Clearcover Raises $43M To Challenge Auto Insurance Giants

If you’ve watched the Super Bowl, or maybe even just turned on your television, you’re likely familiar with the tiny, parking spot-owning gecko, the price gun-yielding Flo, and the soothing sound of Dennis Haysbert’s voice.

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The traditional companies that employ those memorable characters, namely Geico, Progressive, and Allstate, respectively, are coverage giants in a changing insurance landscape–one that will likely rely less on advertising and more on low-key, mobile-forward platforms.

One startup, Clearcover, joined the pack of entrepreneurs aiming to shake up the insurance industry with a less flashy approach. The Chicago-based company has scored a $43 million Series B from Cox Enterprises. Local investors Lightbank and Hyde Park Angels also participated among others. This is the latest deal in what’s likely to be a warming venture market in Chicago, despite the snow. Late last week, Crunchbase News found that well over $100 million in VC funding was announced by Windy City startups so far in 2019.

Clearcover is focused specifically on the auto industry, and is aiming to make purchasing car insurance more efficient and less expensive. Co-Founder and CEO Kyle Nakatsuji told Crunchbase News that the company is bringing something new to the market of companies aiming to disrupt an industry that is as old as the vehicles it covers.

“Most people were trying to fundamentally change the way insurance products were priced, whether that was through some new form of measurement or some new use of data,” Nakatsuji said. “We just had this sort of contrarian view that wasn’t necessarily about changing pricing. It was about fundamentally changing your cost structure.”

Nakatsuji explained that the company is able to cut costs in a variety of ways, including through its API platform which allows the company to integrate with partners that interact with customers when an offer of insurance or an insurance quote is relevant. That ranges from insurance shopping partners, partners in the car sales and refinancing industry, and companies that deal with personal finance management. The company uses the data gathered from those partners to streamline the insurance purchasing process.

“We sell the vast majority of our policies end-to-end online with no interaction with a human,” Nakatsuji explained. “That is different than most of the big carriers … also about 60% of our claims are handled fully digitally.”

Of course, the company is up against other, well-funded companies with similar goals. Root Insurance, for example, is a Columbus-based team that is aiming to reduce the cost of insurance by assessing applicants’ driving behavior through their smartphones. The auto insurance unicorn raised a $100 million Series D from Tiger Global Management in August.

Unlike Root Insurance, Clearcover does not underwrite its own policies and relies on more traditional models to assess coverage pricing. Root Insurance told Crunchbase News in March that expanding into states like California, where there are more stringent regulations regarding insurance companies and the collection of personal data, was more difficult. Nakatsuji said that he’s confident that the difference in strategy–cost structure versus price change–may give Clearcover an advantage.

“By focusing on technology and cost structure as opposed to trying to fundamentally change how the rating structure works, our expansion is a bit easier,” Nakatsuji. “Our first state was California. We’ve sold tens of thousands of policies in California… We have pretty aggressive expansion plans in terms of states, and it’s in part because of the flexibility of our attack.”

Needless to say Clearcover will be spending its newly raised capital expanding its geographical reach, and adding more partnerships in the coming year.

Illustration Credit: Li-Anne Dias

Editorial Note: A previous version of this article misstated Flo’s company. Flo represents the insurance giant Progressive, not the travel company Priceline.