When Melbourne O’Banion had to lie down behind his office desk for an electrocardiogram test, he knew there had to be a better way to buy a life insurance policy.
The EKG was only one part of the process, which took six weeks for the necessary medical exams and policy underwriting.
Fast-forward eight years, and O’Banion’s online startup Bestow is about to go national as a life insurance carrier.
Bestow’s acquisition of Iowa-based Centurion Life Insurance Co. will enable it to be its own carrier in 47 states and the District of Columbia, rather than just serving as an agent. Terms of the deal announced Tuesday weren’t disclosed.
“We’ve known that becoming our own carrier would be necessary to scale life insurance products and protection the way that we’ve envisioned,” O’Banion said.
Last year, Bestow became a carrier in Texas, and O’Banion said the company’s growth plan was to expand state by state. The Centurion acquisition accelerates that timeline.
“We are primarily purchasing Centurion for the state licenses that allow us to become a national life insurance carrier ourselves almost immediately … by early next year, rather than having to wait three or four years to build that national footprint,” O’Banion said.
When Bestow launched in 2016, O’Banion understood that software and data weren’t being leveraged by the $723 billion-a-year life insurance and annuities industry. He was determined to disrupt that by providing policy quotes in minutes without medical exams.
“Millions of consumers want, know and need to get protected with life insurance, but have yet to purchase it because of all the frictions involved in getting life insurance,” O’Banion said. “We really set out to build the first digital life insurance company to be able to solve that gap in the market.”
O’Banion met his co-founder, Jonathan Abelmann, through a mutual friend after Abelmann moved from San Francisco to Dallas. During a trip to Colorado, O’Banion and Abelmann went hiking, whitewater rafting and discussed O’Banion’s initial idea to sell life insurance online.
“We unplugged for a weekend, and Jonathan and I got to know each other really well,” O’Banion said. “We actually came back from that trip and said, ‘Look, let’s really dig in and see if we want to build a business together.’ “
Raised in San Antonio, O’Banion said his interest in the insurance industry was sparked at a young age when he closely followed Berkshire Hathaway gurus Warren Buffett and Charlie Munger. He considers the insurance industry to be one of the worst tech laggards, with many of the top insurers dating back to the early 1800s.
“The adage in the industry has been life insurance isn’t bought, it has to be sold. Our view was contrary to that thesis,” O’Banion said. “If we build a product that is easy and intuitive enough for customers to go and buy like any other product or service, then millions of consumers and applicants would be able to go online and buy it themselves.”
Bestow isn’t O’Banion’s first go-around as a founder. He calls himself a “repeat entrepreneur.” His history includes starting several companies like Presidio Insurance, a title insurance company, and BeautyBio, a luxury skin care brand he helped his wife Jamie launch.
“I’ve definitely been able to take the expertise that I’ve developed knowing how to navigate a very regulated industry of insurance coupled with a lot of the [direct-to-consumer] experience that I’ve had in a BeautyBio to build a company with Bestow that reshapes the life insurance industry by providing a very needed financial product digitally indirect to consumers,” O’Banion said.
Neither O’Banion or Abelmann has a technology background, but O’Banion said they knew they wanted to take technology best practices and bring them to the life insurance industry.
“For us, making that decision to build out our own underwriting software was a critical decision. It required a lot of build upfront,” O’Banion said. “But our view was that we didn’t just want to build a company that’s an extension of existing carriers distributing other companies’ products in the market. We wanted to have the autonomy to be able to utilize our software to really innovate on product and distribution.”
Bestow has already raised $75 million from investors. O’Banion said New Enterprise Associates led its seed round and Peter Thiel-backed fund Valar Ventures guided its next two funding rounds.
In November, Bestow unveiled a digital plug-in that will allow it to embed a purchasing application in a partner’s app. Bestow is initially partnering with the app Tomorrow, but O’Banion said Bestow will announce additional partners soon.
“I think we’re at a really interesting inflection point” with financial technology startups gaining in popularity, O’Banion said. “And a lot of these platforms really appeal to a younger demographic to deliver a digital solution that consumers are loving. But now [these platforms are asking] how do we monetize those consumers?”
Despite the COVID-19 pandemic, Bestow’s sales grew by five times from March to the end of September. Compared with 2019, sales are up 450% from January to the end of October, O’Banion said, though he declined to provide specific sales figures. An online business intelligence site estimates the company’s annual revenue as being between $10 million and $100 million.
“We had to make a decision [during the pandemic] whether or not we were going to lean in or if we were going to pull back,” O’Banion said. “We decided to fully lean in because our view was that demand for our product was going to increase as people were more concerned with their own mortality risk.”
Forty-six percent of Americans do not own life insurance as of 2020, according to LIMRA.
O’Banion said 85% of Bestow customers are first-time life insurance buyers, which the company loves because it means they’re expanding the market by reaching a new and unique demographic.
“We’re going after the underserved community, by and large initially — individuals who know they need life insurance but don’t necessarily have an agent or adviser, and are interested in just going online and being able to purchase life insurance by themselves,” he said.