The ways in which we live and get around have evolved over the past few decades.
For example, sales of e-bikes are outpacing sales of electric cars in the U.S., according to recent research. And pre-fabricated and manufactured homes are gaining in popularity as housing shortages persist globally.
It appears that their popularity is no fleeting trend. The Light Electric Vehicle Association predicts that more than 1 million e-bikes will be sold in the U.S. in 2022. Research indicates that the global e-bike market will surge to nearly $41 billion by 2030, a big jump from being valued at US$ 17.56 billion in 2021.
Meanwhile, the U.S. Census Bureau estimated in 2020 that there were currently 22 million Americans living in 6.8 million manufactured homes across the U.S. As of 2019, about 10% of new single-family homes (including manufactured homes) were categorized as manufactured homes.
Sustainability and cost are among the chief factors behind the popularity of both e-bikes and manufactured homes. So it’s no surprise that startups have emerged to meet the unique needs of owners of both.
Boundless Rider is a new insurance company founded specifically to serve riders of motorcycles, e-bikes and power sport vehicles. The Boston-based startup recently closed on $4.75 million in a seed funding round led by American Family Ventures, with participation from The Cross Country Group, SiriusPoint and Belmont Capital. The company also previously raised $2 million in pre-seed funding that was never announced publicly.
CoverTree is a two-year-old start up that is emerging from stealth with $8 million in seed funding that closed in May and $2 million in “pre-seed” SAFEs previously raised. AV8 Ventures and Distributed Ventures co-led the seed financing, which included participation from Detroit Venture Partners, Ludlow Ventures and Annox Capital.
While both companies are targeting very different products, both have one thing in common: a niche, digitally native focus on a specific industry.
Historically, motorcycle and power sports insurance has been wrapped into traditional car insurance as a subcategory.
“There is a world of difference between someone who is driving their car to commute to work or run errands and somebody who’s driving their motorcycle, snowmobile, ATV or e-bike on the weekends,” said Boundless Rider CEO and co-founder Blair Baldwin. “These are specialty products with different behaviors and they warrant their own unique customer experience, claim experience and their own unique product design and coverage in a way that being wrapped into a much bigger and broader product category just doesn’t.”
Baldwin describes Boundless Rider as a standalone motorcycle, e-bike and power sports product that can be purchased directly from the company or eventually, bundled with another carrier’s homeowner or car insurance product or purchased through a manufacturer at the time of purchase.
CoverTree CEO Adarsh Rachmale — who left his product management role at LinkedIn to focus on building the insurtech with Rishie Modi and Divyansh Sharma — says the goal of the company is to only focus on pre-fab or manufactured home residents. He believes that CoverTree’s offering represents the first time that consumers can buy manufactured home insurance online.
“If it’s built in a factory — and this includes modular homes, tiny homes and ADUs, we help insure it,” Rachmale told Fintech. “And because we’re so focused, we do it so much better.”
In particular, Baldwin predicts only increasing demand for e-bikes, for which he believes “there is a bit of a hole in the market.”
“E-bikes can get very expensive. They are highly portable and get stolen often,” he said. “Many go up to 28 mph or even faster and there is a real liability in case something goes wrong — if there’s damage to a bike, or a replacement is needed, or if one creates an accident that hurts somebody else.”
This isn’t Baldwin’s first insurance technology startup. He also co-founded Quilt, which was acquired by a MassMutual subsidiary in 2018. The entrepreneur then went on to run the product innovation lab at MassMutual before being recruited by American Family Ventures and Cross Country Group to help build Boundless Rider.
“There’s about 7 million recreational ATVs and UTVs, some of which require insurance. There’s about one and a half million snowmobiles in the country. And they’re now selling about a million e-bike units a year, and that’s expected to just increase,” Baldwin told Fintech. “So when you look at this collectively, it’s actually a universe of about 20 million riders that all are being underserved by the market today.”
Boundless Rider plans to use its new capital on state expansion plans as well as on building out its data science capabilities. It’s combining its base insurance product with an optional smartphone app with features that live on proprietary telematics, according to Baldwin.
For now, CoverTree is available in Arizona, Indiana, Michigan, New Mexico, Ohio, Illinois and Tennessee. It, too, plans to use its new capital to expand geographically, as well as to build out its technology, which includes automated underwriting and AI for rating.
Rather than work directly with consumers, the insurtech’s strategy is to build its customer base via partnerships with “major manufactured home industry stakeholders.”
“This helps us ‘pre-underwrite’ potential policyholders via our upfront selection of partners,” Rachmale said. “And, online purchasing gives insurance shoppers better pricing with more data that is built on our own datasets that include, for example, aerial images of roofs.”
Automated underwriting makes its offering more affordable because Rachmale said its competitors “drive up costs and mistakes by underwriting manually with humans.”
Ultimately, CoverTree hopes to move into Boundless Rider’s territory.
“From an independent survey we conducted, manufactured home owners are more likely to own things such as RVs, motorcycles, ATVs and boats than non-manufactured home owners,” Rachmale said. “Our eventual plan is to build an insurance technology brand around protecting manufactured homes and these ‘toys,’ or insurtech for middle America and the outdoors lifestyle.”
VCs writing checks
Investors seem to like the startups’ specialized approaches.
Adam Blumencranz, partner at Distributed Ventures, believes the manufactured homes industry is only going to play a more critical role “in the future for a larger swath of an already significant portion of the population.”
“Reimagining homeowner insurance for this difficult-to-serve insurance segment was a perfect wedge into the market, with massive potential to expand into other risk management-related products,” he wrote via email.
Amir Kabir, partner of AV8 Ventures, said he was impressed with CoverTree’s ability “to build the company with limited resources and establish major relationships with leading insurance carriers and manufactured home communities.”
Kyle Beatty, managing director of American Family Ventures, said his firm has “seen the power of partner-based insurance distribution many times and believe[s] that when it’s done well, it can provide substantial scale and cost advantages.”
“We also believe mobile technology affords real customer retention benefits, and we also had a first-hand role in organizing an expert founding team,” he wrote via email.
As the greater insurtech industry continues to struggle, it will be interesting to see if specialty insurtechs such as these will succeed.
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