Indio, a commercial insurance platform for brokers that aims to do what Sabre did for travel agents or Schwab did for wealth managers, said it has secured $2 million in seed financing.
Venture capital firms NEA, Compound, Merus Capital and 500 Startups participated in the round, along with insurance carrier Hiscox. Indio said it will use the seed round to grow its user base and platform.
Indio is a workflow management platform for traditional commercial insurance brokers that automates the manual processes of retrieving quotes from different carriers and processing insurance applications from clients. Brokers utilizing the Indio platform gain access to a connected commercial insurance marketplace, centralized quoting, and digital tools to interact with end clients.
Indio was founded by Paul Butler, Michael Furlong and Matthew Watson, a team with experience in traditional financial services and technology. Butler was one of the founding engineers at Marin Software, Furlong was a founder of Sliced Investing (Y Combinator, Khosla Ventures), while Watson was a former trader at Citigroup.
“We’ve seen a lot of startups approaching the space trying to replace the broker,” said co-founder Furlong. “We feel that the broker is a necessary part of the commercial insurance buying process. Indio takes a contrarian approach, empowering brokers with technology that streamlines their workflow.”
Furlong told Insurance Journal that while Indio works with brokers of all sizes, its focus is mostly on the small commercial end client.
“Large brokers use us for their small commercial division, ” Furlong said, while smaller brokers — who generally do a lot of their business with small and medium business clients — will likely use Indio more day-to-day across their entire firm, as opposed to within a specific division.
Indio plans to make money by charging brokers a software-based fee. It has no plan to take a commission on business. “We are not — and never plan to be— a broker of record or threaten anything the brokers do,” Furlong wrote in an email.
The founders claim their platforms saves brokers money on selling, general and administrative expenses. “Some brokers spend almost 85 percent of their top-line revenue on SG&A,” said Watson. “Much of this cost is operational in nature and relates to moving application data from the client to the carriers. We help brokers reduce this cost substantially.”
Specialty insurer Hiscox made a strategic investment in the platform.
Kevin Kerridge of Hiscox noted that brokers are here to stay. “They will just look a bit different and be more digitally enabled,” he said. “Indio has the opportunity to power this change.”
Josh Nussbaum of venture capital firm Compound echoed this sentiment. “It is our belief that in industries lacking commoditization like commercial insurance, the broker will remain an integral part of the buying process,” he said. “Indio’s workflow automation platform allows brokers to focus exclusively on being high quality advisors and less on operations.”
Currently, more than 96 percent of commercial insurance is sold through traditional brokers.
Indio’s announcement is a sign that venture capital interest in insurance technology startups is continuing. According to a report by KPMG International and CB Insights, VC-backed insurtech investments hit the $1 billion mark across 47 deals in the first half of 2016. That compares to $2.5 billion of investments in 74 deals for all of 2015, the report says.
Commercial insurance ventures are among those being targeted, yet each seems to take a different approach.
San Francisco-based Bunker, a Hiscox and American Family-backed startup, bills itself as the first contract-related insurance marketplace for independent contractors and small businesses. Bunker, now available in beta, began in stealth mode about a year-and-a-half ago, building a platform that helps businesses understand how to link insurance requirements for independent contracts, suppliers and partners to the financial exposure.
Online personal insurance seller CoverHound recently added business insurance offerings— including workers’ compensation and commercial auto— to its online platform at CoverHound.com. Chubb owns about 24 percent of CoverHound.
Embroker, which has raised $14 million, has taken the approach of launching an entirely new, highly-digital commercial lines brokerage.The platform allows businesses of all sizes to manage, buy, analyze, compare and store all of their insurance information data in one place. They can also file and manage claims in the system. Embroker offers its technology to customers for free; it makes its money on commissions, not on the technology platform.
Last October, Chicago-based online provider of small business insurance, Insureon, announced $31 million in funding led by Oak HC/FT, a venture capital fund investing in financial technology companies. Also participating in the round of funding was the private investment firm, Accretive, which built Insureon and led the company’s previous rounds of financing.
In the direct selling space, giant Allstate has debuted a hi-tech business insurance quoting platform that it says makes it possible for small business owners to buy a policy in about five minutes. Allstate’s redesigned online commercial insurance system has ease-of-use, speed and transparency features that are touted by various insurtech startups trying to attract small businesses.
For its part, Indio said it intends to focus on working with existing insurance companies. “The sophistication of insurance companies varies dramatically — some are already launching public application program interfaces (APIs) while others operate largely in spreadsheets,” said Butler.
Rick Yang, partner at investor NEA, said there is precedence for Indio’s approach across other industries, particularly those that have intermediary distribution channels.
“You’ve seen the success of this model across other industries such as financial services and travel,” said Rick Yang, partner at investor NEA, citing Sabre in the travel industry and Schwab in wealth management.