Protocol | Fintech

When COVID rocked the insurance market, this startup saw opportunity

Ethos has outraised and outmarketed the competition in selling life insurance directly online — but there's still an $887 billion industry to transform.

An illustration of a life insurance policy

Life insurance has been slow to change.

Image: courtneyk/Getty Images

Peter Colis cited a striking statistic that he said led him to launch a life insurance startup: One in twenty children will lose a parent before they turn 15.

"No one ever thinks that will happen to them, but that's the statistics," the co-CEO and co-founder of Ethos told Protocol. "If it's a breadwinning parent, the majority of those families will go bankrupt immediately, within three months. Life insurance elegantly solves this problem."

The problem Ethos and a host of competitors are trying to solve: It's still too difficult to buy.

Ethos uses technology to offer life insurance directly to consumers, faster and with fewer hassles. The company is disrupting a centuries-old industry, worth $887 billion in the U.S., that has been rocked by COVID-19 deaths.

It's one of a swarm of companies that started up in recent years to tackle the opportunity. Fin vs Fin, a site which rates consumer financial services, lists it alongside four main rivals: Haven, Ladder, Bestow and Fabric. But Ethos has raised over $400 million — more than Ladder, Bestow and Fabric put together, according to Crunchbase. (Haven is a subsidiary of MassMutual.)

Colis launched Ethos with co-founder Lingke Wang, a fellow student at the Stanford Graduate School of Business, where the idea for the startup emerged. Wang had a life insurance policy that was "aggressively sold" to him at Stanford when he was 20 years old. Wang had to drop it in order to pay his tuition.

"He lost everything that he put into it," Colis recalled. "And I looked at him and said, 'I'll bet you're not the only one this has happened to.'"

That led to the idea of starting a company that is able to offer policies more attuned to a consumer's needs and situation, including not offering life insurance to someone who "will have a high likelihood of discontinuing in the future because it's too much for their budget" or who probably doesn't need that much coverage.

Colis said they also sought to make the process of getting life insurance dramatically faster and easier in an industry where many of the top providers are more than 120 years old. "They're older than the airplane, older than World War I, older than the polio vaccine, and they haven't changed a lot since then," Colis said.

Buying life insurance typically takes two to eight weeks. Colis said Ethos has shortened that process and mostly done away with tedious medical requirements including blood tests. "You can buy it instantly, online," Colis said. "No medical exams, no blood tests, no paper applications, no commission sales agents. Anyone can buy it."

Medical exams are required for policies worth more than $1 million. These policies make up less than 1% of Ethos's business, Colis said. Among its rivals, only Bestow, whose policies top out at $1.5 million, promises never to require a health checkup, according to Fin vs Fin.

Ethos works with established life insurance carriers, including Legal & General, Ameritas and AAA Life Insurance, which guarantee the policies that Ethos underwrites and administers, Colis said. Ethos is able to offer a policy for "over 90% of the population, regardless of your gender, age, health, financial position, etc.," he added.

Most of the company's policies are sold directly to consumers. Ethos also works with a network of more than 10,000 independent agents who use its software to offer Ethos policies to consumers.

The company's technology "absorbs 300,000 data points in real time" to underwrite policies, using alternate pieces of information such as a customer's pharmaceutical and motor vehicle records, credit information and even "how you're behaving on our website," Colis said.

Ethos, which was founded in 2016, launched its service in 2018 at a time when the life insurance market was actually contracting slightly, according to industry research group IBISWorld.

Then the COVID crisis hit. The pandemic plunged Ethos and the life insurance market into a period of uncertainty, when "there was a tension between a surge in demand for life insurance from consumers and a large caution," Colis said.

It eventually became clear that the pandemic was leading to big changes that favored Ethos. COVID made people "think of their mortality," Colis said.

Nate Niparko, one of the company's independent directors and a partner at Accel, an Ethos investor, said the crisis was also an "accelerant" to online sales.

"A lot of the in-person meetings that would take place over the course of buying a legacy life insurance product were seen as risky," he told Protocol. "They were seen as a hassle. There was just less tolerance for the old way of doing things."

Niparko said he's been struck by "the speed at which the Ethos team is able to make progress in a historically slow-moving" industry which he said was "fundamentally broken, backwards [and] antiquated."

And investor interest has been growing. In May, Ethos secured $200 million in a Series D round led by General Catalyst at a $2 billion valuation. Two months later in July, the company announced another $100 million in investment from SoftBank which valued Ethos at $2.7 billion. Ethos has already surpassed $100 million in annual recurring revenue and is on track to post $200 million by the end of this year, Colis said.

Rob Galbraith, an insurance industry expert and author of "The End Of Insurance As We Know It," said Ethos had "done a tremendous job marketing across social channels in particular" and that its "war chest" was an advantage.

Besides the other direct-to-consumer startups, he noted, Ethos also competes with technology providers like Sureify and Benekiva. Galbraith points to Ladder as "definitely the most direct competitor to Ethos" in terms of offering a faster and streamlined underwriting process.

Ethos co-CEO Peter Colis (left) and chief product officer Jenn Liu (right) Ethos co-CEO Peter Colis (left) and chief product officer Jenn Liu (right)Photo: Ethos

Ethos has also been beefing up its leadership team. It just added several C-suite execs, including Anan Kashyap, a veteran finance executive from Poshmark, GrubHub and Kayak, who is now the company chief financial officer, and insurance industry veteran Troy Thompson, who is now the company's chief actuary.

On Monday, Ethos announced that engineering vice president Vipul Sharma has been promoted to chief technology officer. Wang was also named president.

Another recent big hire is Jenn Liu. A Silicon Valley veteran, she joined Google shortly before the company went public in 2004, helping build Google Shopping and the tech behemoth's Google Lens and AR products.

Life insurance, she admitted, is not as "super cool like AR or Baby Yodas."

"It's a different type of cool," she said. Going to a startup surprised some people, including her husband, she said.

"I'll admit my little ones don't understand what Mommy does every day," she said. She tells them, "Mommy's helping others protect their family and prepare and make sure that they are taken care of should anything happen."

(An earlier version of this story misstated the maximum life insurance coverage offered by Bestow.)

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