Austin—Even the most staid of industries can use a boost from technology.
Case in point: Cerity, an Austin, TX-based insurance tech startup founded last year says it’s developing software that uses artificial intelligence to match worker’s compensation policies to small businesses that otherwise wouldn’t get them. “It’s hard to get, complex to understand, and cost prohibitive,” says Tracey Berg, Cerity’s president.
Because of that, small businesses—especially “micro-sized” ones that employ 10 people or fewer— don’t typically purchase worker’s comp, she says.
“They don’t understand how much risk this brings the employer or employee,” Berg adds.
Cerity, which is backed by parent company Employers Holding, a Reno, NV-based insurer, has developed an algorithm that it says enables these small businesses to apply and receive worker’s comp policies in minutes. Applicants answer about 15 questions related to the type of business they run, whether it has any tax liens outstanding, whether employees have been hired through a temporary staffing agency, and other details.
“Once we have all this information, [the algorithm] puts them into one of 100 price points,” Berg says. “Most insurance companies have around six price points. We are giving you a more accurate price.”
Berg says Cerity decides whether to approve a prospective policyholder depending on its responses to the automated questions, without a human agent’s involvement. “For example, if you have any tax liens, we’re going to decline you,” she explains. “We don’t underwrite contractors because that takes more human interaction.”
So far, Cerity has received approval to write policies in six states, including Texas, where it launched earlier this year. The startup declined to say the value of the policies its underwritten or how much in premiums it has generated.
Among insurance tech startups, entrepreneurs are seeing a niche in specializing in worker’s comp programs. Those in the growing “gig economy” who can end up working as contractors instead of full-time employees, are also potential customers for this insurance, Berg says. “Even for freelancers, to work for a large company as a vendor, you need worker’s comp,” she says.
Pie Insurance, a startup based in Washington, D.C., is also focusing on underwriting worker’s comp policies for small- and medium-sized businesses. In the 11 months since it began selling insurance, the startup says it has generated more than $10 million in premiums from its customers, according to a press release.
To help further expansion beyond the 19 states in which Pie is approved to sell insurance, the startup raised $45 million in a Series B funding round earlier this month, bringing its total funding raised to $61 million, the statement said. Investors included SVB Capital, Sirius Group, Greycroft, Moxley Holdings, Aspect Ventures, and Elefund. (Pie operates as a managing general agency for Sirius America Insurance Company, which is a subsidiary of Sirius Group, and is not related to Sirius XM Satellite Radio.)
Cerity’s Berg says the startup also plans to expand its geographical footprint. “The biggest challenge is the pace with which we can get states’ approval,” she says.
