A new company, Quilt is launching in the U.S. and setting its sight on fixing the incredibly, painfully, broken experience of getting insured in America.
For consumers new options for insurance can’t come fast enough. A recent exposé by 60 Minutes of the life insurance business found that several firms are failing to pay out to beneficiaries of policy holders. And that’s just day-to-day business practices.
In the aftermath of Hurricane Katrina, insurers recorded record profits even as the U.S. experienced what had been, to that point, the worst natural disaster in the country’s history. And three years after Hurricane Sandy hit New York, hundreds of claimants had yet to receive their insurance payments.
There has to be a better way.
At Quilt, which is initially launching in Florida later this month with a traditional renters’ insurance product, that better way will eventually involve changing the entire way policies are constructed and paid out. For now, they’re offering traditional products with a promise that they’ll be better actors than their (no good, awful, terrible) peers.
“I don’t think anybody says ‘Hey! I want to go into insurance,'” says Quilt co-founder and chief-executive Blair Baldwin.
A former marketing and adtech executive, Baldwin fell into the insurance racket through the Boston-based auto-insurance quote comparison business Goji.
“Once I started poking around the world of insurance my eyes lit up, because it combined all the things I do like [and] so much of the customer experience was broken, was really badly broken.”
Companies like Goji set out to solve one problem with the modern insurance industry — its inability to meet customers where they want to spend their time… which is online.
But for Baldwin, the problem ran deeper, he said. “You have a broken channel because people want to interact online and on the phone, but you can’t fix the channel problem without fixing the underlying product,” Baldwin says.
The path that he’s choosing is a tough one.
The insurance industry holds about $1 trillion in policies and invests around $7 trillion annually, according to estimates from PolicyGenius chief executive Jennifer Fitzgerald, which is why venture investors find the business so appealing. But the laws governing the industry are a patchwork of overlapping regulations that date back to the birth of the insurance business over a century ago.
The difficulties haven’t stopped venture investors from trying to get in on the action. Indeed, insurance technology has been a very active sector in recent years.
A report from the Financial Times citing an Accenture survey pegged venture investments in insurance at around $2.6 billion in 2015 up from $800 million the year before. In part that’s because big insurance companies are realizing that the old ways of doing business aren’t working — at least in terms of getting to new customers.
Baldwin says that Quilt is not just looking to change where business is done, but also how the business is done. That means getting state-by-state approval for the changes it’s looking to make to the standard policies for renters’ insurance, and then eventually for life insurance, pet insurance, and travel insurance.
He cited one example where insurers regularly underpay on claims when customers take out renters’ insurance. The way policies are structured, many renters can think that they’re getting fully insured for their electronics equipments, when in reality payments for electronics can be capped at a certain percentage of a premium.
That means that when equipment is damaged or destroyed claimants may only get a small piece of what they need to replace their stuff.
But making changes to policies, means going to a different regulator in each state to get approval, according to Baldwin.
To help with the national expansion the company has raised $3.25 million in seed funding from investors including NextView Ventures, who also led the seed round. Quilt’s other investors include Eniac Ventures, Founder Collective, Titan Partners, Basset Investment Group and a small number of strategic angel investors.
In Florida, where Quilt is launching its initial product, the company is working with Security First Insurance as a partner to both handle traditional policies and work on developing the new ones.
Quilt still has a long way to go before they can prove that they’re actually going to be doing something different in the industry, for now it’s a new way to package what amounts to the same offering.
Still, the company is part of a growing breed of startup that’s trying to tackle the hardest parts of the insurance business. Other companies looking to transform how business in the industry is done include the peer-to-peer insurance service, Lemonade, the micro-insurers Trov, and the still-in-stealth mode, property and casualty insurer, Jetty.