Why Silicon Valley’s newest unicorn, Next Insurance, is taking over the business insurance industry

The United States is home to 28.8 million small-to-medium sized businesses (SMBs) that represent 99.7% of all U.S. businesses. In fact, SMBs have created two-thirds of all net new jobs in the U.S. economy since the 70s, however 40% of all sole proprietors do not carry commercial coverage. If SMBs (businesses with fewer than 500 employees) are widely considered the backbone of the U.S. economy, why can’t they find business insurance that meets their needs? Below, we walk through the process of buying insurance in the past vs. today, and why Next Insurance is the leader in InsurTech for SMBs.

The opportunity for disruption

In the first half of 2019, more than $3 billion of venture capital was invested into InsurTech, which is on track to reach $6 billion by year-end. Current traditional insurance policies offered are fragmented, confusing, and overpriced, which can lead to SMBs jeopardizing their business by opting not to get coverage at all. The 21st century digitization of this business represents a tremendous opportunity to move an antiquated industry into the modern world.

Earlier today, Next Insurance, a leading digital insurance company for SMBs, and a Group 11 portfolio company, announced a raise of $250 million for their Series C round, bringing their total funding to $381 million in just over three years, with a valuation of over $1 billion.

While we could spend time discussing Next Insurance’s rapid growth since its July 2018 financing round, the Group 11 team thought the best way to illustrate Next’s powerful product offering would be to exhibit the process of obtaining a business insurance policy through the lens of an actual small business owner.

Our real life example: Coco Rose Design

Devon Morris, one of my colleagues here at Group 11, recently got married to Nina, who runs a successful small business, Coco Rose Design, a Southern California based floral design company for events, weddings, and conferences.

Nina’s business generates a few hundred thousand in annual revenues, has a number of 1099 contractors who help with events and delivery, and is certainly in need of general liability, property, and casualty insurance.

In a brief interview, we asked Nina about her experience shopping for general liability insurance through an agent and then asked her to go through the process of applying via Next Insurance. Her insights are herein:

Buying SMB insurance through an agent

A few years ago, when she started her business, Nina walked into the local office of a mom-and-pop insurance agent in Southern California whom she was introduced to by her family.

She filled out some physical forms outlining her assets, risks, revenues, and 1099s. After the agent found matching products, Nina had to undergo a phone interview with the insurance carrier to discuss the particular details of her needs versus the insurance carrier’s offering. There were a few more emails and papers signed in person, and in a couple of weeks, Nina had her general liability coverage of $2,000,000 aggregate and $1,000 deductible for approximately $700 a year.

Not only was this process time consuming, it was also costly and involved a few intermediaries. Nina had to continue calling her agent every time one of her venues wanted proof of insurance. This was not only aggravating, but also slowed down bookings, venue relations, and seems entirely unnecessary. Renewing the policy, unsurprisingly, was also as inefficient and time consuming.

Enter Next Insurance

This past week, we asked Nina to apply via Next Insurance for the same coverage she bought years ago. Her new experience went something like this:

She started with a basic Google search for “floral design business insurance,” which returned results of a landing page from Allstate titled “Business Insurance Needs for Florists” and ads from Hiscox, Hartford, Peninsular General, and unsurprisingly, Next Insurance.

She clicked on Next Insurance’s ad and searched her profession “Floral Designers” and selected “General Liability” (from the options of Commercial Auto, General Liability, Professional E&O, and Workers Comp). She then proceeded to provide details such as address, annual revenue, number of W2s, email, type of entity, and verified and approved disclaimers asking about previous claims, any pending litigation, losses, or material issues.

Within minutes, Next Insurance shared the following quotes for coverage:

1. BASIC ($25.00 per month or $300 a year, $500,000 limit, $500,000 aggregate, $0 deductible)
2. PRO ($27.50 per month or $330 a year, $1,000,000 limit, $1,000,000 aggregate, $0 deductible)
3. PRO PLUS ($28.25 per month or $339 a year, $1,000,000 limit, $2,000,000 aggregate, $0 deductible).

The process of obtaining this policy was far more time efficient and the outcome was also extremely cost efficient. Nina also realized that Next Insurance enables her to share proof of insurance with her clients at any given moment, at a click of a button.

Our takeaways

In total, the process today with Next Insurance spanned less than 10 minutes. Nina ran through this process online in the comfort of her home. The process was 100% digital and the policy fit her particular business needs as a floral designer.

She was delighted and went back to focusing on what matters — Her own clientele.

Digitization of SMB Insurance

While this exercise was a simple compare and contrast, we feel that these two experiences are clear examples of “the way it was” versus “the way it should be.” Next Insurance takes a software approach to an age-old industry that has not adapted to meet the complex (and ever-changing) needs of business owners today.

Additionally, the problem with a traditional blanket approach to SMB insurance coverage from current incumbent providers is that the needs of a yoga instructor, for example, are wildly different from that of a general contractor or florist. Their coverage needs to be customized. Next Insurance’s machine learning capabilities cover over 1,000 types of businesses which in turn also allows Next Insurance to process claims faster, increase operational efficiency, boost customer service, and detect fraud. Last but not least, Next Insurance does not charge fees — for generating proof of insurance, for paying monthly, or even for canceling. Doing away with fees has made Next Insurance’s policies significantly more affordable compared to competitors.

For all of these reasons, Next Insurance has quickly become a dominant player in the massive business-insurance sector and has plenty of runway for growth. While we are pleased with the company’s progress and with it being freshly minted to the Global Unicorn Club, we are certain that this is just the beginning for Next Insurance. The best is yet to come.

Congratulations to Next Insurance CEO Guy Goldstein and co-founders Nissim Tapiro and Alon Huri, as well as Group 11 co-investors — MunichRe, American Express Ventures, Nationwide, TLV Partners, Zeev Ventures and Redpoint on this new round of funding.