When Melissa Gale first started working for Lyft as an insurance solutions manager, she was excited to join a fast-paced startup. In 2014, Lyft wasn’t regulated in any state and was receiving cease and desist letters from multiple cities. There were a lot of unknowns for the ride-sharing company.
“The first reactions to Lyft were very ‘anti,’” Gale said. “There was a lot of scrutiny from a regulatory perspective.” In order to expand to New York City, for instance, Lyft had to agree to operate as a commercial service — their drivers had to be commercially licensed and their vehicles commercially insured, though this is no longer required.
It was part of Gale’s job to address that scrutiny by building an insurance framework. But the ride-sharing industry was like the wild west for business insurance.
“We were disrupting an age-old industry in both transport and insurance,” she said. “We had to define the regulations and work forward from there.”
Over the next four years, Gale helped design and implement Lyft’s insurance policy from the ground up. She worked closely with the company’s government relations team, as well as Uber and several personal lines insurers to draft TNC (Transportation Network Company) regulations and build Lyft’s insurance program around that framework.
“We were constantly iterating on the program, tweaking and finding opportunities to build out a sustainable and scalable insurance program,” Gale said.
The problem wasn’t unique to Lyft. The arrival of the sharing economy brought with it a growing need for business insurance that didn’t fit within the confines of traditional policies.
Lyft was “disrupting an age-old industry in both transport and insurance.”
To address that, a number of startups are emerging to make insurance coverage fit the many non-traditional needs of new technology companies and gig economy businesses. They're finding that a one-size fits all approach is no longer sufficient.
The Startups Looking Out for Other Startups
Founded in 2016, San Francisco-based Vouch is a startup that provides insurance to other startups. They’re one of several insurance outfits that have cropped up in recent years to address the difficulties many startups face when trying to secure business insurance.
The main promise of the sharing economy is that consumers can take advantage of goods and services, from co-working desks to designer clothes, without actually having to buy them. It’s a dramatic shift in consumer habits traditional business insurance providers have struggled to address.
“We’re living in a time when you no longer need to own assets to enjoy them,” according to Gale, who now heads program development for Vouch. “Insurance providers never anticipated that, and we want to tackle it head-on.”
Business today is so nuanced, especially for tech companies, that the process of buying insurance can be a total nightmare — or “hair pulling-ly frustrating,” as Vouch co-founder and CEO Sam Hodges put it. When he went to buy insurance for Vouch, for example, he found that the company first had to be set up as a producer. He realized that many of the distribution partners weren’t a match for their business needs and most of the market wouldn’t even give him a quote.
The insurance applications also frequently emphasized criteria that weren’t yet relevant to Vouch, like revenue.
“When we were trying to secure E&O coverage so we could get licensed, we were declined by over 10 insurers because we didn’t have revenue yet,” Hodges said. “It was a painful process.”
“Generating a new insurance policy is a complex affair.”
The experience reaffirmed what he already knew — there was a clear need for the company he was building.
Vouch covers many of the typical risks any business might incur, like general liability, which includes personal injury and rented property damage, D&O (Directors and Officers), E&O (Errors and Omissions), as well as cyber and crime coverage and rented and non-owned auto insurance. But the sign-up process is much faster — most startups can complete the process in 10 minutes on their phone.
“Generating a new insurance policy is a complex affair,” Hodges said. Policies must be customized by customer and by state, and there are many variables going into this, making the industry reliant on manual, time-consuming processes. “Insurance hasn’t adapted to the technological revolution yet.”
Vouch is addressing the insurance field’s struggle to grasp the tech industry by building an advanced risk taxonomy, which includes more than 80 class codes for the tech sector. They also leverage data to streamline the user experience and increase their underwriting precision.
“We’re untangling this whole process, which is an intellectual challenge,” Hodges said.
Embroker, also based in San Francisco, provides insurance to startups through existing carriers and tailors them to fit the specific needs of each business. Many of their products are similar to Vouch’s offerings, but they also provide worker’s compensation and employee health benefits.
Right now, Embroker is developing partnerships with legal and regulatory experts to help them better understand the evolving issues that impact tech startups, like those in the sharing economy.
“Disrupting an antiquated industry is really exciting.”
“This allows us to articulate relevant issues to web and mobile marketplace companies,” said Chris Gunston, VP of alliances at Embroker. “It also allows us to collect relevant data related to these issues.”
That data is helping Embroker design and price their own insurance product for online marketplaces that they intend to be easier for users to understand than current offerings.
“I think what’s needed is a new type of simplified consumer-friendly policy,” he said.
Untangling Business Insurance
As head of program development for Vouch, Melissa Gale spends most of her day talking to product teams, engineers, salespeople and founders, asking them about their biggest pain points. It’s her job to figure out the problem each customer needs to solve.
Right now, Vouch is creating core insurance programs because it lays the groundwork for every other type of policy. Core insurance coverage varies by customer, as well as the state they operate in. Gale is focused on designing those core programs to be flexible enough that they can work for different customers, while still being innovative enough to cover their needs and remain cost-efficient.
Finding a solution that can fit and be modular for all different sectors, Gale said, is one of the most interesting parts of her job.
“I’m an insurance nerd, but I think disrupting an antiquated industry is really exciting,” she said.
Matt Miller, founder and CEO of Embroker, agrees. “Insurance fundamentally supports businesses and helps them thrive,” he said. “We’re building technology to systematize, streamline, and improve decision-making processes.” In doing so, Miller believes Embroker can catalyze a fundamental change in the commercial insurance industry.
What’s next in the ‘wild west’ of startup insurance?
This year, Gale is looking forward to building out her team at Vouch, as she continues to identify and create new products for a constantly evolving industry.
“Unfortunately, technology moves at a pace that both the insurance and the regulatory industry struggle to keep up with,” she said. “It’s my job to help bridge that gap and find innovative solutions that meet the needs of the insureds, while appeasing the insurers and those that regulate them.”
Embroker has plans to launch up to four new digital insurance products for businesses this year — several of which will be firsts for the industry.
“I think the pace of innovation for the insurance industry will only continue to increase,” Miller said. “It’s an exciting time for us, and for the industry overall.”