YC-backed Goodcover, the insurtech startup that looks to pass unused premiums back to the policyholder, is today announcing the close of a $7.5 million Series A funding round. The funding was led by Goodwater Capital, with participation from Fuel Capital, Broadhaven Ventures, Global Founders Capital, Liquid 2 and TransRe.
Goodcover launched out of Y Combinator in February of this year with a mission to charge as close to what is needed as possible in premiums, using its own machine learning algorithm for underwriting. It backs up that pact with its users by paying back unused premiums to its users. In fact, this year marked the first time Goodcover was able to offer users a dividend, which amounted to 1.89% of premiums paid that year.
“This isn’t about charging everyone and then giving 50% back,” CEO and co-founder Chris Lotz told TechCrunch at launch. “It’s a guarantee that we’re not overcharging you in the first place.”
The company operates as a managing general agent, which means they write the policy, set the pricing and build their own risk assessment model, but partner with insurance carriers to hold the back-end capital and write on their book. This differs from Lemonade, which is its own insurance carrier, but is similar to Hippo and many other new insurtech startups.
At launch, Goodcover was operational in California, which Lotz says is one of the more difficult states to get licensed in. With the fresh funding, Goodcover plans to move to more states in 2021 and expand coverage across the country.
Here is what Goodwater Capital's Eric Kim had to say in a prepared statement:
We fully trust in Goodcover’s mission. We think a cooperative model is the future of insurance, and companies of yesterday who maintain their incentives that are in conflict with the customers will struggle. Goodcover is the modern alternative that will help move the industry forward to better serve customers. We’re excited to see Goodcover grow and fulfill this role to more people.
Goodcover also has plans to hire on the back of the funding. The team is currently only five people, and Lotz admits that it's not a diverse team.
"As we go forward, that's one of my number one priorities," said Lotz. "I think it's important that our company reflect as much as possible the people we're serving. We've written a little bit about the systemic inequities that exist in the insurance world and it's one of those spaces that has traditionally been difficult to change, and I think we have a strong opportunity to be able to do that."
Goodcover wouldn't share specific membership numbers, but said the company is growing 30% month-over-month and is on track to hit its goal of 10,000 members by early next year.