Clearcover, a Chicago-based auto insurance startup that uses artificial intelligence to more effectively market auto insurance, announced today that it has raised a $43 million round of funding led by Cox Enterprises. Other participating investors include American Family Ventures, IA Capital Group, Lightbank, and Hyde Park Angels.
Former American Family Insurance employees Kyle Nakatsuji and Derek Brigham are the cofounders of Clearcover, who saw a way to use technology to offer better customer service and lower prices when they founded the company in 2016.
“Doing both of those at the same time is exceedingly difficult, and we didn’t think anyone else was doing it right or doing it as well as we thought we could,” CEO Nakatsuji told VentureBeat in a phone interview.
In practice, here’s what that means: Clearcover has developed an API that it seeks to integrate with websites that have the data it needs to figure out which customers are seeking to buy car insurance right now; that includes personal finance apps, automotive websites, and insurance shopping sites. A visitor to one of the sites or apps that has Clearcover’s API integrated might get an ad to check out a quote from Clearcover. Clearcover has also developed an AI-based coverage recommendation tool called SmartCover that helps the company automatically make custom coverage recommendations to potential new customers.
Clearcover pays its API partners — the company currently has 25 — based on how many introductions to potential customers they’re able to make, but doesn’t disclose exactly how much. However, Clearcover says that it’s still spending less than traditional insurance companies might spend on traditional marketing campaigns — billboards, commercials, etc. The company says that enables it to offer insurance at a lower price than traditional carriers, and to only reach people in the “moments that matter” — the moments when they actually need to buy car insurance.
Currently, Clearcover is only selling insurance in California, though the company aims to expand to at least 6 or 8 more states next year. Nakatsuji said the company has thousands of customers in the state, and wrote about $10 million in direct premium in 2018. Nakatsuji declined to say how much Clearcover’s first customers are paying, but said that Clearcover charges anywhere from 15 to 40 percent less than the larger agency carriers.
Insurance tech is a popular sector in the Midwest right now, and Clearcover’s biggest competitors in the auto insurance sector are San Francisco-based Metromile and Columbus-based Root Insurance. Clearcover is the smallest of the three — Root Insurance wrote $55.6 million in direct premium in just Q1 to Q3 2018, for example.
Metromile quotes customers based on the number of miles they drive, while Root Insurance generates quotes by using smartphone data to determine how safe of a driver they are. Nakatsuji told VentureBeat that one thing he and Brigham did not want to do with Clearcover is to use different data than traditional insurance companies to generate quotes.
“Making tweaks to how the foundation of insurance or risk pricing actually works … makes the product too complex for most insurance users,” Nakatsuji told VentureBeat. ” We think [that] can help a handful of people, but often at the expense of a larger group of people.”
Clearcover currently has 50 full-time employees, and hopes to roughly double its headcount within the next year.