With the advent of the internet, the way that people bought goods and services changed forever. E-commerce has become the preferred channel for consumers in a large number of product categories due to the ease and convenience of purchasing an item from the comfort of your own home or while on the go from your mobile phone. At General Catalyst, we have not shied away from backing great teams attempting to digitize the insurance market with investments like Lemonade and Oscar.
However, different types of insurance have nuanced approaches to the underwriting process, so while some categories have come online quickly with rich ecosystems enabling consumers to shop around and pick from multitudes of carriers, others have lagged. Due to the complexity and risk involved in the underwriting process, the life insurance industry has digitized more slowly. While ten million consumers purchase life insurance each year, the traditional process to get approved for a policy is onerous, time-consuming and still largely analog, taking an average of 15 weeks. Customers need to fill out manual paper applications, undergo blood tests and insurance carriers pull medical records from outdated tracking systems that haven’t been improved in decades.
Moreover, most households do not qualify for life insurance under traditional application processes. Legacy insurance carriers, the largest of which are over a hundred years old, lack the technological sophistication to leverage the vast amount of data available today that can more precisely measure and underwrite risk. As a result, only the lowest-risk and higher-income segments of the population get approved by most carriers.
Ethos set out to broaden the ability for families to access life insurance by lowering friction and making more forms of insurance available with more flexible, dynamic pricing. By automating previously manual processes and integrating with third-party data sources, Ethos can more quickly and accurately evaluate the risk of an applicant. By collecting data on how policies mature and applying modern machine learning methods, Ethos’ underwriting engine improves over time as it refines its predictive model.
The benefit of all of this is two-fold: first, more households can get approved for life insurance; and 2) the easier process removes a huge barrier to entry for many potential applicants who could benefit from life insurance but balked at previous processes. The human consequences of this are significant. 5% of all children in the U.S. lose a parent before age 15, and 70% of those families go bankrupt within 3 months if that parent was the breadwinner. By expanding access to life insurance and making the process easier, Ethos enables more families to protect themselves from this risk.
At General Catalyst we believe that digitization of the life insurance industry is long overdue for the millions of people looking for a better, easier way to protect their loved ones. We also believe that the Ethos team, with their strong leadership, deep technical capabilities and domain expertise, are the best positioned to execute on this opportunity. We’re excited to welcome them to the GC family.