We’re excited to announce today that we led a $2M seed investment in Goodcover, a new insurance company that is truly putting customers first. I’ve known Dan DiSpaltro, the co-founder of Goodcover, for close to ten years. He worked with a friend of mine at IBM and then co-founded Cloudkick with Alex Polvi (whose company, CoreOS, we invested in).
Dan reached out to me about a year ago to get feedback on the company and my initial email response was something along the lines of: “We don’t love the insurance space but happy to meet with you and be a sounding board.”
Since starting FUEL, we’ve spent time with a dozen or more insurance startups. Many of these companies have gone on to raise large sums of capital. We’ve looked at new consumer insurance companies as well as commercial insurance companies either sold directly or through brokers. But we kept getting stuck on the model. All these companies promised to use technology to lower cost by removing people on the opex side or develop better underwriting models, and then funnel those savings back into customer acquisition.
But there wasn’t anything truly innovative about the customer experience that would get someone excited to tell their friends about it and radically change the market for insurance. Margins and lifetime values are very good in insurance and many of the incumbent and legacy players have high fixed costs, but the category is very, very efficient at acquiring customers, which gave us pause.
I was skeptical too because I am lucky to be a USAA member. Before I was born, my father was an officer in the military, and for a period of time was stationed in Okinawa. When I turned 16, I was able to secure auto insurance. Since then, I’ve received my health, renters, home and life insurance through USAA, which only sells to current and former military service members and their families.
USAA is known for having the best rates -- every time I’ve asked about switching I hear the same thing: “Don’t bother. USAA is the best.” They have incredible customer service, their agents don’t work on commission so they aren’t pushing me into products I don’t need. And every year whatever surplus they have is returned to their members via a dividend.
And this was the pitch that Chris and Dan laid out for Goodcover - “building USAA for everyone else” - starting with renters insurance and then expanding from there. Chris worked for 8 years at AIG and together with Dan’s experience at Cloudkick, Rackspace and IBM, they have the right combination of skills. They’ve spent the past two years putting the infrastructure in place to launch the product. Out of the gates, the product saves customers 45% on their premiums, auto cancels members’ existing policies, and rewards members with a dividend for unused premiums. Given all the goodness, it is not surprising that members are organically telling their friends, which is an acquisition strategy we love.
Goodcover launched today to help renters in the state of California and we couldn’t be more excited to partner with the team to create a member-based insurance carrier for everyone! To learn more about Goodcover, check out their website or this TechCrunch feature.