As might be expected, a Richmond insurance startup is covering all of its bases this summer prior to its launch in 10 states.
One of only 10 companies nationwide selected for the inaugural class of the MetLife Digital Accelerator carried out in partnership with Techstars, Buddy, described by its founders as a “new type of insurance,” is soaking up all of the advice and guidance it can get.
“For a prelaunch company, one of the most important things you can do is get other peoples’ thoughts,” said CEO Charles Merritt, one of the startup’s three co-founders. Other founders include David Vogeleer, Buddy’s head of technology, and James Paul, head of insurance.
Incorporated in January 2017, Buddy offers flexible episodic accident insurance to “outdoor enthusiasts” through an online platform. According to the company’s profile on startup community F6S, coverage can range from “a day term policy for an adventure race [to] a two-week policy for a backpacking vacation, or a season policy for hitting the slopes.”
As an intermediary between the customer and the insurance carrier, the startup is part of the growing field of “insurtech,” an industry described by consulting firm McKinsey & Co. as “technology-led companies that enter the insurance sector, taking advantage of new technologies to provide coverage to a more digitally savvy customer base.”
Unlike many other startups, insurtech companies face an unusual number of barriers to entering the market because of the degree of government regulation insurance faces and the consequent slowness of change within the sector.
“We’re already working against the current,” Merritt said, noting that insurance markets “don’t move at startup speed.”
To help bridge that gap, Buddy has partnered with insurance market Lloyd’s of London since May 2017.
“They have a much longer view on how they operate,” Merritt said. “But they also are willing to innovate.”
One of Buddy’s most forward-looking innovations is its BuddyBot, a chatbot built specifically for message-based communication related to the sales and servicing of insurance. Customers will be able to ask BuddyBot questions 24/7, with licensed insurance agents available as a backup for more complex issues.
Given that insurance “is driven almost entirely by transmission back and forth,” Merritt said, “we see messaging as the natural way to engage” with customers.
Because of the complexity of the insurance markets, Buddy has gone through three levels of state approval, a contributor to its two years of development. Currently, it is licensed to operate in 48 states and D.C., and is preparing to file its product in 10 states, including Virginia.
The startup has been funded thus far by a friends-and-family angel investor round, Merritt said, although the MetLife Digital Accelerator may open doors to additional funding opportunities.
While Buddy, as accident rather than health insurance, doesn’t fall under the purview of the Affordable Care Act, that legislation has helped expand the market of customers for the startup’s product. Besides rising costs for services such as emergency room visits, consumers have also seen surges in the cost of accident insurance since implementation of the ACA.
“Since the uncertainty has been introduced into the marketplace, deductibles and copays have gone up,” said Merritt. “That was a lot of the impetus behind, ‘why this, why now.’”
