As mentioned in my previous article regarding Petal, the credit card company for people without credit, the FinTech industry is booming because of the attractive market for millennials. Younger generations are more flexible and less likely to choose firms based on tradition. Millennials tend to switch between preferred companies based on convenience and simplicity. FinTech has been largely steered towards millennials because mobile platforms such as Robinhood, Petal, and Acorn are able to have seamless apps with virtually no learning curve and limited costs. Beyond financial services, startups have been increasingly targeting opportunities for growth in the insurance industry.
It is clear that insurance can be extremely useful, but it is also difficult for the average Joe to understand the inner workings of “the system”; that is, people are often at the mercy of well-advertised insurance providers. Seeing this information asymmetry, “insurtech” companies are reaching consumers that need the simple platforms and guidance to succeed. Clearcover is one such company that has been slowly making its mark in the auto insurance sector.
Clearcover first launched its services in February 2018 and received over $50 million in seed funding across two rounds after January 22, 2019. The model is poised to be successful because of its use of artificial intelligence and machine learning technology. The ultimate goal of the company? Provide customers with simple plans and lower rates. The company is able to provide lower rates by reducing overhead including extensive advertising costs. The company reduces its systemic risk through its AI platform which tracks insurance industry data and transactions. The algorithm can understand purchase patterns to find both the most profitable points for the company while also creating the most valuable plans for its customers.
Clearcover is very attractive especially to millennials and first-time buyers because of the ability to obtain a transparent, affordable plan within minutes. There is considerable risk that first-time insurance buyers will stay with the traditional insurance providers that their parents or spouses use, or even opt for a provider whose sales are primarily driven by expensive marketing campaigns. If Clearcover successfully integrates its innovative platform, a strong resonance marketing campaign will allow the company to pivot into the industry. Partnerships with name brand firms and testimonies from highly regarded business journals will establish the credibility Clearcover needs to prove it isn’t another scam advertising great prices.
Technology is disrupting every industry via improvements in data collection, analysis, and decision making. By using a digital platform and a data-oriented mindset to both strategically target customers and choose the statistically appropriate plans, Clearcover is able to compete against the major companies and offer much lower premiums. This Chicago-based early stage venture started in solely California and is ready to use the second round of funding to expand to Illinois and other states. It will be exciting to see how Clearcover grows when faced against new state regulations, current players, and other tech startups.