Ethos for data-driven life insurance company

GV invests $60 million in Ethos, a data-driven life insurance company.

Ethos, a life insurance company that uses predictive analytics and big data, has raised $60 million in a series C round of funding led by Alphabet's venture capital (VC) arm GV, with participation from Sequoia Capital, Accel, and Goldman Sachs.

According to a spokesperson for Ethos, the company was valued at nearly $500 million in its most recent funding round.

The typical life insurance application process is a time-consuming, time-consuming endeavor involving reams of paperwork and medical exams — all driven by commission-incentivized salespeople looking to shoehorn their client onto the most lucrative plan. Ethos positions itself as the polar opposite of all of this, with an application process that it claims takes minutes and requires no medical exams “for most applicants.” The user answers some questions about their health and medical history, which Ethos then validates against a person's medical and pharmaceutical records — this data is then "algorithmically analyzed to understand the assumed mortality for each individual," Ethos co-founder and CEO Peter Colis told Venture Beat.

The company, based in San Francisco, is also quick to point out that its sales agents do not work on commission. “You can be confident that you are receiving the best recommendations for you and your family,” the company declares on its FAQ page.

Get The Best Life Insurance in your Location

“Buying life insurance is one of the most selfless financial decisions a person can make,” Colis added. “You should not have to go through what amounts to a medical and financial strip search to protect your family.”

Ethos, which was founded in 2016, only provides “term” life insurance, which means that the applicant pays for (and thus is covered for) a specific time period rather than their entire life. Manual underwriting is handled by life insurance partners such as Assurity, with Ethos using its analytics to automatically assess and approve "a percentage" of its customers. Ethos, in effect, examines people in similar situations to predict how likely it is that someone else will die prematurely during the term of their insurance policy.

“Because we have a modern predictive analytics component, our ability to underwrite grows with our pool of applicants and data,” Colis explained. “This is why the majority of our clients do not need to undergo a physical medical exam, and it is also how we can reduce application time from around 10 weeks to 10 minutes.”

Ethos' main selling point is that it promises to remove some of the barriers to obtaining coverage — according to some reports, more than 40% of Americans currently do not have a life insurance plan. Furthermore, Ethos stated that it employs machine learning to analyze customer data in order to ensure that they are paying the correct amount based on their personal circumstances and mortality risk, rather than what a sales agent bestows upon them.

“Roughly half of customers with right-sized policies end up with a lower monthly premium,” Colis continued. “This practice runs counter to the traditional model of sales-incentivized agents.”

Big business

The broader insurance technology (“insurtech”) market has seen some significant investments recently, with car insurance startup Root recently closing a $350 million round of funding at a $3.65 billion valuation, while others such as Lemonade, GetSafe, and Embroker have all recently closed sizable funding rounds. According to Crunchbase, a record $2.5 billion was invested in insurance startups in the United States last year.

With a specific focus on life insurance — arguably one of the most important types of insurance, especially for families that rely on a single breadwinner — Ethos has managed to attract major investors over multiple rounds, as well as some names you might not normally associate with an unsexy industry like this. Indeed, Ethos had previously raised approximately $45 million from investment vehicles owned by rapper Jay Z, actors Will Smith and Robert Downey Jr., and basketball powerhouse Kevin Durant, as well as traditional venture capital firms such as GV, Sequoia, and Accel.

“Since our initial investment in Ethos last year, we've been consistently impressed by the company's commitment to growth, customer traction, and execution to date,” GV partner Tyson Clark added. “With product differentiation and a unique approach to modern life insurance, Ethos is well-positioned to disrupt a $100 billion+ industry.”

While Ethos would not provide specific figures, the company did state that it has quadrupled its revenue since last October and that it plans to use the new funds to hire more technical staff and further develop its product.