Root Insurance, found in 2015, is the first US licensed Auto insurance carrier powered entirely on mobile and founded on the basic fundament that Auto insurance rates should be based on how you drive, not who you are. Through smartphone technology and data science, Root records and measures driving behaviour and uses that as a primary aspect in determining rates. Customers obtain their personalized quote after a test drive and they can purchase and manage their policy entirely via the Root mobile app.
Auto insurance is a massive industry at the verge of disruption. Root convincingly managed to reshape the USD 266 billion US auto insurance industry by using smartphone technology to study and analyze an individual’s driving behaviour and directly apply to their premiums.
As of 2020, they have licenses in 36 of 50 US states. However, they are only active in 30 states yet available to more than 65% of the US driving population. Their aim is to be licensed in all 50 states by early 2021.
They wrote more than USD 306 million in insurance premiums in the first half of 2020 and reported a revenue of USD 245 million and net loss of USD 145 million. Being in nascent stages and aspiring to grow across all US states, Root relies on investor money for expansion. With below accomplishments under their belt, they managed to raise USD 350 million in September 2019 at their last venture round with a valuation of USD 3.5 billion.
· Raised USD 523 million (combination of equity and debt)
· Licensed in 36 states, operating in 30, and targeting ~65% US driving population
Future goals involve to strive towards increasing profitability
· Improve the loss ratio as it drives the profitability
· Reduce marketing as a percentage of premium
· Recurring customer renewals have no associated customer acquisition costs and minimal underwriting costs, which altogether improves the profitability
Pioneering and coming up with an alternative way to determine premium has helped Root create a niche within the auto insurance industry. Expanding across all US states and driving towards profitability will help them achieve a greater valuation in the long run.
