State Auto puts $25M toward innovation
State Auto Financial is putting $25 million to work to come up with the next big thing in the insurance business.
State Auto Labs, the insurer’s innovation arm, said Tuesday it is starting a corporate venture fund to support entrepreneurs and innovation in the insurance industry. State Auto Labs is collaborating on the effort with Rev1 Ventures, a technology-business incubator in Columbus.
“We look at the insurance landscape and how things are changing — technology, sensors, telematics. ... Companies that don’t keep up with that are at real risk,” said Kim Garland, managing director of State Auto Labs.
Garland said the creation of the fund helps address the notion that insurers aren’t good at working with startups, entrepreneurs and innovators.
“It will make yourself be of that world,” he said.
The fund will focus on: technology that can connect, collect and communicate with people and vehicles, offices and homes; datadriven innovations that can improve analytics and decision-making; and products that can anticipate the changing needs of insurance customers and tap into new markets.
The fund is the latest locally to be created in the
insurance arena.
Nationwide recently launched a $100 million fund similar to State Auto’s and a new group called FinTech71, which just announced investments in 10 fledgling financial-technology companies.
The rise of self-driving cars, smart homes and artificial intelligence figures to dramatically change how insurance is priced and who it is sold to in coming years.
For the past several years, for example, insurers have embraced telematics
— typically plug-in devices in cars or smartphone apps — that track driving habits and allow companies to set insurance rates accordingly.
“As risks evolve in the modern economy, we have to evolve with them,” he said.
The partnership with Rev1 will allow the two to come together to pinpoint the best investments. Rev1 can identify promising young companies and State Auto can advise Rev1 on whether a company Rev1 has targeted will help State Auto with a product or service.
“We’re helping them make the right decision ... and building a process to work with startups,” said Tom Walker, Rev1’s CEO.
The companies that State Auto expects to target are in the early stages of development. For example, they would have customers and some revenue, Garland said.
State Auto anticipates it would be one of several partners to take stakes in a company.
“We want to make money on these investments,” Garland said. “They need to fit around insurance.”
Garland said for a company the size of State Auto, the fund represents an opportunity to make a big change in the company.
“That level of disruption creates a once-in-a-generation opportunity for a carrier to really leap to the front of the chart to impact its size and profitability,” he said. “We kind of look at all this as a great opportunity.”