NEXT Insurance and Thimble are the latest InsurTechs to lay off part of their workforce this year, with NEXT citing challenging economic conditions and both InsurTechs pointing to an increased focus on profitability.
NEXT laid off 17 percent of its workforce this month, addressing the change in a July 7 letter to employees that was shared later that day on the company’s blog.
“I am making an incredibly hard decision to part ways with many of our friends and colleagues in an effort to adapt to the worsening macroeconomic environment and to secure the long-term vision of the company,” NEXT CEO and Co-Founder Guy Goldstein shared in the letter. “This is one of the hardest decisions I have made in my professional life and one I take very seriously. As difficult as this is, it is my responsibility to adjust our priorities in light of the new reality of market conditions and to accelerate NEXT’s goals to become profitable.”
Goldstein said in the letter that worsening economic conditions, as well as the company’s focus on profitability for long-term stability, factored into the decision. He added that NEXT is also focused on managing costs after evaluating its plans for the coming years and determining its expenses are too high for the company’s current revenue and insurance capital requirements.
“Earlier this year, we reduced operating costs, discretionary spending, marketing spend, and consolidated functions for greater efficiency,” he said in the letter. “However, in order to set NEXT on a clear path to becoming profitable, I was left with the hard choice to reduce the size of our team.”
Departing employees will receive severance that also includes extended company-paid medical benefits and mental health services, if applicable, the option to keep their company laptop and office equipment, and job search support.
“NEXT is committed to our vision to help entrepreneurs thrive and to become a one-stop-shop for small business insurance,” a NEXT spokesperson said in an emailed statement to Carrier Management about its future plans. “Our goal is to provide products that are uniquely tailored and competitively priced and this requires time. In the meantime, we’ve decided to focus on our leading products while postponing others, such as commercial auto. We will work with partners to deliver this coverage to our customers.”
The news of NEXT’s layoffs closely followed July 5 layoffs at another InsurTech – Thimble – where a reported 33 percent of the workforce was let go. In an emailed statement provided to Carrier Management, Thimble Chief of Staff Han Dang said the move aims to accelerate the company’s transition to profitability. All affected employees will be offered severance and assistance in securing new employment, according to Dang.
“Thimble’s vision is to become an iconic, independent, profitable insurance company,” Dang said in the statement. “Last Tuesday, we accelerated our transition to profitability and independence by cutting our burn through leaner expenses and, unfortunately, organizational changes including layoffs.”
Carrier Management reported earlier this year that technology company Root Inc., the Columbus, Ohio-based parent company of Root Insurance, laid off approximately 330 team members throughout its business in January.
Co-Founder and CEO Alex Timm in an emailed statement cited pandemic losses as factoring into the decision.
“As the pandemic has continued to evolve, supply chain and inflationary pressures have caused historic levels of loss cost increases,” he said.
However, one former employee affected by the layoffs refuted the company’s claims of pandemic losses, saying he believes the layoffs were a function of over hiring and overspending.
“They over hired,” said Robert Martin, former property/casualty inside sales agent at Root. “This was an underwriting failure and a marketing failure. They overspent. They didn’t fire underperformers. … They made consistent bad choices, and they cost people their jobs.”
A Root spokesperson declined to comment on these claims. Root Co-Founder and CEO Alex Timm said in a public statement regarding the layoffs that the move will further focus the company’s efforts on differentiating and diversifying its distribution, as well as improving its insurance operations and customer experience.
“We are confident we are building an enduring organization poised for future growth,” Timm said in the statement.