We recently announced our investments in Plum Life and Pendella - two companies that focus on digitizing life insurance distribution. 

Plum Life is a broker general agent (BGA) that develops digital life insurance products in partnership with leading carriers, and offers them on Plum's online portal. Plum's products are sold exclusively through the US independent agent channel. 

Pendella is an enterprise SaaS platform and digital insurance agency that offers an embedded marketplace of individual life and disability insurance products from major US insurance brands, through channel partners such as PEOs and mortgage companies. 

Notably, neither Plum nor Pendella distribute products directly to consumers. Our conversations with many D2C start-ups leads us to believe D2C is a far smaller market for life insurance than the advisor-led market. D2C also comes with the cost challenges of building a brand and acquiring customers.

Traditional Life Insurance Distribution

Estimates suggest there are $155bn of premiums in force in US individual life and disability insurance (“IL&D”) ($150bn in life and $5bn in disability). Each year, approximately $13bn of new individual life insurance premium and $425m of new individual disability insurance premium is written. IL&D products are complex and consumers are typically uncomfortable confronting the financial implications of their own death/disability. This means these products are typically “sold, not bought”. Life insurance agents, who provide product and coverage recommendations based on an individual’s financial goals and health status, account for 90% of distribution. Independent agents alone represent ~50% of new individual life insurance sales.

However, the traditional IL&D purchasing process, characterized by face-to-face meetings, lengthy health questionnaires, and paramedic exams, no longer works for the middle class. IL&D insurers face high acquisition costs as customers who have grown accustomed to digital journeys consistently fall out of the funnel. Agent commissions typically range from 100% to 140% of the first-year premium. And it can take several weeks or even months to go through the entire sales and underwriting process for a life policy. 

As a result, most life agents focus on the mass affluent / high-net-worth market where high-premium life insurance products are sold as tax-advantaged investment products (with higher commissions). Lower premium, pure protection products such as term life insurance, are less attractive to agents and receive less attention. Consequently, a large swath of middle- and lower-income families are often uninsured. A recent LIMRA survey shows that 16% of Americans (41m individuals) say they need life insurance but are currently uninsured.

Among Americans who have life insurance, more than 50% rely solely on their employer-sponsored group life policy, which usually provides the beneficiary far less coverage (typically 1-2x annual salary) than would be required for a family or spouse to maintain their current standard of living. Furthermore, group life policies are not portable, which means that workers lose their coverage when they switch jobs.   

Agent-Focused Digital Distribution - Plum Life

We invested in Plum because of their focus on providing a best-in-class experience for independent agents: Clear and attractive user interface, accelerated underwriting decisions, competitively-priced products, attractive commissions, all achieved through Plum's digital portal. Plum's platform brings efficiency to life-focused agents which allows them to sell more insurance to a broader customer base — namely those middle and lower-income consumers. Plum also empowers P&C/health agents to start selling life insurance. 

Plum’s portal is designed to be a one-stop-shop for agents to manage their entire life insurance business: from pipeline management to digital application submissions to commission reconciliation. Plum believes their product features, which are informed by the management team’s extensive experience distributing life insurance through both agency and direct channels, will mitigate common drop-off points in the life insurance sales funnel. 

The founding management team (Manish Bhatt - CEO, Sanjay Mehra, Amir Weiss, and Rahim Rajpar) previously worked together at Hawthorne Advisors, a boutique life insurance consultancy that helped Fortune 500 life insurers improve their digital product offerings and customer experience. Prior to Hawthorne Advisors, the founders each held senior roles focused on digital life insurance distribution at MetLife and John Hancock. We believe Plum’s exclusive focus on agent-led distribution will enable them to become the leading digital platform for US life agents. 

Embedded Digital Distribution - Pendella

We invested in Pendella because of their their multi-carrier marketplace that can be embedded through channel partners (similar to our embedded insurance investments in existing MTech portfolio companies Matic and Polly). Pendella believes that consumers who would not otherwise shop for life insurance would be willing to do so if offered a simplified, digital-first purchasing experience through embedded channels where they are already making important financial decisions (e.g. selecting benefits, shopping for a mortgage).

Pendella offers individual life and disability insurance products (e.g., term, whole life, final expense) from a panel of major insurance carriers with options that cover most consumers, including individuals whom life companies would typically exclude due to age, health, and extensive coverage needs. Pendella's "field underwriting engine" provides personalized product and coverage recommendations using a channel partner's existing customer data combined with Pendella's questionnaire. Importantly, Pendella will triage customers depending on underwriting complexity,  sending some down an entirely digital, instant issue purchase process, whereas other customers with more challenging health conditions will be routed to speak with a licensed agent.

We believe Bob Gaydos, founder and CEO of Pendella, with years of life insurance experience in the employee benefits space, has been key to the Company’s success in developing partnerships with several major PEO and HR channel partners. These channels have been particularly fruitful for Pendella, as employers are enthusiastic to offer their employees individual life and disability protection products to supplement existing group life and disability policies.

1] LIMRA, NAIC, Milliman