But there’s another player in the space that’s quietly growing with plans to take its rapid underwriting and quoting technology for home and auto insurance nationwide by the end of 2021.
Columbus, Ohio-based Branch Insurance in July raised $24 million in Series A funding from the likes of Greycroft, SignalFire and Revolution’s Rise of the Rest Seed Fund to help it reach that goal. The three-year-old startup claims to be able to provide customers with “an instant insurance offer” for bundled home and auto insurance “within seconds” using just a few pieces of information.
Co-founder Steve Lekas began his career at Allstate, where he went on to hold roles in underwriting, technology and product management. He then went on to build Esurance’s first online home insurance business.
But in the back of his mind, Lekas yearned to figure out a way to make insurance more accessible for more people. And so Branch was born.
FinLedger talked with Lekas about Branch’s growth plans, why the company never considered a marketplace offering and how it aims to reimagine the insurance distribution model.
FL: We’ve seen some insurance marketplaces and companies underwriting life insurance, but I haven’t seen a lot of digital insurers offering both home and auto insurance.
SL: There are very few digital insurers, and part of it is because it’s a different skill set to underwrite. It’s a different data model and a different regulatory construct.
Our technological differentiation is that we’re the first insurance company to offer the bundle digitally. With Branch, the bundle is if you buy home and auto insurance, you get discounts. Or if you buy renters and auto insurance, you get discounts. We do this because it’s less expensive to make the products if we make them together. We also get this expense arbitrage in the way that we manage the business. We buy one lead and underwrite it twice. Or we buy one lead and we underwrite it as an account, and we provide two products. So we get immediate scale and premiums within the account and pass back all those savings to the consumer.
FL: What were the biggest challenges you faced in becoming an underwriter/insurance provider? Why did you choose that route instead of a marketplace offering?
SL: The business of insurance is complex: insurance underwriting is to predict the future of claims costs, and predicting the future is hard. The industry is not well-loved or trusted by its consumers. It is also heavily regulated and regulations vary meaningfully state to state. And, home and auto insurance is a highly competitive space with billions spent annually on marketing. All of those are real challenges.
For those who have the stomach to try to make a positive impact, we must raise a great deal of capital and have reasons for capital providers and consumers to believe in us. These high barriers to entry shorten the story to the fact that becoming an insurance company is difficult. There are thousands of insurance companies that have gone out of business in the US over its history for either underpricing the product for growth or profitably shrinking to irrelevance. These themes continue to play out today. Becoming a successful insurance company is about doing all the hard things exceptionally well and it’s, most importantly, about bringing new value to your clients. At Branch we think the value we create for consumers in lower prices, ease, convenience and social good gives us the privilege of growth.
A marketplace offering sounds great but it’s complicated. Marketplaces that offer consumers easy access to many insurers should provide great choice and speed but they are limited in speed by regulation and incumbent insurer legacy tech/underwriting. If you go to one of these sites, they’ll have a delightful intro experience asking you some questions, they’ll then give you a quote estimate from many insurers. But these quotes aren’t real prices and insurers may provide a lower price to entice you to their site then win your business because you’re too fatigued to go back and shop all the rest in a similarly friction-filled, exhausting experience.
To get a price from many insurers, you would need to click through or call each insurer listed and answer the full set of questions to finally have a comparison in front of you. These sites are paid by insurers for lead generation, a cost ultimately borne by the client.
Branch’s mission is to make insurance less expensive so more people can be insured. We disintermediate as a core function of our method of reducing expense. There was no path to that mission for Branch as a marketplace offering and Branch chose another method that could ultimately lead to much lower prices for consumers, allowing us to financially include so many more.
FL: How are you able to provide an instant “offer” so quickly with so little information?
SL: Branch has developed technology that gathers information rather than requiring an application of hundreds of questions to be filled out by our clients. We need to deeply know our clients’ risks, their cars, their homes and themselves, in order to give each the most accurate price for insurance. Branch doesn’t do quotes. Our technological innovation eliminates the ancient idea of a “quote” altogether. With Branch, we only ask you for your name and address. When you give us your name and address, we give you a price. Every price a consumer sees at Branch can be dropped in their cart and purchased.
FL: What states are you in and which are you planning to expand to?
SL: Branch is currently writing insurance in Arizona, Illinois, Missouri, Ohio and Texas. We are in the midst of a rapid, national expansion and expect to launch new states like Colorado, New Jersey, Virginia soon.
FL: What is your main method of attracting customers? It seems like a lot of people can still be resistant to digital insurance these days.
SL: For almost a hundred years, insurance has caused real friction for consumers trying to buy houses and cars. Branch is available to consumers directly, through traditional insurance agencies and in a new channel: “insurance moments.” Being the first frictionless insurance purchase allows Branch to reimagine the distribution model and bring insurance to consumers in moments of convenience.
Imagine you’re buying your first home and the lender asks you for your W2, federal tax filings, proof of home insurance, and bank statements. Then the lender indicates that you may or may not be able to buy your dream home based on this financial examination. You have reasonable anxiety trying to ensure that everything lines up and the process goes smoothly as your closing date approaches. You’ve been asked by your lender to go buy a home insurance policy and bring that information back to the lender. You go out, shop, buy insurance, scan documents, and email them to the lender. The consumer is the information hub and project manager and the consumer, lender and insurer are expending time and money for their separate businesses, representatives and acquisition costs.
Imagine instead that while the lender is underwriting the loan, Branch brings an instant insurance offer in a convenient moment that is price advantaged because of the efficiency of operating digitally and without the same acquisition expenses. This consumer now has the convenience of considering insurance as a part of a larger home-buying transaction, as well as the convenience of not having to expend shopping energy, the ease of a frictionless insurance purchase and a lower price because the insurer is not spending billions on advertising.
This model works because other industries such as mortgage lending, car selling, home building, home security have had insurance friction causing poorer customer acquisition and retention outcomes for decades. Branch provides its partners an ability to be better at their businesses while Branch gains the privilege of growth and our joint clients save time and money.