Yet another startup out of Silicon Valley has vowed to “disrupt” the insurance industry.
Next Insurance was founded by Guy Goldstein, Nissim Tapiro and Alon Huri – the founders of Check, a mobile payments start sold to Intuit for $350 million. The men have raised $13 million in seed funding for the venture, which will offer commercial insurance online tailored for specific professions.
“We were looking for a big space where there was an opportunity to disrupt, and one of them is definitely insurance,” Goldstein told Biz Journals. “If you are a lawyer in New York, we will tell you exactly what you need. Not more and not less. You put your credit card information in and you are done – in 15 minutes, you have your insurance.”
The startup is just one of several that have targeted the insurance industry in recent months. In fact, a CB Insights report earlier this month revealed that there have been 24 seed and Series A deals in the insurance sector in the first quarter alone – a pace that equals more than a third of all insurance funding deals during 2015.
Many of these startups have encountered difficulty adapting to the dense world of insurance, however. Google announced it would be shutting down its comparison services later this month, and Zenefits – the San Francisco-based health insurance business – is now being investigated in multiple states for selling policies without proper licenses for its agents.
Goldstein said he’s not worried about these failures, however.
“[Zenefits] is focused on areas that fit with the free payroll and benefits software they offer,” he said. “We and Zenefits can be great partners in the future.”
Next Insurance is also undaunted by the solidity of the agency distribution channel, nor the complicated regulatory world of insurance.
“We were in payments with our previous company, and that is by far more complex,” Goldstein said. “The nice thing about the insurance industry is that it is very mature. There is a lot of supporting structure to help you navigate the complexity of regulation and compliance.”
Insurance professionals in general believe attitudes like these are simplistic, devaluing just how difficult it is to sell any insurance policy – and commercial insurance in particular – to a buyer over the Internet, alongside proper education and distinction among carriers.
Nevertheless, there is an appetite for such an offering.
About half of the 751 small business owners surveyed in March 2013 by the Deloitte Center for Financial Services said they would be at least somewhat likely to consider buying some of their insurance policies directly from a carrier.
Close to half of those same survey respondents said they would eliminate an intermediary like an agent or broker in exchange for a relatively small discount. Even more indicated they would be willing to purchase from direct sellers if they were offered risk management advice and other value-added services currently provided by agents.
“If online sellers provide value-added self-services in addition to discounts, there may be a growing risk of disruption and disintermediation unless agents and their carriers respond in kind,” the Deloitte report said. “It is unlikely that agents and brokers will be significantly disintermediated in the small-business market any time soon. However, additional direct initiatives will likely be launched, requiring a response by their legacy agency competitors.”
