Why Insurtech Companies in the U.S. Are Discovering the Columbus Region
With strong talent, incumbent carriers and a host of investors, Columbus is becoming an insurtech epicenter.
Many have attributed the growth of on-demand services like food delivery, online streaming and ridesharing to the fact that 35% of the U.S. workforce is now between 25 and 41. Millennials know what they want and they want it now, which is why the generation now makes up nearly half of on-demand consumers.
The financial services industry is no stranger to this demand, with mobile phones doing more in a few clicks than people could do in several hours with a car just a decade ago. This is why in 2019, insurtech companies in the U.S. received $4.9 billion in funding, representing more than a quarter of total fintech funding nationwide. A significant chunk of that came out of the Columbus Region, where new and expanding insurtech startups are rising alongside established industry giants like Nationwide and State Auto Insurance, as well as JPMorgan Chase’s largest global technology center.
There are a lot of finance and insurance hubs around the country, but why are insurtech companies in the U.S. finding a home in Columbus? A 2020 Deloitte study reported that they flourish there because of five major strengths: proximity to capital, access to talent, proximity to incumbent carriers, low business taxes in comparison to peer states and low cost of living.
Insurtech companies do not secure investors simply by domiciling near industry clusters. They do it by being innovative — from toothbrushes that monitor brushing habits and mobile apps that flag good driving habits to pass the savings on to the insured. Statewide, JobsOhio reports a 134% growth in venture capital support of Ohio insurtech companies between 2017 and 2019.
One of the superstars is dental insurance company Beam Dental, which raised $80 million in new funding in March 2020 from a group of investors that includes Nationwide. Beam’s business model involves transforming patient dental hygiene behavior into policy savings.
Root Insurance, the largest IPO in the history of Ohio, has been increasing its workforce in the Region since 2019. With auto insurance licensure in 48 states, and its best quarter ever selling policies and avoiding claim losses in Q1 2021, Root is disrupting the auto insurance industry through a system of pricing based solely on driving behavior. Another insurtech startup breaking state records is Columbus-based Lower, which raised $100 million in a Series A Funding round in 2021 – the largest Series A funding round in Ohio history. Lower, which is already profitable and growing rapidly, is a millennial and Gen-Z focused home finance platform.
Right behind them is Branch, a technology-driven home and auto company that makes bundling easier than even Flo and Jamie of Progressive fame. Its seamless data integrations eliminate the traditional insurance application and quote estimate, presenting clients with an instant, purchasable price instead of just an estimate. The company secured $50 million in investment in June 2021, bringing its total investment to-date to $82.5 million.
Insurtech companies recognize the benefits of collaborating strategically in the Region, as well. With its acquisitions of RiskGenius and Xagent, and a 2019 partnership with Progressive to build an online quoting system, Bold Penguin is focusing on insurance agents and creating a streamlined process of underwriting for carriers. The firm was acquired in 2021 by American Family Insurance.
It isn’t just home-grown successes that are trending up. Fintech and insurtech companies in the U.S. (and beyond) have also established significant operations in Columbus. California-based Upstart launched its HQ2 in Columbus in 2018, and may scale it bigger than its San Mateo headquarters. Its Silicon Valley neighbor, Huckleberry Insurance Services, also announced the opening of an HQ2 in Columbus this year. Back in 2017, Swedish firm Klarna launched its U.S. operations in the Columbus Region. Up until the pandemic, it was outgrowing its existing space based on demand – something that has clearly kept up based on the company’s decision to make a splash with a Super Bowl ad in February.
Innovation in insurtech can be capital intensive — especially for property and casualty insurtech companies in the U.S., where surplus requirements could range from $500 to $6 million. Thankfully, venture capitalists like Drive Capital and Rev1 Ventures are starting to realize that top talent is no longer restricted to the coastal regions, and insurtechs have profited from this awareness alongside other startups.
Columbus is home of the nation’s largest non-coastal VC fund, Drive Capital. Recently, Drive co-founder Mark Kwamme mentioned that Columbus’ high concentration of insurance companies was one reason the VC chose to invest in the Region and industry. Drive has been an investor in Root, Beam Dental and Branch Insurance, and in 2020 closed two new funds for a total of $650 million.
Rev1 has been Ohio’s most active seed investor for years, with $100 million in capital under management. In early 2021, Rev1 launched a new $10 million for-profit fund focused on building the Central Ohio startup ecosystem through investments in up to 15 companies including fintech and insurtech.
One of the biggest challenges for insurtech companies in the U.S. are a web of state and federal regulations. The nonprofit economic development organization JobsOhio announced a partnership in July 2020 with SixThirty, the global enterprise technology VC fund, to work together in partnering insurtech, FinTech and cybersecurity startups with the incumbent corporations, providing access to mentorship and connections to facilitate their growth while finding faster ways to address such obstacles.
The Ohio Innovation Fund, NCT Ventures, and Tamarind-Hill bolster the funding landscape for fintech and insurtech companies in the Region but aren’t the only support for early stage companies. Besides a steady flow of funding from VC firms, the Region’s established insurance providers like Nationwide, State Auto and Grange each offer their own venture arm to help fund new, innovative ideas in the insurtech space.
Incumbent insurance providers are redefining what makes an “insurtech.” In the U.S., these giants are creating innovations of their own and thinking like a startup. The Columbus Region has been at the forefront of that as well, with Nationwide recently partnering with Slice Labs to provide on-demand, pay-as-you-go auto insurance for rideshare drivers. Nationwide also created its own innovation center called the CoOperative in December 2019 to accelerate innovation like SPIRE, the company’s easy-to-understand digital insurance platform.
JPMorgan Chase is the second largest private employer in the Columbus Region with close to 20,000 employees across 13 buildings, including its largest technology center. In 2015, Rev1 received a $150,000 grant from the company to support startups, and in 2016, the two partnered together again with JPMorgan Chase’s $1.5 million commitment to support veteran-owned startups through Bunker Labs.
From homegrown startups and expanding disruptors to increasingly nimble stalwarts, the Columbus Region has built a layered and dynamic ecosystem within which insurtech companies in the U.S. can grow. When it comes to navigating that ecosystem, the One Columbus team has the experience and expertise to help.
Matt McQuade serves as the Managing Director, Business Development for One Columbus.