SAO PAULO – The insurance industry accumulated revenue of R$273.7 billion in 2020, according to the National Confederation of Insurance Companies (CNseg). But the numbers could be much higher: the segment represents only 3.7% of the country’s Gross Domestic Product (GDP). 70% of cars around here run without auto insurance, while 81% of Brazilians do not have life insurance.
Pier is one of the startups that work to bring technology to the insurance market – and win more users for the experience or for the smallest impact on the pocket. THE insurtech it serves 50,000 customers with smartphone and car insurance, granted after analysis of user data through artificial intelligence and machine learning (machine learning). This week, it received a capital injection to expand its proposal.
Pier did a R$108 million (US$20 million) series B round, led by Raiz Investimentos. The root is the single family office Ivan Toledo, founder of Sem Parar, to invest in infrastructure, technology and telecommunications.
“The financial market is being transformed in stages. There was strong work on investments with XP, and on acquisitions with PagSeguro and Stone. But the insurance industry has not yet suffered this disruption, and this is seen in its underpenetration. In the United States, insurance represents 12% of GDP. So, we see a great opportunity,” said Igor Mascarenhas, co-founder of Pier, to From Zero To Top, entrepreneurship brand of InfoMoney.
Insurance with artificial intelligence and machine learning
Pier was founded by Igor Mascarenhas, Lucas Prado and Rafael Oliveira in 2018. The partners come from the technology investments area: Mascarenhas was investment director at Startup Farm; Prado worked at the Tarpon fund and at the Somos Educação group; and Oliveira founded several technology companies.
“We talked to insurance users and identified two problems: they are afraid of not receiving, and that this process is too bureaucratic. So we focused on creating a product that was easy to hire, easy to use and that would fit in your pocket”, says Mascarenhas.
insurtech has invested in infrastructure and data analysis to provide more approvals and more agility in recognizing claims and paying claims. “As a record, we approved a claim in one second and payment was granted in 11 seconds. Even in cases such as total vehicle loss, we were able to make payment within 24 hours”, says Mascarenhas.
Users who register in the enterprise only enter basic information, such as CPF, CEP, email and insured item data. But Pier claims to collect tens of thousands of data at information centers and see user behavior (such as IP, time, how many times you accessed insurtech and by which channel you arrived at insurtech). This data passes through Pier’s proprietary artificial intelligence and machine learning models. Thus, insurtech quickly decides which user should or should not have their insurance approved.
Pier has 120 employees. Half of them are on the data, product and technology team. “We ask for 10 times less information from the user, but we analyze 300 times more information than the incumbents. And we maintain a loss ratio in line with the market, estimated at 40% to 45% for smartphones and 60% for auto”, says the co-founder.
Pier started with smartphone insurance. Mascarenhas estimates that this market is between R$1 billion and R$2 billion per year. “Every machine learning model needs examples to learn. As smartphone insurance has a high number of claims, it was essential to accelerate the learning curve of our models”. Pier has expanded more recently into auto insurance. This is a larger market, estimated at between R$30 billion and R$40 billion per year.
Today, the business serves 50,000 customers with their smartphone and car insurance. 75% of them had no insurance before hiring Pier. “This shows our impact and how we are not in a war to steal clients from large insurance companies. It is a market with still a lot of space”, says Mascarenhas.
Some traditional competitors that have entered the affordable insurance market with digital contracting are Ciclic (Banco do Brasil) and Youse (Caixa Seguradora). An example of another insurtech is Justos, which offers car insurance based on the user’s driving behavior.
The price of smartphone insurance at Pier starts at R$8, with an average ticket of R$57 reais. Auto insurance starts at R$30, with an average ticket of R$65. Mascarenhas says that the value of auto insurance is 30% cheaper than that practiced by an incumbent.
insurtech is on the rise in revenue. In 2019, it was BRL 4.6 million. In 2020, BRL 11 million. For 2021, the projection is to earn R$ 30 million.
Investment and expansion
The $20 million round, a series B, came just ten months after series A. Pier had raised $14.5 million in a round led by Monashees. Before that, it received a seed contribution of US$ 7.6 million. “In theory, a new round usually takes place just 12 to 18 months later. But we live in a scenario of high liquidity and still low interest rates, and we had a good relationship with Raiz Investimentos. We decided to anticipate the round to accelerate our plans”, says Mascarenhas.
Pier intends to apply for a permanent insurance license – today, it operates through the sandbox of the Superintendence of Private Insurance (SUSEP). In this program, SUSEP authorizes startups to operate with specific products and risks. O compliance it is simplified and requires a lower minimum capital. On the other hand, Pier had limitations such as only covering automobiles of up to R$ 100,000 and not covering damages to third parties. With final approval, Pier intends to cover these gaps.
“O sandbox sets important limits including for consumer safety. If startups validate their business model, they can become outright insurers. We are at this stage to give you a superior experience in auto insurance. The value of the insured vehicle will now depend only on our capital reserve”, says Mascarenhas.
With the investment, auto insurance will also receive the same artificial intelligence and machine learning technology seen in smartphone insurance. “We have automatic regulation and settlement of claims in the case of smarpthones. In auto insurance, we have a mixture of digital and human processes. We want to train the model to automate regulation and accelerate settlement in auto insurance. Automatic settlement is not yet possible because some documents still need a physical signature in this segment”, says Mascarenhas.
Changes require investment in the team. Pier will double its staff, going to 240 people.
More than the projected revenue of R$30 million this year, Pier is eyeing annualized revenue of R$60 million – the projected revenue for December this year, multiplied by 12. “As we are a startup and we are always growing, high rates, it is important to look at the annualized billing”, says Mascarenhas. The number of customers should reach 80 thousand this year. The goal is ambitious for 2022: to earn R$ 100 million and reach 250 thousand customers.
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