Home to large players like American Family Insurance and Northwestern Mutual, Wisconsin has become a hotbed for both insurance innovation and talent. Gener8tor, the state's top startup accelerator, operates an insurance-focused accelerator program, and several local startups have popped up in recent years to improve and disrupt the legacy insurance industry.
So it might not come as a surprise that Understory, one of the state's most high-profile startups, is itself going all-in on insurance.
Madison-based Understory announced today that it's launching a new product called Auto - Hail Safe, a data-driven hail insurance product for auto dealers. Understory's weather sensors automatically detect if a hailstorm has impacted a dealership, and the policy processes payouts to the dealership in less than two weeks. It's designed to make the claims process more efficient and cost-effective for the dealership, while providing more precise weather data. Understory's Dot sensors, which are located on the auto dealership lot, can send the exact hail size to the insurance company.
"We're allowing a lot of (dealerships) that have previously been uninsurable---because the costs have been too high---and actually making them insurable," Understory co-founder and CEO Alex Kubicek said. "We’re solving this pain that auto dealerships have because they’re buying insurance but it doesn't go far enough. We actually give them the coverage they need."
The product launch is somewhat of a pivot for Understory, which launched in 2012 to bring its sensors and weather data to a range of businesses like broadcasting and utility companies. Kubicek said that now all of Understory's products are insurance related and it no longer offers its weather data to those other industries.
The startup plans to expand its insurance product beyond auto dealers, providing Hail Safe policies to agriculture businesses and commercial buildings.
Hail damage can be both costly and difficult to predict as a result of climate change, Kubicek explained. More than 4,600 destructive hailstorms hit the United States in 2018, resulting in more than $8 billion of damage, according to the National Oceanic and Atmospheric Administration. One hailstorm can cause millions of dollars in damages to an auto dealer’s inventory---especially in "hail belt" states like Texas, Colorado and Kansas.
Understory has raised around $25 million in venture funding to date. Its backers include Revolution’s Rise of the Rest fund, 4490 Ventures, Future Shape and True Ventures. It has around 25 total employees, and expects to double that in the next year or two as it expands its insurance offerings, Kubicek said.
“We invested in Understory five years ago, because we knew that a weather satellite 22,000 miles above the earth can’t tell you exactly what is happening on your dealership lot, your vineyard, or your farm," Tony Fadell, principal at Future Shape, said in a statement. Fadell is a former Apple engineer who helped invent the iPod and iPhone and co-founded Nest. "The Dot sensor is the holy grail of data-powered insurance."