When it comes to using algorithms and other formulas to determine what types of services you could offer to specific customers and at what price, the insurance industry is one of the oldest in the book. However, this old position hides the fact that some of their provisions may leave something to be desired, as customers who do not fit typical profiles may not be able to get competitive prices.
Now a British startup called Marshmallow, which aims to take over the bigger old insurance giants with a new approach to risk determination, is announcing a $ 30 million round of funding. First with Marshmallow Auto Insurance uses a wider range of analytics to target underserved market segments and plans to use Series A funding to further grow its business with a focus on diversity and inclusion. The plan is to roll out more countries and more types of insurance over the next 18 months.
We know the company is worth around $ 310 million in this round.
The company does not reveal any names of people in this final round other than that one is a prominent fintech backer and the other is a large financial institution. PitchBook notes that Outrun Ventures and other unnamed investors are in this round. Previous supporters were Passion Capital and Investec.
Marshmallow first came out of the wild in 2018 with a product originally aimed at expats. The logic was that UK insurers usually rate a driver’s UK records when determining premiums. However, if you are an adult who moved to the UK from abroad, your history (for better or for worse) is not connected to you. Marshmallow's solution was to create a scoring algorithm that took into account global, not just national, data.
"With auto insurance, an insurer typically needs to understand a person's driving ability, driving history and current lifestyle before they can offer them an exact price," said Oliver Kent-Braham, Co-Founder and CEO, of TechCrunch. "Unfortunately, many insurers do not try to understand foreign drivers in the UK, they simply overwhelm them. Foreign drivers based in the UK can expect quoted prices that are 51 percent above the market average."
Now that role has expanded to include those who cover a wider range of age groups but don't have consistent records in the UK.
“We continue to offer auto insurance to expats, but we now also offer insurance to people between the ages of 21 and 50, with an emphasis on providing great value and experience for those with a fragmented address and credit history as well as the less affluent Individuals have lower credit scores, ”he told us today. "Both customer groups are burdened more by the traditional insurance industry."
Kent-Braham may understand a thing or two about being out of the norm. He co-founded the company with his twin brother Alexander, and both are black – a rarity in the world of engineering in the western world. In the US, it is estimated that less than 1% of founders are black, and the numbers for color founders are equally appalling in Europe. (David Goate is the third co-founder.)
Indeed, the rise of marshmallow – both as a story about the founders of its minorities and as its own focus on serving underserved sections of society – comes at the right time.
A major focus in the technology year was how more diversity and inclusion can be built in the industry. Spurred on by a wave of social unrest following several incidents in which black people were killed by police in the US, further questions have been raised about how best to address the massive economic and social disparities around the world.
In the world of technology, it has long been known that greater diversity in the makeup of the companies involved is crucial in order to better address a wider audience and their needs. With that in mind, it may not come as a surprise that it took an insurance startup run by two black men to identify and develop products for a larger group of users.
"We have the tools to provide insurance to clients traditional insurers have struggled with," Alexander said in a statement. Tim Holliday, a founding associate who is now chairman, was also an integral part of understanding what technology can do to the company in terms of tenure: he has many years of leadership experience in the industry.
Perhaps due in part to the Covid-19 pandemic and the tremendous uncertainty we've seen around the world, Insuretech saw a lot of focus over the past year.
In addition to Lemonade's public listing (which now has a market capitalization of over $ 2.8 billion), Hippo has seen its valuations rise sharply, and we've also seen a number of companies rethink the insurance model on both aspects by whom is it addressed and how is it modeled. BIMA and Waterdrop each deal with microinsurance for emerging markets and the idea of crowdfunding insurance services.