Root Insurance is one of the leading insurtech players globally, having raised in excess of $500m, and is reacting to a tough quarter by moving into home insurance. The insurtech is known for its telematics-based motor insurance as it offers personalised cover, based on a trial period, through its app. It ticks the boxes for insurtechs by offering instant, digital, and flexible policies, but despite its rapid rise and significant funding, it recorded a loss of $50m in Q3 2019.
The company announced in November it plans to move into the household market. It will specifically target renters with cheaper and flexible policies, which has been a key trend over the last year or so. It will offer personalised cover for $6 per month, which will also cover temporary living expenses and theft outside the household.
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Root has become a well-known brand within the US motor insurance sector, but it will face challenges moving into the renters’ household insurance market. Firstly, it faces competition from one of the most prevalent global insurtechs in Lemonade, which offers a very similar proposition for renters.
Furthermore, consumer behaviour in the UK suggests that the household market is more difficult to break into for a new provider than the motor one. Our 2019 Insurance Consumer Survey found that 26.1% of respondents automatically renewed their household policy without even looking around, while only 20.7% did likewise for motor.
Root will be reliant on new customers as it moves into the household market, though start-ups such as Lemonade have shown that market entry is possible. Root will offer cheaper rates to customers who have both motor and home insurance, which should help it upsell this cover to existing motor customers.
Similarly, Aviva in England has linked up its home and motor coverage with Aviva Plus, through which consumers pay a monthly subscription for products including home and motor. It is an attempt to modernise and make its offering more similar to Netflix-style subscriptions, and suggests that younger generations want more joined-up insurance. The monthly, interest-free payments from Root should prove popular, though it will face stern challenges from existing players in the US and potentially consumers who are less willing to look around for better deals.
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By GlobalData
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