Startup Loop Wins Funding for Fairer Auto Insurance Rating Model That Uses AI

January 19, 2021

Loop, a managing general agency focused on building an auto insurance model that does not utilize credit scores and ZIP codes, announced the close of a $3.25 million seed round last week.

Freestyle.VC led the funding round, with participation from Blue Fog Capital, Fontinalis Capital Partners, Concrete Rose, Uprising Ventures and Backstage Capital.

Loop, a B-corp, uses artificial intelligence, big data and telematics in its proprietary auto insurance pricing model that measures road safety and customer driving behavior on the roads. The startup’s executives are committed to the idea of replacing the demographic factors like credit score and ZIP code traditionally used in pricing. They argue that those factors perpetuate structural bias against vulnerable communities, while Loop’s AI-based approach prices customers more equitably.

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“The technology and data to assess risk more dynamically have long since been available, but insurers have been slow to adapt,” said Carey Anne Nadeau, co-founder and co-CEO of Loop.

“We believe there’s a large market opportunity in pricing people more fairly and building a community-first brand in the auto insurance space,” added John Henry, another co-Founder and co-CEO.

Nadeau is an MIT-trained statistician and city planner, former researcher at the Brookings Institution, and founder and CEO of the open data and predictive-modeling company Ometry.

Ometry, formerly known as ODN, was one of 10 finalists in the QBE Urban Resilience Challenge—a countrywide initiative highlighting innovation to power resilience within city ecosystems. (Ometry was not ultimately the winner of the competition.)

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Henry brings media expertise as co-founder of the diversity-focused VC firm Harlem Capital, executive producer and host of HUSTLE on VICE TV, and founder and CEO of Mobile City Services, an on-demand service suite offering dry-cleaning, laundry and housecleaning.

Nadeau and Henry teamed up to start Loop in July 2020 after the George Floyd events inspired them to take on a meaningful challenge.

As some states do away with criteria like credit scores, Loop offers an alternative methodology that measures customers driving behaviors more directly, the company’s statement said.

Loop is not alone in looking for an alternative rating model. Last August, Root Insurance pledged to eliminate the use of credit scoring from its car insurance pricing model by 2025, a move the insurtech said will help remove bias and discrimination from the process.

“Eliminating credit scores is a major and necessary step toward dismantling archaic industry practices and making car insurance fairer,” Alex Timm, co-founder and CEO of Root, said at the time. “We are committed to working with our partners, regulators and industry stakeholders to adopt this important change, and hope our announcement today inspires others to join us in fighting discrimination, bias and systemic inequity in auto insurance. It’s time to drop the score.”

Timm also said that removing credit scoring from insurance underwriting is a difficult process – hence Root’s five-year timeframe.

The journey to a new rating model via AI is complicated in part because AI has itself been criticized for bias, even as insurers introduce it into pricing and claims handling activities.

IBM has called for rules aimed at eliminating bias in AI to address concerns that the technology relies on data that incorporates past discriminatory practices and could harm women, minorities, the disabled, older Americans and others.

Loop Founders

In a statement about Loop’s seed funding, Dave Samuel, founder and managing partner at Freestyle.VC, said, “Carey Anne and John are top-decile founders taking on a once-in-a-generation opportunity to transform an industry that touches so many lives,” adding that the special team brings “a highly defensible approach to a worthwhile problem.”

“The size of this market combined with the community-first ethos has the potential to build a movement,” said Harris Brody, managing partner at Blue Fog Capital, stressing the prospect that Loop will make a difference in the lives of people who are disadvantaged by legacy auto insurance models. “This founding team is proven and uniquely combines Carey Anne’s deep technical and domain expertise with John’s go-to market talents,” Brody said.

“Raising venture capital is normalized now, but it really is a unique and distinct privilege. Not many women or founders of color get to go on this journey, and we’re not taking it for granted,” said Henry. “We are deeply committed to and driven by our mission to create fair insurance for all.”

Loop’s angel investors including Kristen Dickey, Steve Schlafman, Songe LaRon, Craig J. Lewis, Gerard Adams and Joshua Dorkin also participated in the seed round.

Topics Insurtech

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