Building a Fast Growth, Cutting-Edge Insurance Brokerage: Karn Saroya, CEO of Cover (Part 5)

Karn Saroya: When it comes to segmentation, it’s exactly what you would expect. 80% of our customers are under the age of 35. A quarter of those are homeowners. We tend to get the types of folks who are accumulating assets over time. They may start with getting an auto insurance policy but very quickly graduate to getting a home policy.

We don’t accept term life, but people coming to Cover are starting to think about term life policies. The types of people that come in through Cover build a solid enough relationship with us to graduate through each of these things that they need to cover off exposure.

Sramana Mitra: Your thesis is you acquire the young consumer and then find all the different insurance needs of this consumer as the consumer insurance requirements moves through life journey. Then you give that lead to the various types of insurance providers.

Karn Saroya: Right. It’s a composite of that. We operate in 29 states. We work with 30 carrier partners. We’re starting to stand up some of our own insurance products to sell out our market place. When a customer comes in, they need to buy insurance. We want to be part of that wherever they may end up with. That’s the crux of this insurance business.

If you take a look at how State Farm came to be, it started with auto insurance and very quickly grew, because it was able to retain its customers by cross-selling into other lines of business as their customers’ needs changed. Similarly, GEICO operates in the same way and does auto insurance. They own a GEICO insurance agency which helps them syndicate out to other carriers to plug in. That is how the economics of insurance works. You have to be a multi-line entity at the end of the day to make the math work.

Sramana Mitra: When you finish Y Combinator, what kind of financing did you walk out with?

Karn Saroya: We raised $3.1 million out of our batch. We raised money from Tencent, Social Capital, Shasta, Sherpa, Maveron, and other fairly high-quality investors.

Sramana Mitra: Were you going to operate out of Silicon Valley or did you move back to Canada?

Karn Saroya: We have two offices, but half of our team is based in San Francisco and half in Toronto. We have a very strong connection to Toronto. All the founding team is Canadian. We’re all from Toronto. We knew the market very well. We’re well-regarded there. It was a no-brainer for us to build a practice there.

Sramana Mitra: How does that split? These days, it’s very difficult to hire in Silicon Valley and compete in the talent market. Does that mean that you have just a small team in San Francisco and the bulk of your team is in Toronto?

Karn Saroya: We have engineering on both sides. Insurance needs to be sold in America by Americans. A lot of our insurance business ops and sales ops guys live in the Bay Area. We also have engineering and product people. Toronto is largely back-end engineering, design, and growth. Our CTO is based in Toronto. Natalie is back and forth half the time. I’m back and forth quarter of the time.

Sramana Mitra: Interesting. I didn’t know you had to be American to sell insurance in America.

This segment is part 5 in the series : Building a Fast Growth, Cutting-Edge Insurance Brokerage: Karn Saroya, CEO of Cover
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