Fintech Focus Rewind: Ethos Wants To Ease The Headache Of Acquiring Life Insurance
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“Insurance is sold, not bought. If we create an excellent product, our life insurance will be bought, not sold.”
This is how Peter Colis is approaching a new way to sell life insurance.
Colis is the CEO of Ethos, which helps simplify the process for purchasing term life insurance. The company hopes to quote a policy price in a quicker and easier fashion by minimizing the amount of paperwork, fine print, and sales agents that can make the process stressful.
How Does It Work?
Life insurance can take around 15 weeks for someone to acquire, according to Colis. Ethos uses external data and predictive modeling to speed up the approval process. Colis also said this model helps reduce manual underwriting processes that can take weeks to complete.
Although he admits Ethos does not have a perfect underwriting system, Colis said he believes the system is highly comprehensive and can be trusted to pay out to a client when needed.
“The system is not perfect,” Colis said. “There are small gaps in what we can't test for yet, although I would say it is highly comprehensive. If someone has a terminal illness but they are not aware of it and a doctor's not aware of it, as with any life insurance product, if underwriting doesn't catch that, that's a legitimate claim. But that's a claim that you have to trust the life insurance company's going to pay out on.”
Claims are paid out by Assurity Life, which is partnered with Ethos. Colis said it takes about 14 days to pay out claims from the time they are filed.
Given the speedy process Ethos provides for approvals, Colis said people have wondered whether there is a ‘catch’, such as more risk in a policy. Colis said Ethos eliminates these ‘catches’ in its pricing model that simultaneously reduces the time-consuming underwriting process.
“With Ethos what we do is unique, in that our pricing is still very, very competitive, while reducing this underwriting friction,” Colis said. “That's kind of where we eliminate that catch part of it. The reason that catch is it's truly a better option for 99% of people than going through a traditional process.”
If a client feels concerned about the process or their policy, Ethos has agents licensed in all 50 states able to assist them. Unlike most insurance agents, Ethos agents do not earn individual commissions, helping assure clients they can trust the policy they get works best for what they need.
Perfecting The Craft
Creating Ethos came about when Colis and his co-founder Lingke Wang met as roommates at Stanford. An alumni insurance agent aggressively sold the then 20-year-old Wang a permanent life insurance policy he clearly did not need, and they learned Wang’s experience was not unique. Diving in deeper, the pair realized most buyers of permanent life insurance never make a claim and lose the money they invested into their plan.
The two also noticed what they felt was a lack of suitable options for most people, and felt inspired to create Ethos to make the process easier.
At the time of Colis’ interview on the Fintech Focus, Ethos had just raised $11 million from venture capital firms like Sequoya Capital and celebrity investors like NBA star Kevin Durant, rapper Jay-Z, and actors Robert Downey Jr. and Will Smith. While this amount raised may seem small, Colis said he believes this has made the company focus on perfecting the product and business operations.
“I think that an excellent team, with very smart engineers and a great product needs very little firepower to accomplish a lot,” Colis said. “We have accomplished a lot with very little, is what I would say. It really ends up making you focus on building a phenomenal product, learning clearly who your customers are, how to be smart about customer acquisition, and run an operationally efficient ship. I think very rarely is it a good idea to give a start-up $50 million or $100 million before they solve for those various things.”
The celebrity investors believed in the issue Ethos was trying to solve, Colis said.
“It was a message that resonated with all of our investors,” Colis said. “To reiterate, a great life insurance company, MetLife, Northwestern Mutual, New York Life. These companies, they were literally created over 100 years ago. I do think it's time for a new brand to be created in this space.”
A new brand focused on making the process easier for clients will make them feel as though they are buying life insurance as opposed to being sold insurance, according to Colis.
“There is a thing in the industry, which is life insurance is sold not bought. And our core thesis is if we can build an excellent product and be very smart about customer acquisition, our life insurance will be bought not sold. As in we don't need to hard sell anybody, we can make it a pleasant experience.”
Listen to the full podcast episode below.
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