Zenefits exits insurance brokerage biz

Hi there,

Last summer, we wrote about a San Francisco-based auto insurance startup named Blue Owl aiming to use data and technology in auto crash prevention. At the time, we noted that Blue Owl’s business entity address pointed to State Farm headquarters at One State Farm Plaza. 

Blue Owl is indeed part of State Farm and is being used by a new digital direct auto writer State Farm is calling HiRoad Assurance Company, which was assigned a Financial Strength Rating of A- (Excellent) by A.M. Best in August. HiRoad plans to launch in Rhode Island, where State Farm does not have any of its own agents, in “the latter part of 2017.”

These are interesting moves that come at a time when 63% of State Farm’s combined net written premium comes from its auto business, but market share in personal auto now looks like this:  

Meanwhile, this week saw both new investments to auto insurance startups as well as a shutdown:

Guevara: The UK-based P2P auto insurance startup, said it would cease operations after it was “unable to establish a fully capitalized underwriting vehicle.” In June 2016, Guevara co-founder Kim Miller said at WIRED Money that it was in the middle of seeking a Gibraltar general insurance license in order to move from a brokerage model to a carrier. At the time, Guevara had raised just under £3 million from investors including Mosaic Ventures. 

The Zebra: The Austin-based online auto insurance comparison startup raised $40M led by Accel and tapped former Kayak president Keith Melnick as its new CEO. Zebra COO Joshua Dziabiak said the company would look to bring “innovations” available to its consumers, presumably meaning it would add offerings from insurance startups to its platform.

Clearcover: The Chicago-based startup emerged from stealth with $11.5M with plans to launch as an online managing general agent in auto insurance starting in California. Clearcover CEO (and former AmFam Ventures VC) Kyle Nakatsuji said the startup would look to offer car insurance “in moments when it really matters” such as when consumers are already shopping for insurance, getting or refinancing an auto loan, shopping for a car, or managing personal finances.

The idea of making an insurance offer in key moments in time is also bearing out in other places. In India, Digit and Acko this week announced they both received final regulatory approval in India to launch new general insurers with plans to offer retail insurance products through strategic partners.

We also took a look at Amazon’s warranty brand Amazon Protect which is offered at the point of sale for a host of products and has expanded to four other countries in Europe since launching in the UK last April.

The idea of making a relevant insurance offer at the right moment in time was also the approach utilized by Zenefits, which this week announced a major shift in strategy, moving out of the broker of record business and transferring its book of 7,000 accounts to employee benefits company OneDigital. Zenefits plans to license its technology to more regional and local brokers over time. Recall Zenefits first introduced a new tiered pricing structure in January. Per CEO Jay Fulcher:

“We realized that digital brokerage in an online fashion and not in person is somewhat resonant with really small companies, but as you begin to go beyond that the digital brokerage value prop is not nearly as useful as having local, embedded brokers…Our focus is on being a SaaS company, and not a broker.”

Have a great week,

Matt
@mlcwong