Waffling On and On and On...
InsurTech is getting piles and piles of money thrown at it, at all stages and across all niches. Waffle Labs is our star child. Here's their story.
Who would have thought a soul-crushing, absolutely debilitating Black Swan-ey global pandemic that brought the world to its knees, kicking off an immense shared sensation of fragility and mortality across all ages and creeds would have people looking at insurance again. Huh.
Getting insurance was always seen as something you do when you “grow up”. You walk into the house, hang your hat, pet the dog, ruffle your son’s hair, pick the daughter up and swoop in for a kiss from the wife as the smell of overcooked meatloaf wafts through the house. Yes, we’ve been re-watching Mad Men in quarantine, but you get it. It was not an industry where the youth were targeted. You have to have some frailty. The courage of youth has to be pierced.
It has now. Actually, it has been for a few years. The wealth of opportunities available these days for consumers of all ages gives them an immense amount of choice to own and experience things they love. It also offers them the opportunity to lose them all. The footprint of ownership has stretched across so many areas in our tangible everyday life, but has even stretched further into our digital existence. What happens when your entire digital identity that has been carefully curated gets attacked? What happens when your precious devices, the conduits for every aspect of life, are damaged?
In recent years, what was previously a black and white, after-school special industry, has become an ultra-hot sector for VCs and startup founders. According to crunchbase, “from digital-first insurance providers to AI-enabled risk measurement tools to customer-focused SaaS plays, venture investors have poured over $20 billion into the space over the past three years. A handful of startups have also been moving rather rapidly from launch to exit”.
Public equities have also followed the same bullish trend. Since summer, at least four venture-backed InsurTech companies have carried out U.S. public offerings, with the largest and most recent entrant, Oscar Health, valued at $6.5 billion. Another two relative babies — Hippo Insurance and Doma (formerly States Title) — announced plans this month to go public by the flavour of the month route of SPAC.
The trend continued across venture where last year, U.S. investors put a record $4.9 billion into insurance-related deals.
Why the interest? Why the frenzy? Could it be the usual VC group-think prevailing? Some guy was extra convincing and vocal on a late night Club House session and everyone else fell into line? Could this all just be FOMO-fuelled?
Even in an era with all this extra liquidity sloshing around, the pace of growth amongst insurance newcomers has been astonishing. Lemonade, Root and Hippo were all founded merely 5 years ago. Five. Each of them is also worth north of $5Billion. Five. Billion.
The answer? Many different pies, each one pretty large by its standards. Everything worth having is worth protecting. Consumption is increasing and therefore the need to safeguard our possessions is increasing. Newcomers have found a way to enter the market and offer ultra-niche, specialised products. In some cases it is a digitised experience of a traditional offering, like health insurance for example. In other cases, it is a new offering: Insurance against cyber bullying.
Even with each vertical you have different customer segments. Zego Insurance in London is tasked with insuring gig-workers. They raised their Series C at a £1Billion valuation. The possibilities are endless. Global insurance last year was higher than $5 Trillion(!).
Everyone is thinking vertically. Those verticals might be increasing and bifurcating, with niches being discovered and areas of coverage being divided, but nonetheless, the orthodox path for an InsurTech company is to choose a vertical, drill down to a niche within that vertical, and then use all manner of artificial intelligence and machine learning to assess risk and fine-tune their insurance offering.
Oscar chose health insurance. Lemonade chose renters and home-owners insurance. Root and Metromile went after car insurance from differing angles; based on driver behaviour and a pay-per-mile approach. Hippo went after homeowners policy. Quantemplate is a London-based InsurTech firm than offers machine learning, data transformation and analytics solutions for insurance professionals.
All those vertical lines.
Walking around a hotel breakfast buffet with a few errant cheese slices and the odd grape, you start shuffling inevitably towards that omelette station. Like the mythical siren, you are drawn to the ease and familiarity. But wait. Wait. Whats that smell.
The Waffle. Of course. It was never in doubt. Beat it shitty cheese and egg that is literally apologising as it slides onto your plate. Not today satan aka stale muesli with that cheap almond milk. Fruit platter? Do you even know me?
What if all those vertical lines, were then crossed with horizontal ones making a beautiful crispy Waffle. A Waffle that insured You. The holistic You. A one-stop shop for a little bit from vertical A, a bit from vertical B and a sprinkle of vertical C. Life, auto and pet insurance, all from one place.
That is what Waffle Labs is doing. Under the stewardship of Quentin Coolen, Sam Barnsley and Michael Li, they have started injecting a bit of horizontal into the mix. They have crafted the You Insurance.
The basic premise of Waffle is that your insurance should be based on you, what you want to protect and not what traditional insurance products have been focused on. You should no longer have to get car insurance or home insurance but rather get insurance. Period. A product tailored to your own needs.
You select what you want to cover, and they create the product for you—whether it’s your car, home, life, health, tuition, pet, watches, travel or electronics (amongst other things). As a digital broker, Waffle sells products that have all been carefully curated to address the particular pain point in each particular line. For instance, you can buy a life insurance policy that only takes 10 questions with no medical exam; a travel policy without exclusions that you can cancel at any time, etc. Waffle is the first InsurTech in history to offer 7 products at launch (as opposed to one for most other InsurTechs) in all 50 States (as opposed to one to two States for most other InsurTechs).
To do this, Waffle has partnered with some of best carriers in the business including Chubb, MassMutual / Haven Life, Hippo, Crum & Forster / ASPCA Pet Health Insurance, Arch RoamRight, and Boost/Markel. Every time a product is sold on the Waffle platform, Waffle collects not only a commission but also the underlying underwriting data. With these data, Waffle is able to generate and monetize actuarial insights based on the cross-correlation between the different lines. This is done through the holistic risk model that the Waffle team developed at MIT as part of its research.
This is all possible due to a number of innovations that were developed at MIT, particularly on the risk modelling side but also on automation and customer engagement. They participated in MIT’s accelerator Delta-V, then at the Barclays Fintech Incubator Rise.
Now, the team are in Beta with a waiting list for users and have raised their seed, with a suitably geeky nod to their stomping ground. Verve Ventures is incredibly proud and privileged to have Waffle Labs as our first lead investment. We cannot wait to take the world of insurance by storm together.
Now, about those waffles.