Root Insurance raised a $100 million financing round in a bid to fuel market expansion and hiring as the auto insurance startup with its telematics-based platform goes national.
Tiger Global Management led the Series D funding round, with Redpoint Ventures, Ribbit Capital and Scale Venture Partners all participating as follow-on investors. The financing is expected to close during the fourth quarter of 2018, pending regulatory approvals.
“This additional capital will allow us to accelerate our strategy to transform the car insurance world and reinvent a broken industry from the ground up by setting the new standard for how customers buy and use insurance,” Alex Timm, co-founder and CEO of Root, said in prepared remarks.
Root, founded in 2015, uses telematics and smartphone-related technology to reward good drivers with cheaper insurance rates. Customers get a personalized quote after a test drive with the technology of two to three weeks. They can also purchase and manage their policy entirely within the Root mobile app. Root asserts that its approach can save good drivers up to 50 percent compared to traditional insurance carriers.
Root’s latest financing is on top of a $51 million Series C round disclosed in March that was designed to help propel expansion into additional states and investment in the insurer’s core technology.
Root said the new financing raises its valuation to about $1 billion. The company said the additional money will help it penetrate further into existing markets; expand into additional states; and fuel hiring of additional engineers, actuaries, claims and customer service to support its national expansion.
Root now operates in 20 states: Arizona, Arkansas, Delaware, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Texas and Utah. Plans call for expanding into all 50 states and Washington, D.C. by the end of 2019. Munich Re and Odyssey Re are among its reinsurance backers.
While the insurer is growing rapidly in terms of scope and premium volume, it has dealt with high loss ratios.
Root’s latest financing, while large, rivals other funding rounds in the InsurTech space over the last year. Digital insurer Lemonade, for example, raised a $120 million Series C financing in December intended to help accelerate a global expansion. Metromile Inc., a pay-per-mile auto insurance provider, raised $90 million in July to help expand the use of its artificial intelligence for fully automated claims processing. Also in July, Next Insurance pulled in $83 million in new financing that will back its continued U.S. expansion as a full-service digital insurance carrier focused on the small business market.
Source: Root Insurance