Marshmallow Raises $30M at $310M Valuation - Inclusive Car Insurance

The insurance sector has a long history of employing algorithms and formulas to establish service offerings and pricing for individual customers. However, this established practice can sometimes result in less-than-ideal outcomes, leaving customers with non-traditional profiles unable to secure competitive rates.

A U.K.-based startup, Marshmallow, is challenging established insurance companies with a novel approach to risk assessment. The company has just announced a $30 million funding round. Initially focused on auto insurance, Marshmallow leverages more extensive data analytics and a user-friendly mobile and web platform to reach underserved market segments. The Series A funding will support continued business expansion, with a strong emphasis on diversity and inclusion, and plans to extend operations into additional countries and insurance categories within the next 18 months.

The company is currently valued at approximately $310 million following this funding round, though specific customer figures are not being disclosed at this time to reflect its stage of market penetration and growth. The insurance industry represents a substantial market, with McKinsey estimating global premiums exceeding €4 trillion in 2017. While Allianz recently reported a “cooling” of the market due to COVID-19 related economic uncertainty, this is also accelerating the adoption of new technologies and methodologies. Given that even a modest portion of such a large market translates to significant revenue, Marshmallow presents a compelling investment opportunity.

The identities of investors in this latest round are not being revealed, aside from the inclusion of a prominent fintech investor and a major financial institution. PitchBook reports that Outrun Ventures and other undisclosed investors participated. Previous investment came from Passion Capital and Investec.

Marshmallow launched in 2018, initially targeting expatriates. Traditional U.K. insurers typically base premiums on a driver’s U.K. driving record, which disadvantages individuals new to the country whose driving history is not reflected in U.K. data. Marshmallow developed an assessment algorithm that incorporates international driving data, in addition to national records.

“Determining car insurance pricing generally requires an insurer to evaluate a person’s driving skills, driving background, and current lifestyle,” explained Oliver Kent-Braham, co-founder and CEO, to TechCrunch. “Unfortunately, many insurers do not attempt to understand the circumstances of foreign drivers residing in the U.K., and instead, simply overcharge them. Foreign drivers based in the U.K. can anticipate receiving quotes that are 51 percent higher than the average market price.”

The company has since broadened its focus to include a wider range of individuals who lack extensive driving records within the U.K.

Kent-Braham’s own background reflects a departure from the norm. He co-founded the company alongside his twin brother, Alexander, and both are Black – a relatively uncommon occurrence within the technology sector in Western countries. It is estimated that less than 1% of founders in the U.S. are Black, and similar statistics apply to founders of color in Europe. (David Goate is the third co-founder.)

Marshmallow’s emergence – both as a story of minority founders and its commitment to serving underserved populations – is particularly relevant in the current climate.

This year has seen increased attention on fostering diversity and inclusion within the technology industry. Fueled by social unrest following incidents involving Black individuals in the U.S., this has prompted greater scrutiny of global economic and social disparities.

Within the tech world, it is widely recognized that greater diversity within companies is essential for effectively addressing the needs of broader audiences. In this context, it is perhaps not surprising that an insurance startup led by two Black entrepreneurs has identified and sought to develop products for a more inclusive user base.

“We possess the capabilities to provide insurance to customers that traditional insurers find challenging,” stated Alexander in a press release. Tim Holliday, an early employee now serving as chairman, brings extensive experience in the insurance industry. He has been instrumental in helping the startup pinpoint market gaps that established companies overlook, which Marshmallow can then address with its innovative technology. 

The COVID-19 pandemic and the resulting global uncertainty have contributed to a heightened focus on insurtech in the past year.

In addition to Lemonade’s public listing (currently boasting a market capitalization exceeding $2.8 billion), Hippo has experienced significant valuation growth, and numerous companies are reimagining the insurance model, both in terms of target demographics and underlying methodologies. BIMA and Waterdrop are, respectively, focusing on microinsurance for emerging markets and the concept of crowdfunding insurance services.