Root Insurance, a startup auto insurance company based in Columbus, Ohio, has raised $100 million and is now valued at $1 billion by its investors.
Tiger Global led the investment round and was joined by Redpoint Ventures, Ribbit Capital, and Scale Venture Partners. The size of the round and valuation is unusual for a Midwestern company, with such startup funding usually more common in Silicon Valley.
But auto insurance has become an attractive field for tech companies and investors and Root has an interesting approach. According to VentureBeat:
Root Insurance last raised a $51 million series C in March. Cofounder and CEO Alex Timm told VentureBeat in an email today that the company wasn’t looking to raise a new round of funding, but that “we were open to the conversation with Tiger as we knew the extra capital could help accelerate our expansion.”
Timm, a former consultant for insurance conglomerate Nationwide, cofounded Root Insurance with Dan Manges in 2015. The company aims to provide cheaper car insurance policies by incorporating “individual driver behavior” into quotes, rather than focusing just on standard demographic data, like how old the driver is or how many accidents he or she has been in. Interested customers download Root’s app, and for 2-3 weeks the app will gather sensor data while the customer drives, to determine things like how often a driver tailgates.
Over the past 18 months, auto insurers have expressed renewed interest in what is known as usage-based insurance as consumers become more comfortable with sharing their data to get discounted rates, said Gwenn Bézard , co-founder and research director at financial services research firm Aite Group.
For instance, more than 30 percent of new customers are now opting for usage-based insurance at Nationwide and Progressive, Bézard said.
Usage-based insurance, which bases rates on your driving record more than your credit score, relies on devices known as telematics to track driver behavior.