Toronto-based insurtech startup PolicyMe wants to make it easier for Canadians to access not just affordable life insurance, but other types of insurance, online.
PolicyMe got its start as a life insurance broker, tackling the issue of distribution with the initial launch of its coverage calculator and price comparison platform. In March 2021, the startup launched its own fully-underwritten digital term life insurance product in partnership with Canadian Premier Life Insurance. To date, PolicyMe claims to have sold over $5 billion in life insurance coverage.
PolicyMe CEO Andrew Ostro expects the startup’s new insurance industry backers to play an important role in PolicyMe’s growth.
After focusing primarily on life insurance and selling direct-to-consumer to date, PolicyMe has announced $18 million CAD in Series A financing from existing investors and insurance industry players to roll out other types of insurance products and develop its business-to-business-to-consumer (B2B2C) distribution pillar.
As PolicyMe expands in a risky and cost-intensive space, PolicyMe co-founder and CEO Andrew Ostro expects the startup’s new insurance sector backers’ expertise, credibility, and balance sheets to play an important role in PolicyMe’s growth. “There’s a reason why innovation doesn’t happen quickly in life insurance,” Ostro told BetaKit in an interview. “There’s a lot of risk … and there’s a lot of exposure should things go wrong.”
“Having investors who have credibility trust you, have a vested interest in you succeeding not just through the commercial partnership, but through the investment, and having a balance sheet that we can utilize to sell more and get behind our products—it’s extremely valuable to the company.”
PolicyMe was founded in 2018 by Ostro, COO Laura McKay, and CTO Jeff McKay, who experienced firsthand the inefficiencies that existed across the traditional life insurance valuation chain through their years working in the insurance and tech industries. The startup claims to have streamlined the traditional insurance process with tech, making it possible for Canadian customers to get quotes and apply for term life insurance online in 20 minutes or less, selling life insurance policies that PolicyMe claims provide “the same quality protection customers deserve but with fewer steps and lower costs.”
The startup’s Series A round consists of $13 million in equity funding raised across four tranches that closed between November 2021 and April 2022, and $5 million in debt financing PolicyMe secured in July from an undisclosed “Tier 1 Canadian bank.” Ostro says PolicyMe currently has about three-quarters of this capital left in the bank. This financing brings PolicyMe’s total funding to about $21.8 million.
The Series A round’s equity component was provided in part by a trio of new PolicyMe investors, insurance industry players Missouri-based RGAX, Bermuda-based SiriusPoint, and Minnesota’s Securian Financial—the parent of PolicyMe partner Canadian Premier Life Insurance. All three have either previously partnered with PolicyMe or Ostro claims have broached the possibility of doing so in the future.
The round also included follow-on support from Miami’s HCS Capital and Toronto-based Westdale Properties, which co-led the startup’s $3.3 million 2020 seed round.
According to PolicyMe, the company’s policies are priced 10 to 20 percent lower than most traditional offerings, a discount Ostro says it is able to offer by eliminating inefficient underwriting and distribution costs, which PolicyMe has done by building its own insurance product from scratch.
“PolicyMe continues to make huge strides in the industry, and has solidified its standing with one of the simplest and most affordable life insurance offerings in Canada,” said HCS Capital managing partner Luis Felipe San Martin. “Their ability to deliver a consumer-centric product with a seamless experience puts them in an ideal spot to expand their suite of offerings and distribution channels.
Ostro groups PolicyMe’s competition into two groups: big incumbent insurance companies and other insurtech startups. Compared to incumbents, Ostro says PolicyMe’s advantage is that it owns its distribution and customer experience, which CEO says enables it to operate and convert leads more efficiently.
Big players typically sell policies through third parties, and have to design products that can be sold by thousands of advisors. Ostro argued that this can result in a very inefficient underwriting operation that is reflected in pricing.
On the startup side, PolicyMe’s Canadian competitors include companies like PolicyAdvisor and Emma, which also claims to offer its own digital life insurance products, while Breathe Life operates in the digital life insurance space as well, but is not a direct competitor. Like PolicyMe, these companies are part of a growing group of startups looking to modernize the insurance industry that also includes Samos, ProNavigator, and Goose.
According to Ostro, PolicyMe’s startup peers in Canada do not control operations and product the way PolicyMe does. “I haven’t seen any other [Canadian] insurtech company take this approach and build a product from scratch,” said Ostro. “They’ve all taken existing products from the carriers and adapted them to their platform.”
Ostro explained that PolicyMe doesn’t just distribute Canadian Premier Life Insurance’s offerings. He said the company worked with PolicyMe to “re-think” the technology infrastructure, product specifications, and underwriting, indicating that the insurance company gives PolicyMe the autonomy to underwrite its own policies. “It’s super difficult to get balance sheet partners, big insurance or reinsurance companies, to give you that kind of autonomy to be able to underwrite your own policies on their paper with their balance sheets,” he said.
“Our life insurance is considerably less expensive than everything else out there, and it’s purely because of the expense of underwriting and distribution, and the value of being able to rebuild the underwriting model from scratch,” Ostro argued.
PolicyMe has used some of its Series A funding to develop a critical illness insurance policy to supplement its life insurance product within the coming months. Beyond that, Ostro said health and dental insurance are next on the company’s roadmap, noting that PolicyMe is “well into the product development stage” on both.
From a distribution standpoint, PolicyMe is currently exploring a variety of different partnership opportunities with B2B FinTech companies. Ostro sees an opportunity to work with channel partners that are already selling life insurance but at a high price with low conversion rates, such as in the employer space, by embedding PolicyMe’s products.
PolicyMe has done smaller-scale B2B2C partnerships up to this point. Going forward, Ostro sees selling B2B2C as “a major growth engine” for PolicyMe, which plans to focus on larger-scale opportunities that could entail custom solutions for each partner.
“We’re in a very strong position here in Canada.”
-Andrew Ostro, PolicyMe
From a geographic standpoint, PolicyMe currently serves every Canadian province and territory except for Newfoundland and Labrador, New Brunswick, and Québec. Ostro expects the startup to expand into Newfoundland in the coming months. With New Brunswick and Québec, Ostro said PolicyMe needs to build up its French language operations before tackling the two provinces, adding that the company intends to move into both within the next year.
While Ostro noted that while United States expansion is on PolicyMe’s radar,—a prospect that could be enabled by all of the startup’s US-based investors and partners—PolicyMe is unlikely to start selling insurance south of the border within the next year.
For now, the company sees plenty of room to continue growing in Canada, where Ostro says there is still a lot of fragmentation in the market. “We’re in a very strong position here in Canada … with a huge competitive advantage in our ability to get similar products out to our competitors at lower rates,” said Ostro. “We’re sitting at an opportunity that we want to remain laser-focused on before we jump to other areas.”
Feature image courtesy PolicyMe.