Root Insurance launches a new car insurance company
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Root Insurance launches a new car insurance company
Alexander Timm has been working in the insurance industry since he was 14. While that’s strange enough, what’s even weirder is that Timm really loves the work.
He’s so enamored of the business that he’s founded his own insurance company, Root Insurance, to remake the process of applying for — and insuring — drivers.
There’s a lot happening in the sleepy world of insurance that’s making it possible to drive costs down and provide better results for policyholders, says Timm.
The founder of Columbus-based Root has spent his entire life working on insurance. He began working at Nationwide Insurance right out of college and has launched Root to take the negative lessons he’d learned from that experience to create a different kind of insurance company for users.
“Although we had these noble goals… we weren’t adequately using machine learning and algorithms,” Timm said. “At first I tried to change it from the inside, I wasn’t really able to make any progress.”
So last March, Timm began talking to Drive Capital, the Columbus-based venture investment firm and managed to secure $3 million in initial funding.
With that capital, the company began the lengthy process of applying for approval to issue insurance in Ohio. Today, the company is officially launching its services in the state and will then begin to roll out across the rest of the country.
Drive subsequently put in another $4 million behind the company, which along with a debt facility for Silicon Valley Bank has given the company the cash it needed to develop.
Root has already applied for approval in Illinois and intends to be in ten more states by the beginning of 2017. The company hopes to be nationwide by the end of next year.
Unlike other insurers, everything Root is doing is handled on smartphones. Users can download the app, scan their drivers’ license and Root’s software automatically updates the insurance application with the necessary personal information.
Root’s iPhone app then takes data from the accelerometer and other sensors on the smartphone and gauge an applicant’s driving skills.
“For the best 30% of drivers we cut the price [of insurance] in half,” says Timm. “For the best 70% of drivers we’re the cheapest in the market.”
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Timm says that on average, Root, can save 20% on the typical insurance policy. The lowest premiums the company has issued are $12 per month. The company’s policies are reinsured by Munich Re, Maiden Re, and Odyssey Re.
As technology continues to advance, Timm predicts that the insurance industry will be ripe for additional new entrants. “We also saw this big data come in and suddenly sensors were on everything,” said Root’s chief executive. “We’re going to have to start using people’s data to actually help them.”
Eventually, Timm wants to issue a single, simple contract for insurance. “You just buy car insurance and you get $1 million of coverage,” Timm proposed. “We want to make it the fairest simplest product.”
Source : Techcrunch.com
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