Branch, a digital insurance start-up based in Ohio, plans to pursue further national expansion in the US thanks to a new $147 million Series C financing.
The company debuted in 2019 and offers auto, home, renters’ and umbrella cover. Branch uses three distribution channels including partnerships, agents and direct-to-consumer sales, and is also able to rapidly bundle cover.
Such a large venture capital round is noteworthy because investors have been pulling back their financing in many other cases, turned away by rising inflation, stock market volatility and negative treatment of insurtech (and broader technology) stocks.
Co-founder and CEO Steve Lekas (pictured) said he appreciated the relevance of securing such a high financing round during difficult market conditions.
“It’s a testament to what we’ve achieved. It’s also something we’re humbled about and by and very grateful for,” Lekas told Insurance Business America. “Investors see what we’re capable of and the results we’ve generated. What sets us apart is we didn’t build for growth. We built to grow as fast as our loss ratio would allow us.”
Weatherford Capital led the new round, which included participation from new and existing investors including Acrew, AmFam Ventures, Anthemis, Gaingels, Greycroft, HSCM Ventures and SignalFire.
Branch has raised nearly $230 million to date overall, according to Lekas. Employment levels have also risen steadily, currently clocking in at over 400 people. With the new fundraising, Branch is also now valued at more than $1 billion, which makes the company an insurtech “unicorn.”
The company is a full-stack insurance company that uses data, technology and automation to make home and auto insurance easier to obtain. Branch operates as a public benefits corporation and a reciprocal exchange, in which policyholders are the owners of the policy premiums. The company’s structure is designed to align incentives and give members as much of a saving as possible. It also provides members access to a number of community-based products.
The company operates so far in 28 states, but not as a carrier in all of them. In addition to being a reciprocal exchange, it operates as an MGA in some markets to enable its products to be embedded, said Lekas, who has previously stated a goal of reaching the entire US by the end of 2022. Branch is underwritten by the Branch Insurance Exchange, Everspan Insurance Company and General Security National Insurance Company. It is backed by SCOR.
Branch’s premise is being able to fully underwrite home or auto insurance instantly by simply accepting a name and address from the consumer. It also allows consumers to bundle products such as car and umbrella in a single transaction that takes less than a minute, Lekas said. The company’s technology stack uses predictive analytics to help optimize the company’s rating plan and underwriting so it doesn’t have to ask a consumer questions that segment risk.
What Branch does instead, is use a customer’s name and address to find data to verify identity and then obtain additional relevant data as the process continues.
“I go get more data, [information] I couldn’t get with just your name and address because I’ve continued to thicken up a file about you that I’ve created algorithmically,” Lekas explained. “That then fills out all of the things that I’m required to use in giving you a price for insurance based on what I filed with the regulator.”
Lekas also claims that Branch is the only insurance business in the US that can sell home or auto insurance through an API and actually purchase through an API. This means an embedded partner gains the ability to ask the consumer for a name and can present the price on its website.
“By selling through an API and having the ability to lift and shift the customer’s account, the combination of ease and that technology is meaningful," Lekas noted.
Partnerships and integrations
For the partnership leg of distribution, Branch integrates and embeds into the workflows of many agents. It has also forged key partnerships with companies such as Rocket Mortgage for clients buying a home, Homepoint Financial for clients servicing their mortgage, and ADT for customers who are buying home security.
According to Lekas, most partnerships with clients involve helping them to simplify their own workflows and gain what revenue that can exist from insurance.
“There are hundreds of go-to markets across the US that are already a mortgage company with an insurance play, or a car selling operation and insurance play,” Lekas said. “We just tend to improve their outcomes by an order or two of magnitude.”
Connecting to a new partner can happen through a variety of ways. Initial discussions with new partners often focus on selling options.
“We discuss their pain points, their strategies, their existing go-to market. We show them results that we’ve had with other partners. We explain how their consumers can win and [grow] their business through a go-to market with Branch,” Lekas said. “We set up and then we operate our business for the benefit of their business, as if we were something that they could use in improving their own business outcomes. Then we implement and we optimize, shoulder-to-shoulder with our partners.”
The process tends to be a “multi-month” engagement, Lekas explained.
“The implementation is the shortest part of it,” he said. “Because these companies may already have an implementation, or we have templates because we’ve done this so many times, then we built out from each other’s shared experience to optimize for the strategic benefit of our partner’s business.”
Lekas said that Branch aims initially for older customers, rather than the 20-something targets insurtechs such as Lemonade go after.
“We’d like to grow with long-term relationships,” Lekas said. “It’s already very hard to build a de novo insurance business, and so building with the right customers allows us to build for the long term, and that’s how we’ve thought about it.”