Read for Context

“People do not see things in context anymore, that’s the negative side of the internet. We have a lot of fake realities and fake news but it’s nothing new but of course now it comes like an avalanche at us because much of politics is done via the internet.” – German film director, screenwriter, author, actor, and opera director Werner Herzog in an interview that took place about a year ago. According to Herzog one of the reasons people fall so massively for fake news is because people aren’t attached to the real world as much. “Hardly anyone reads.”

* * *

A Coverager Research member recently asked Avi what he got wrong. Here’s his answer: “In May 2018, I got excited about the partnership between Swiss insurer Baloise and Valoo, a Paris-based startup that allowed users to secure, value and manage their belongings. Valoo offered users a mobile and web app to keep track of what they own and see the current market value of their belongings. It claimed to be “the social network for one’s belongings” by also offering users the opportunity to sell, share, lend and rent their products. In the article, I stated the following bottom line: “Good move from Baloise. An even better move would be investing or acquiring the company, or at least creating a new brand that shows the commitment of both parties. The name of the new brand? Baloo. After all, it’s the bare necessities.”

In July 2019, while doing our routine startup pulse check, I discovered that Valoo is ending its operations. David Gascoin, the CEO and co-founder of the startup which raised ~$10 million, provided the following statement: “The end of Valoo is not only related to our offer on demand, but we have encountered real difficulties in the distribution of this offer.”

This mistake helped me learn a valuable distribution lesson – the frequency in which users will interact with a product or service has a big impact on distribution. Many people have many belongings but few are bothered by how to better organize and manage them. What’s more, those who decide that the need exists find that it is a short-lived one – the app’s touchpoints are limited to very limited occasions.

So, if you’re considering a new product or service, focus on the ones that have higher usage. An insurance company introducing a new coffee chain will benefit more than an insurance company launching a new will service.”

If you asked me this question, my answer would center on Earny, which is barely active nowadays and has been acquired according to its co-founder and CEO. The price monitoring app has raised $11.5 million since its inception in 2015 to give users money back on their online purchases. At one point, its founder said it will consider entering insurance. And while I was right to suggest that “one needs more than a car/home/health insurance bill, to negotiate a better deal,” I was wrong in my omission of the type of customer Earny attracts and whether an insurance carrier should actually consider such a partnership. Short answer: Yes. Long answer: “Consider the story of Atoms, the startup selling shoes online. Initially, the startup focused on leather dress shoes but it learned that “nobody wanted to wear them.” Of course, this is not an accurate statement as people still buy and wear leather dress shoes, but for Atoms, which has no physical retail presence, the reality was plain and simple. If we try to get to the bottom of this, we can come up with a reasonable conclusion that the digital shopper, who Atoms was after, was not interested in leather dress shoes. There could be a variety of reasons for why these digital shoppers were not interested in dress shoes – it could be the case that they were younger individuals working in a ‘dress casual’ environment, or perhaps a leather dress shoe, which tends to have issues around comfort and fit, is a purchase most people would rather do in-store where they can try on multiple pairs, something Atoms didn’t offer.” Like Atoms, Earny has (had?) insights into its consumer base that would have helped a potential insurance partner determine whether a product-market-fit existed.

As more and more of you consider alternative distribution partners and value-added service providers, consider the following formula which we’ve shared with Coverager Research members in our Fintech Fundamentals research report published last year:


Context is Key

“It will be royally stupid of Root to stick to its current way of doing business – and even if it had no other plans, which is doubtful, SoFi won’t have it. And SoFi matters more because one operates in a commodity market, and the other is building a community (and a stadium).” – Coverager, October 25, 2019, via a blog post titled Gin & Tactics.

17 months later and SoFi didn’t have it as the fintech company now works with Gabi; opting for choice in lieu of a single-carrier model. These announcements come after Root’s branding changed last year, with the company no longer using the catchphrase “save up to 52% on your car insurance.” This is the result of putting things into context.

Staying on the subject of Root, it has hit the ‘submit news’ button twice this week.

First, it announced two “key additions to the executive leadership team as it launches into its next chapter of growth.” Anirban Kundu will join as Chief Technology Officer on June 21, and Michele Streitmatter will join Root as Chief People and Organizational Effectiveness Officer on June 28. Kundu is taking over the role of Root’s current CTO and co-founder Dan Manges, who will remain a co-founder and transition to a “non-employee advisory capacity” following the effective date of Kundu’s appointment. Some of you suggested there’s more to this story and so we’ve reached out to Root for a comment and received the following statement from Dan: “I had a two-year gap between the last startup I built and beginning to work on Root in 2015. I worked on a variety of projects during that time, but I ultimately hadn’t found the right next opportunity. That changed when I met Alex and heard about his vision for Root. Car insurance is a product that affects nearly every person in the country, and pricing insurance primarily based on driving behavior over traditional demographic variables was a mission worth pursuing. I’m proud of what we’ve achieved to date, and I’m excited about how much opportunity we still have ahead of us. At the same time, due to personal life circumstances, I’ve made the difficult decision to step out of my operating role at Root and move into an advisory capacity. I’m going to take some time to focus more on my three young kids during these irreplaceable years of their childhood. I’m thrilled to have Anirban joining us. He aligns well with our engineering values, and he’ll be an exceptional leader in evolving our engineering organization.”

Second, yesterday Root made a change via its RootReady feature which allows select GM vehicle owners to get a quote without taking a test drive as the insurer will be using driving data from their vehicles to deliver its fast, fair car insurance value proposition.

The test drive is a key component of Root’s underwriting process (they said that). During the two-to-four-week process, Root gathers and analyzes data from smartphone sensors measuring braking, consistency, turning, time of day, and other performance and contextual data. For some drivers, Root offers coverage ahead of the test drive to later present the 6-month premium while others have to wait to complete the test drive to see if the insurer would insure them and for what rate. After hitting a dead end and seeing its stock price go from a 52 week high of $29.48 to a low of $8.19, Root decided it is time for a new point of view.

“The frame, the definition, is a type of context. And context, as we said before, determines the meaning of things,” said professor of psychology Noam Shpancer. “There is no such thing as the view from nowhere, or from everywhere for that matter. Our point of view biases our observation, consciously and unconsciously. You cannot understand the view without the point of view.”

Root’s original point of view was of an innovator looking to please the investor community. From their S-1 – “It [the insurance industry] has not awakened to the reality that consumers are walking around with supercomputers (smartphones) in their pockets that can offer a deluge of individualized driving data on a daily basis. As data and predictive analytics are the foundation of insurance, we think the industry is in a prime position to be disrupted by an innovator, and we believe Root will be the one to do it.” Further, Root has placed on the back burner the rise of connected cars, despite it offering a solution to its battery life problem due to data collection. However, now with RootReady, the insurer is adopting connected cars technology and a shorter conversion process in lieu of its proprietary data collection since convenience is a bigger point of view.

Like Root, Nationwide is considering the new context. The company may be hitting the ‘submit news’ button soon in the context of its commercial insurance marketplace. According to a few sources, Nationwide has sent a request for proposal that places into question its existing partnership with Bold Penguin following the latter’s acquisition by AmFam in a deal valued at around $520M. Progressive should be paying attention.


  • Berkshire Hathaway invested $500 million in Brazilian fintech company Nubank which reaches 40 million users in Brazil, Mexico, and Colombia and – aside from digital banking – offers life insurance from Chubb.

  • Klarna announced a new equity funding of $639 million led by SoftBank’s Vision Fund 21, at a post-money valuation of $45.6 billion. The Swedish company (which at one point received an investment from Swedish insurer Skandia) operates in the space of ‘buy now pay later.’

  • And Hokodo closed a $12.5 million Series A round. The London-based company offers an invoice protection product underwritten by SCOR that protects SMEs against non-payment of their customers and offers merchants ‘trade credit as a service’ similar to the “buy now pay later” model.

A quick query on Coverager Data suggests:

  • Around 100 distribution partnerships between a financial services company and an insurance company where Rising Bank and Starling Bank land the top spots in terms of the number of insurance partners.
  • When it comes to total partnerships announced – 2020 is a peak year with 55 new partnerships. A trip down memory lane has us looking at Revolut and Qover, Credit Karma and Progressive, and, and Hippo/Lemonade.
  • And when it comes to insurer-backed investments, there are 195 financial services companies backed by insurance companies with 54 companies (highest recorded) announcing deals in 2019 (noted a few below).
# D2C Fintech About Insurer-Investor Total Funding
1. JD Digits Digital investing China Taiping Insurance $5.03B
2. Chime Digital banking Northwestern Mutual Future Ventures $1.5B
3. Digital banking Ping An Global Voyager Fund $905M
4. Wealthsimple Digital investing Allianz X $900M
5. N26 Digital banking Allianz X $819M
6. WeLab Digital banking Allianz X $656M
7. Remitly Online money transfer Prudential $505M
8. Varo Money Digital banking Progressive $482M
9. Current Digital banking CMFG Ventures $402M
10. Betterment Digital investing Northwestern Mutual $275M

In some ways, Berkshire Hathaway is following in the footsteps of Progressive, which backed fintech startup Varo, and Hokodo is following in the footsteps of Klarna, and generally, insurtechs are following fintechs and vice versa.