Ethos Raises $100M at $2.7B+ Valuation - Big Data in Life Insurance

The Growing Demand for Accessible Life Insurance

Over half of the American population has refrained from exploring life insurance options, largely due to perceived high costs. Traditionally, purchasing life insurance has predominantly occurred through in-person interactions. However, a new company is challenging these norms and striving to broaden access to life insurance and its associated benefits through a novel platform.

Ethos Secures Significant Funding

Ethos, a company utilizing over 300,000 data points to assess eligibility for both term and whole life insurance policies – starting at just $8 per month – has recently received $100 million in funding from SoftBank Vision Fund 2. According to Peter Colis, CEO and co-founder of Ethos, this investment elevates the startup’s valuation to exceed $2.7 billion.

This represents rapid growth for the company, following a $200 million equity round just two months prior, which valued Ethos at slightly over $2 billion.

A Growing List of Backers

To date, Ethos has raised a total of $400 million, attracting a distinguished group of investors. These include SoftBank, General Catalyst, Sequoia Capital, Accel, GV, Roc Nation (owned by Jay-Z), Glade Brook Capital Partners, Will Smith, and Robert Downey Jr.

Expansion and Product Development

The recent funding will be allocated towards expanding the team and broadening the product portfolio to encompass related insurance areas, such as critical illness coverage. This investment was unsolicited, according to Colis, and follows a period of substantial growth for the company.

Currently operating in 49 U.S. states, Ethos has experienced over 500% growth in both revenue and user base compared to the previous year. The company is projected to issue approximately $20 billion in life insurance coverage this year, and is nearing $100 million in annualized growth profit. While experiencing rapid expansion, Ethos is not yet profitable.

Underlying Trends Driving Growth

Several factors contribute to the significant opportunity for Ethos at this time.

The Impact of the Pandemic

The ongoing COVID-19 pandemic has heightened awareness of mortality globally, prompting more individuals to consider life insurance coverage who may not have previously done so. However, Colis suggests this impact may be temporary.

He noted an initial surge in demand during the pandemic, which subsequently returned to normal levels. He believes the initial increase was largely driven by individuals with pre-existing health conditions.

A Lasting Shift in the Insurance Landscape

A more enduring trend, according to Colis, is the relative lack of innovation in the life insurance sector compared to other insurance types like auto, health, and property. Traditionally, obtaining life insurance involves a lengthy vetting process, often including medical examinations and substantial costs, leading to the perception that it’s primarily accessible to wealthier individuals.

Leveraging Data for Accessibility

Similar to fintech companies utilizing big data to reassess loan applications, Ethos applies this concept to life insurance. By analyzing a wider range of data points, Ethos streamlines the application process, offers more affordable and flexible options – such as term life insurance – and increases accessibility for a broader audience. The company’s data pool is continuously expanding.

“Every month, we get more intelligent,” Colis stated.

An "Insuretech" Approach

Ethos functions as an “insuretech” company, integrating with established third-party insurance carriers. Similar to neobanks utilizing APIs, Ethos enhances the customer experience through underwriting, customer service, efficient onboarding (eliminating in-person medical exams), and personalized packages and pricing. This approach allows Ethos to readily acquire new customers in a traditionally rigid market.

Competition and Market Position

Ethos’s success coincides with a growing number of startups and established providers seeking to modernize the life insurance industry, both in the U.S. and internationally. Companies like YuLife in the U.K. are exploring policies linked to health and wellness, while Sproutt focuses on emphasizing the “life” aspect of life insurance. Other companies, such as DeadHappy and BIMA, are also working to improve accessibility.

Democratizing Access to Coverage

Ethos is demonstrating success in expanding the pool of policyholders. In the first half of 2021, over 40% of new policyholders had annual incomes of $60,000 or less, and nearly 40% were under the age of 40. The top five occupations of these customers included homemaker, insurance agent, business owner, teacher, and registered nurse, highlighting the company’s democratization efforts.

SoftBank’s Investment Rationale

“Ethos is leveraging data and its vertically integrated tech stack to fundamentally transform life insurance in the U.S.,” said Munish Varma, managing partner at SoftBank Investment Advisers. “Through a fast and user-friendly online application process, the company can accurately underwrite and insure a broad segment of customers quickly. We are excited to partner with Peter Colis and the exceptional team at Ethos.”