CoverWallet is an online insurance platform for small and medium businesses of up to 100 employees. Businesses can use CoverWallet to help them determine the best insurance for their business, secure the insurance, and manage it online with the help of concierge style services. CoverWallet provides a variety of insurance types for a large assortment of businesses, specifically catered to the industry the business is in, from restaurants to contractors, florists and more.
Business & Marketing Strategy: CoverWallet’s solution offers concierge style functionality that further enables small businesses to understand their insurance needs. Until March of 2016 the company was still in stealth but has now launched their product. They have already formed strategic partnerships with leading national insurance carriers that can help them gain prominence in the industry such as Liberty Mutual, CNA, Starr, Hamilton, Market, Employers, Travelers and Atlas. They have stated that with their latest funding they are looking to increase their employee count, forge further partnerships within the industry and expand their operations and reach.
Competitive Position: CoverWallet’s closest competitor, Next Insurance, which was founded just a few months later in 2016, was also started by accomplished founders, including Guy Goldstein, the former Co-founder 7 CEO of Check, which was acquired by intuit in 2014 for $360M. In addition, Next received seed funding in March of 2016 of $13M, the same time as CoverWallet, who only received $2M. Other close competitors include emBroker, an online commercial insurance company founded in 2015 that helps small businesses buy and manage insurance and has raised $14.4M in funding. Also in this field is Insureon, an online business agent that provides insurance services for small and micro businesses, which has raised $31M and made one acquisition since their founding. Indirect competitors include German company FinanzChef24, an online broker and comparison portal for insurance for SMBs, which seeks to expand outside of Germany, as well as brick and mortar insurance agencies and those moving into the online field, such as Hiscox and Berkshire Hathaway. Lastly, there are online insurance providers such as Gather, NerdWallet, Goji, Coverhound and Policy Genius, which all offer online insurance, but are limited to specific fields, such as car insurance or renter’s insurance, yet have the ability to broaden their offering since their infrastructure is already in place.
Market Forecast & Exit Indicators: The online insurance market is still very new. The brick and mortar insurance giants have dominated the industry for a long time, which could make it difficult to penetrate. However, the market for SMBs is opening up as these businesses look for new and alternative methods to solving their insurance problems. Currently, there are over 20 million under-served small businesses in the US that have difficulty managing their risk insurance needs. The total insurance market currently stands at $1 trillion and, specifically, the market for small businesses with under 100 employees is $100 billion just in the US alone. According to TechCrunch, the insurance industry is coming off of huge growth in 2015 and early stage insurance tech deal activity is expected to set new records in 2016. Over the last two years, investment in insurance technology startups has multiplied, reaching $2.7 billion in 2015 and according to a recent study by Deloitte, 52% of small businesses said they were ready and willing to buy their insurance direct from a carrier on the internet. Experts believe that some factors that may lead to this push towards online insurance are the growth of ecommerce, as well as the changing consumer demographic, with millennials being highly tech oriented.
Investors Positions: CoverWallet received both a seed round and an A round of funding in 2016. Their seed round, held in March, raised $2 million from investors including Adeyemi Ajao, the founder and CEO of Identified, who previously co-founded Tuenti.com and was sold to Telefonica in 2010 for $100 million, and Founder Collective, which has made investments in 198 companies and has seen one IPO and 54 acquisitions. Founder Collective has invested in companies such as Quilt, Transfix and Airtable. Also contributing to the round was Highland Capital Partners, an investment company that has seen 21 IPOs and 67 acquisitions from their 197 investments, including Outfittery, Bromium, OneSpace and Handy, and Two Sigma Ventures, who has helped fund such as Glide, Canary and Placed. CoverWallet’s Series A round saw repeat investment from all but Ajao, and added investor Union Square ventures, a company that has made 207 investments in 97 companies, including Codecademy, FourSquare, Zynga, Etsy, Tumblr and Twitter, and has see 5 IPOs and 23 acquisitions.
Inside Scoops: In addition to closing their recent funding round just two weeks ago, CoverWallet hired Jim Ermilio as President of Insurance. Ermilio brings a lot of industry experience with him, having previously been the CEO of online auto insurance company Goji, and EVP of Commercial Insurance. In addition, there is a lot of information on the industry. A recent report from McKinsey said that small businesses are progressively shifting towards online insurance purchasing and are increasingly open towards this new way of doing business, though this will cause the competition for this market to greatly intensify as more small businesses show that they are open to buying insurance through direct and digital channels. As proof of this theory, just recently, brick and mortar insurance agencies have begun to venture into the online arena, including Hiscox and Berkshire Hathaway. There is thought by experts that if the traditional insurance brokers forge their way into the online market they may perhaps be able to edge out newer competitors thanks to their combination of ease of use with expertise.