Layr raises $5mn in seed funding to create better insurance
Utilising artificial intelligence (AI) and machine learning (ML) to help SMBs customise commercial insurance bundles, the company offers a quick, easy and totally online service to its customers.
“Liability insurance is a critical piece of protection for the often vulnerable small business, yet far too many companies are operating without it. We are changing this reality,” said Phillip Naples, CEO.
Addressing fundamental problems
Founded in 2016, the core management team encompasses more than 20 years of commercial insurance brokerage experience, making Layr particularly well placed to address the persistent problems of the insurance sector.
It is by fusing this sector expertise with a customer-centric philosophy, modern automation technology and cloud that the company is able to have a transformative effect on the previously arduous task of sourcing, purchasing and managing insurance.
“Layr addresses some fundamental pain points in the industry: the accelerating interest in engaging customers in an efficient, fully digital format and the rapidly evolving customer needs in the small business segment of the market,” said Keith Molzer, General Partner at Flyover Capital.
“With a platform that can deliver efficient and adaptable coverage for SMBs, we think Layr is particularly well-positioned during this era of economic uncertainty as small businesses look to get back on their feet in the new environment.”
A new era
- Falling equity market and interest rates
- Delays in the evaluation of claims
- Increased focus on risk portfolio diversification as those with highly concentrated interests face a sharp downturn
As such, with these elements creating uncertainty in the market, Layr’s technologically sophisticated approach could be a remedy to address certain sectoral weaknesses and provide other businesses with the security they need to hold the economy together.
Naples concluded, “Data suggests that more than 60% of US-based businesses will be owned by Gen Xers and Millennials in the next year. We’ve created an entirely new and automated process that meets the needs of modern business owners.
“This round of investment affirms that we’re solving a real problem and supporting economic growth by making business insurance more available, understandable and affordable than ever before.”
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.