One of the original insurance-technology companies has been sold.
Brown & Brown
has scooped up CoverHound, and its wholly owned unit CyberPolicy.
Financial terms weren’t announced. CoverHound, based in San Francisco, provides an online marketplace where consumers and small businesses can shop, get quotes and buy insurance. Management will remain, according to Keith Moore, chief executive of CoverHound and CyberPolicy.
“We’re thrilled to become part of Brown & Brown, an exceptional company with an entrepreneurial spirit,” Moore said in a statement. “Combining Brown & Brown’s strong carrier relationships with our proven marketplace technology will offer customers best-in-class curated choice and digital simplicity.”
Founded in 2010, CoverHound isn’t an insurance carrier—like Lemonade (Ticker: LMND) or Root Insurance (ROOT). CoverHound is more the
Expedia
of insurance, providing a destination where consumers can search for policies, including auto, homeowners, renters and life, Moore said. Companies can choose from general and business-owner liability, workers’ compensation, as well as cyber insurance through CyberPolicy to cover breaches or possible attacks.
CoverHound, which has partnerships with more than 50 insurance companies including
Chubb
(CB), Liberty Mutual,
Progressive
(PGR), Nationwide and Safeco Insurance, has sold more than 250,000 policies, according to the company’s website.
The sale will cause some job cuts. CoverHound and CyberPolicy employ about 110 people. “We will lose a few people where there are redundancies,” Moore said.
CoverHound is joining the much larger Brown & Brown (BRO), which sells insurance policies from multiple carriers to consumers and businesses. Brown is one of the more acquisitive public brokers, having bought at least 20 companies in 2019, according to investment bank Optis Partners. Brown has continued buying throughout 2020—CoverHound is its seventh acquisition since September. “We’re bringing—in true insurtech fashion—digital capabilities to a successful, larger broker,” Moore said.
Other insurtechs, including Lemonade, Duck Creek Technologies(DCT) and Root, have opted to go public this year. CoverHound chose a sale rather than an IPO, because it would still have to build out carrier relationships as a public company, Moore said. “We felt like strategic synergies are far more instantaneous and beneficial to us [with a sale] than continuing to build these things on our own.”
CoverHound is one of the founders of the insurtech movement, Moore said. Insurtech refers to companies, typically backed by venture-capital firms, that are trying to reinvent the insurance industry. Moore remembers trying to fundraise in 2013 and some venture capitalists at that time were doubtful an insurance-technology company could raise capital. Now there are 1,500 insurtechs operating globally, attracting more than $30 billion of investment, according to JMP Securities. CoverHound, for its part, has collected $110 million through four rounds. Investors have included Chubb, Aflac Ventures and Blumberg Capital.
“We were insurtech before it was cool,” Moore said. “We made it so others could raise money.”
CoverHound didn’t start out looking for a buyer when it began fundraising for an E round in April. The company, which was also considering a strategic investor, was targeting $30 million to $50 million, Moore said. The pandemic made fundraising hard, because most business travel had stopped, he said. “VCs are very face-to-face, very in-person driven,” Moore said. By June, conversations had morphed to a sale, he said. Perella Weinberg Partners advised on the process, which attracted insurance companies and traditional private-equity firms, he said.
There were some obstacles. Some bidders wanted only parts of CoverHound and pitched buying just the company’s personal lines or its auto and homeowners segment, Moore said.
CoverHound also didn’t want to get sold to an insurance company, because that would cause other insurers to not want to work with it, he said. “It’s easier to be in the marketplace when you don’t have a strategic interest in the marketplace itself.”
A sale to Brown & Brown, which has a $13 billion market capitalization and a similar business plan, solved those problems. In September, Brown sent some of its management team to visit CoverHound in San Francisco. Following pandemic guidelines, executives met for two days, which “really sealed it on our end that we were able to make the right decision,” Moore said.
Steve Boyd, senior vice president of technology, innovation, and digital strategy at Brown & Brown, said in a statement, “We see CoverHound as an important platform for Brown & Brown’s expansion into the digital insurance marketplace while at the same time helping our traditional businesses to continually deliver an exceptional customer experience.”
Andy Tam and Michael Grace of Perella Weinberg advised on the CoverHound sale.
Executives for Chubb, Aflac Ventures and Blumberg Capital couldn’t immediately be reached for comment.
Write to Luisa Beltran at [email protected]
