As many already know, insurance has been an emerging focus area of mine for quite some time. I’m fortunate enough to be a Board Member for Snapsheet – the leading virtual claims estimation service in the auto insurance market – and work with several of our other companies as they navigate the insurance landscape. We’re not the only one touting insurance as the next mega opportunity in the startup landscape, but believe that we have a nuanced viewpoint that is backed by the insights from many of our corporate relationships in the Midwest area – one of the world’s primary hubs for insurance.
As our team analyzed the landscape, we’ve met with nearly 200 companies at varying stages of maturity, but struggled to find a solution that aligned to our core thesis on the market – that distribution in commercial P&C was fundamentally ripe for true disruption. Various macro factors led us to this thesis, including aging of the broker population and a need for efficiency and transparency in what has traditionally been a very manual, opaque process. While players like Insureon (another great insurance tech company based here in Chicago) focused on disintermediation of the SMB market, we believed there was a gap in larger enterprises where policy complexity required the expertise of brokers, but remain shackled to legacy technology. As we examined these mid-market and enterprise players, there was a clear opportunity for improved efficiency as we discovered large-scale brokers spending more than 80% of topline on SG&A (Aon, a $29B publically traded broker and risk management firm, spent 84% in 2015) and carriers spending up to 50% of gross profit on customer acquisition alone. These dynamics led us to believe that there was significant opportunity for a transactional marketplace focused on mid-market and enterprise commercial P&C insurance – a category that represents roughly $150B in premiums a year.
That said, the commercial P&C market is a tough one to crack. Players have tried to create efficiencies in the past and have often failed due to the entrenched nature of existing software systems (primarily Vertafore and Applied) and a general apathy toward technology innovation in a market segment that has comfortably cranked out massive profits for centuries (insurance companies remain one of the most resilient and consistent top performers in the Fortune 500). All that changed as brokers started facing labor shortages and seeing their down-market business eaten up by digital platforms. This urgency for innovation has even further accelerated with the amount of VC capital flooding the market, enabling well capitalized startups to attack segments that would be too difficult to do otherwise.
Despite these catalysts, customers in the industry remain wary of new comers given the nuance and complexity of the space. As were we, having seen many startups fail to penetrate the entrenched institutions in the sector. To be successful, we knew the startup would need to command the trust of key industry players and have a go-to-market strategy that ensured incentives for substantial network effects – a characteristic that we view as essential to any successful marketplace. Combining the grey hair of industry expertise with highly disruptive marketplace dynamics is often hard to find, but then we met RiskMatch and its CEO, Kabir Syed.
We came across Kabir 6 months ago as we were planning the OnRamp Insurance Conference. Our Associate Eric Ong found the company and we immediately felt that what Kabir was presenting was compelling. The company already had significant traction and the team represented the requisite skillsets with industry veterans and forward-thinking marketplace technologists like Roman. As we spoke to contacts in the industry, it was clear that there was something really special here. As one customers cited, “Kabir is the real deal. He’s extremely respected in the industry and one of the few guys that could pull off a project this ambitious.” It wasn’t just Kabir either. Another customer noted, “If we couldn’t use RiskMatch, we would be starting from ground zero.” As it became increasingly clear that the addition of each incremental broker and carrier added significant value to the platform, Kabir noted that our persistent efforts bordered on annoyance.
Today, we are happy to announce our investment in Riskmatch, leading a $3m Seed round along with 8VC and Wildcat Ventures. With this investment, we look forward to seeing Riskmatch further enhance its already strong team and product positioning to solidify its role as the leading marketplace for commercial P&C insurance. Congratulations to Kabir, Roman and the rest of the fantastic team at Riskmatch.
For more information on Riskmatch and its near-term plans, please see Kabir’s recent interview with CBInsights’s lead insurance industry analyst Matt Wong here.