers enter the field.
The report, Small Commercial Insurance: A Bright Spot in the U.S. Property-Casualty Market, said that the shifting behavior of small business owners towards online purchasing presents new challenges for carriers, particularly those that use independent agents. While a segment of small commercial insurance buyers will always value independent agents, an increasing percentage are open to the direct route and may only be using agents to close a deal because direct binding isn’t readily available, according to the report.
The McKinsey warning isn’t new. According to a 2013 study by consultant Deloitte, more than half of small businesses (52 percent) said they were ready and willing to buy their insurance direct from a carrier over the Internet without an agent or broker. However, as the McKinsey report found, they were not buying it online in great numbers in the U.S. for a number of reasons including the lack of a binding option but they were interested.
Independent agency carriers are not unaware of the challenges ahead in small commercial lines. A number have joined the TrustedChoice.com online commercial insurance platform backed by the Independent Insurance Agents and Brokers of America (Big “I”) to sell small business insurance.
Bolt has for several years been providing online access to personal and commercial lines products from national insurance companies, managing general agencies and wholesalers.
Insurers are also investing in digital platforms including CoverHound, 24 percent of which is now owned by ACE Ltd. (now the new Chubb). CoverHound is building a small commercial insurance platform. Insureon, an online agency for small business insurance, raised more than $30 million last October. Seattle-based AssureStart, backed by the American Family Mutual Insurance Co., which sells to business with fewer than 30 employees, is backed by the American Family Mutual Insurance Co. Insurer Hiscox has been expanding its online platform for small businesses for a number of years.
Last December, Berkshire Hathaway Inc., which owns GEICO, created Berkshire Hathaway Direct Insurance Co. to sell insurance directly to businesses over the Internet. The new insurer planned to initially focus on workers’ compensation and business owners’ package policies.
Many insurers offer online service portals for small commercial lines customers.
- Why Small Commercial Lines May Not Be So Bright for Agency Carriers
- Small Commercial Buyers Moving Online: Who Are They? What Do They Want?
- How Carriers, Agents Can Adapt As Small Commercial Buyers Move Online
- ACE Takes 24% Stake in CoverHound’s Online Commercial Insurance Plans
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