Since the end of last year, Clearcover’s team of techies and insurance industry veterans have been building a framework to make car insurance more user friendly.
On Tuesday, the insurtech startup emerged from stealth to share the details surrounding that vision, along with news of an $11.5 million initial funding round.
“The biggest problem in insurance today is not bad user experience or a need for fancy new products that measure risk in a new way,” said co-founder and CEO Kyle Nakatsuji. “The big problem is that insurance companies have failed to understand how their customers feel about insurance.”
In researching consumer sentiment, Clearcover found that most customers don’t enjoy interacting with insurance companies or thinking about insurance. Yet according to Nakatsuji, the national insurance industry spends $50 billion a year on advertising campaigns and other activities designed to bring insurance to the forefront of the consumer’s mind.
Instead of mass mailers and television spots, Clearcover uses data analytics to reach consumers when they actually need insurance — and leave them alone when they don’t. This digital-first approach helps Clearcover cut its operational costs, relative to those of a traditional insurance provider, and pass those savings on to its consumers.
“We offer the same exact coverage they would get from any of the big companies, but at a 50 percent discount,” said Nakatsuji.
After identifying a potential customer, Clearcover draws extensively on data from external sources to streamline the purchasing process.
“If you’ve gotten an auto loan online, you’ve already provided a lot of information that’s pertinent to car insurance as well,” said Nakatsuji. “We take that information, run it through our algorithms and dynamically generate an acquisition experience that has all the information we know and highlights the fields we still need.”
In some cases, a purchase can be made in a matter of seconds. For customers starting from scratch, the forms can still be completed in minutes. Clearcover also uses machine learning to help the customer choose between plans.
Although Clearcover handles every step of the customer experience, it is not actually an insurance company. Its policies are underwritten by an insurance industry partner. That said, Clearcover still faces many of the challenges that comes along with operating in a tightly regulated market.
“We’re going to look and feel like an insurance company to our customers, so for all intents and purposes, we have to build a functioning insurance company on top of a tech company,” he said. “And the idea of a minimum viable product is a little different in insurance than in other categories, because we can’t sell something people can’t rely on. ”
The startup is launching its first auto product in California by the end of the year, with plans to expand to additional markets early next year. Nakatsuji said the state’s size, along with penchant for cars and consumer tech companies to draw data from, made it an ideal first market for his startup.
Clearcover has 25 employees to date, and will make a handful of additional hires before launching in California. Nakatsuji expects that hiring to ramp up across the board starting next year.
Although both were living in Madison, WI when they started working on Clearcover, Nakatsuji and co-founder Derek Brigham decided to build their company in Chicago after considering a number of other markets including New York City and the Bay Area.
“We knew we wanted a big market, because this is a big swing, and it’s going to take a lot of people and a fair amount of capital,” said Nakatsuji. “By putting it here, we get the Midwest work ethic, a great tech community and a great insurance community, all together.”
Image via Clearcover.