1Mby1M Deal Radar 2012: InsureMonkey, Las Vegas, Nevada

If you’re lucky, you have an employer who offers a great health plan that doesn’t cost too much. These days, millions of people aren’t so fortunate. Either they are unemployed, self-employed, or their employers don’t have health plans that meet their needs. The founders of the Las Vegas, Nevada–based InsureMonkey understood that searching for insurance can be a study in frustration and set out to alleviate some of that frustration by simplifying the search process.

A few years ago, company chairman and CEO Alex Rivlin, who has more than 10 years of experience in the insurance and services industries, tried to find an easy way to help his clients get personal health insurance. He tried to find a broker who specialized in health insurance, but many focus on small group (employer) insurance rather than individual consumer plans. Rivlin searched the Internet but didn’t find anything that was easy or helpful. Out of sheer personal frustration with how radically underserved his own clients were and recognizing how underserved all consumers must be, he set about changing it. In the early days, the primary focus was to make it easy for clients and friends and family. That focus quickly grew to fill an ubiquitous consumer need.

When the company was founded in 2009, the market landscape was sparse; eHealthInsurance was the only company with any traction that had built a direct-to-consumer model with an enterprise technology channel as well. With the passage of healthcare reform, more companies have begun to move into the space; however, within the competitive ecosystem of companies trying to help states and other private entities usher in health insurance exchanges, the field remains rather small.

The founders credit the company’s early success to a great product and hustle, because it operates in a space with a big need and limited players.  InsureMonkey has partnered with other health services companies where needed, and its beachhead was landing one of the larger regional insurers in the West and having demonstrable experience with a multi-billion dollar client.

InsureMonkey develops technology for the health insurance industry that automates the shopping, price, and benefit comparison, and application enrollment into health plans. This technology is in use in more than 40 states and is provided, through the company’s website, for health insurers, private market exchanges, brokers and agents, and consumers.

InsureMonkey claims that one aspect of its technology that sets it apart is that it shares a secure API data connection with its health carrier partners, which makes the information provided for consumers as accurate and real time as possible.  For example, if United Healthcare makes a change to the pricing or benefits of a particular plan at 4 p.m., then that change is represented through InsureMonkey’s technology at 4:00:04 p.m.

The infrastructure of InsureMonkey’s platform was developed using a service-oriented architecture that’s interoperable among multiple platforms, each with its own set of business requirements. For example, one carrier might use a Microsoft stack to power InsureMonkey’s technology, whereas another carrier might use Oracle. The flexibility and scalability of InsureMonkey’s program allows for integration among these varying environments and lifts the burden from carriers by getting their products distributed to market efficiently.

Through its direct-to-consumer channel, InsureMonkey intends to find people with an immediate pain point who are actively trying to buy health insurance.  The company forgoes brand advertising and general awareness campaigns in favor of direct-response marketing through affiliates and online channels. InsureMonkey $350 in gross profit margin per sale through this method and generated nearly $5 million in revenue overall in 2011.

According to the founders, two years ago the team would have said the market size was $78 billion in direct-to-consumer sales with a TAM of $115 billion (market buyers plus shoppers), with data supported from Forrester, Kaiser Family Foundation, and McKinsey Research; however, the private and public market demand for health insurance exchange technology is growing, and Gallup has estimated that there will be as much as $595 billion in government contracts awarded through 2016 for exchange services and technology vendors. InsureMonkey believes the private market demand will eclipse the public market; the market for its technology layers over top of the market for the company’s direct-to-consumer sales.

The company’s top target segments include regional health carriers that have limited technology solutions at best and outsource their needs in this area. InsureMoney has a platform that helps these carriers automate online sales and customer management in a branded UX/UI while helping them take advantage of a shifting market in the small business space away from a “defined benefit” (a company choosing a plan to provide for its employees) to a “defined contribution” (a company providing a set stipend to employees so they can choose a plan that best fits their needs and life stages). Other targets include property and casualty insurers. InsureMonkey helps these carriers expand their product lines into health insurance, which gives them a new customer entry point and more products to increase retention among current customers. Examples of these targets include All State, State Farm, Farmer’s, Nationwide, USAA, and Progressive.

Finally, companies and associations that serve as large aggregators of consumers or small businesses are targets. In 2011 Walgreens announced plans to explore a health insurance exchange offering to its customer base. Similar companies with a large consumer base may follow suit, including companies like Walmart, Costco, and Sav-On. Plus, chambers of commerce and other business associations are looking at ways to expand offerings.

Through direct-to-consumers, InsureMonkey’s top targets are families with parents aged 30-59 in specific states. There are regions that perform substantially better than others and regions that don’t perform well at all.  For example, the state regulations in the Northeast make it problematic to be effective selling to consumers.

Despite that obstacle, in 2011, the company handled more than 100,000 consumer requests, processed more than 65,000 consumer proposals, had over 1,000 licensed brokers using the platform, powered the individual exchange infrastructure for one of the largest regional carriers in the West, powered the individual exchange infrastructure for one of the largest private-market exchanges in Illinois, the American Westbrook Exchange, and have recently been selected to help one of the largest P&C insurers in the country expand its product offering into health.

InsureMonkey’s pricing depends on the client segment. Some enterprise clients are on a price model range of $4 to $9 per-member per-month. Others pay a technology usage fee on quotes and applications where a per-application charge can range from $88 to $165 with add-on costs for service.  The company receives a commission between 15% and 28% on all direct-to-consumer sales.

In 2009, InsureMonkey raised $990,000 in private seed capital, almost exclusively from Nevada. In 2010/2011, the company raised another $1.85 million.

The company expects to raise additional capital to help meet demand.  The ideal investor is someone who understands and embraces what it means to be on the forefront of change in a large, growing and stable marketplace.

The founders’ strategy for continued growth is to optimize direct-to-consumer sales to increase the margin on lifetime value and continue to offer a best-in-class technology solution that very few offer and that many want and need.

InsureMonkey has no exit strategy at this time, preferring to focus on improving the feature set of its products and selling.

Recommended Reading:
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Outsourcing: Jason Beans, Founder and CEO of Rising Medical Solutions
Guidewire Gearing for IPO; Looks Solid 

This segment is a part in the series : 1Mby1M Deal Radar 2012