It’s not everyday that Jay Z and Kevin Durant invest in fintech. They recently joined Sequoia and Accel on the cap table of Ethos, a new brand that’s trying to reconfigure our relationship with buying and owning life insurance.
It’s clear the life insurance industry is in need of fresh blood. The agent model is aging. The vast majority of whole life policies are surrendered. Ethos has a direct to consumer model that markets term life and the kicker? The company has removed the friction of medical exams for its policyholders.
Co-founder and CEO Peter Colis joins me on the podcast to discuss his startup experience in the life insurance space and why he and his partner came back a second time to try and disrupt the industry. We dig in to why such high caliber investors wanted to own a piece of Ethos as it embarks on its mission to grow a direct to consumer, life insurance firm.
The following excerpts were edited for clarity.
I’m originally from Chicago and came up through digital marketing and advertising at a big agency. I moved out to California for business school at Stanford and that’s where I met my co-founder, Lingke Wang. He’s a brilliant software engineer and was my roommate. We started one life insurance company before this and started Ethos as we graduated. Now we live in San Francisco.
Life insurance is a fascinating industry. 5 percent of children will lose a parent before they are 15 years old. 70 percent of families would be bankrupt in a few months if they lost their primary bread winner. There are two types of insurance: permanent and term. Term is cheap for most families. For permanent insurance, there’s often an investment component to it and it’s where agents and companies make their money. As we researched the industry, we found out that 87 percent of people either lapsed or surrendered their policies, meaning that they lost most or all of their investment.
In our previous company, we tried to start a company that allowed people who were going to give up these policies to sell them to institutional investors and unlock the equity value. We helped a lot of people and it was an incredible product but it didn’t let us recognize our ambitions of building an industry-changing company.
Ethos approaches the same problem with a different solution. We’re giving people the right product to begin with.
What gets celebrity and institutional investors excited about the Ethos story
We’ve raised over $45 million from Sequoia, Accel and Google Ventures. It’s a real problem what we’re solving. When you start a business, some times you have to convince yourself to take a leap of faith. With Ethos, we keep getting more excited about the problem. Our investors saw this.
You have a massive industry that’s dominated by fragmented, antiquated companies with legacy issues that make it hard for them to get anything done. They’re completely dependent on aging agent distribution channels. We have the executional chops to make it instant and affordable online. 99 percent of our customers have no medical exams or blood tests. It takes 10 minutes to fill out and we have non-commissioned agents to help customers out. This story resonated with our investors.
Getting new customers
We get customers organically through word of mouth. We have wonderful reviews and our customers love us. We do direct marketing through a variety of channels. We also do partnerships. So, with someone who has a a lot of trust built up with a customer group and a product that is somewhat synergistic with our product and where we can find the customer at the right time in their lives. These are non-insurance companies in the health and wellness, employment, or financial space. There are a number of different verticals we play in.