In 2018, Steve Hartman was rounding out his 30th year in the insurance and reinsurance industry, serving as CEO of Raleigh-based Falls Lake Insurance Companies, when he had an inclination that technology could help automate and improve the effectiveness of the underwriting process.
After spending a year to take various classes at MIT related to machine learning and artificial intelligence, Hartman founded SynchronoSure—officially registered as Synchro Group Inc.—a Raleigh-based startup that uses AI to allow small businesses to obtain insurance faster. SynchronoSure will present at CED’s virtual Venture Connect summit (March 23-25).
“The more I looked at how insurance companies operate, the more I appreciated how inefficient it is,” Hartman said.
SynchronoSure’s services are aimed to meet the property and casualty insurance needs of small businesses, startups, and the gig economy. As a managing underwriter, SynchronoSure is paid by insurance companies to make decisions on client claims on their behalf.
“They keep the risk, we do the work,” Hartman said.
SynchronoSure currently represents four insurance companies that are backed by most of the top 15 reinsurers globally. The average level of experience in the insurance industry among the senior management team is 30 years, Hartman said.
“The benefit we bring to the table—because we have deep industry relationships with other insurance and reinsurance companies—is we don’t have to build that standing capital that would otherwise be required for us to be an insurance company,” Hartman said.
Here’s how SynchronoSure works: after an insurance agent makes an account on behalf of the end customer (a small business), SynchronoSure pulls data on the account from several API sources and runs that through an underwriting algorithm, where it receives a score based on its riskiness.
After the account’s risk characteristics are then integrated through a predictive analytic tool, which gives a detailed view of the account’s expected loss, SynchronoSure decides whether to quote the account and if so, how much.
Hartman said the normal process for a small business buying insurance entails hours of filling out applications with a broker and submitting them to various insurance companies, and then a back-and-forth of questions and answers about the account until the insurance company makes an offer. After the small business makes a purchase decision, they wait a few weeks to get their policy, Hartman said.
“For us and our preferred business, we can reduce the normal process to about three-and-a-half minutes,” Hartman said.
Geared Towards Small Businesses
SynchronoSure’s four products—which began rolling out in January—are tailored toward the small business sector, which Hartman said was projected before the pandemic to grow 50% over the next decade. Following the recession caused by the Covid-19 pandemic, Hartman said they expect an even larger proliferation of small businesses similar to the material increase seen after the 2008 financial crisis.
“The reality is in the U.S., small businesses drive the economy more than large businesses do,” Hartman said.
One of SynchronoSure’s products, GigBOP, is specifically tailored to provide solutions for risks related to the gig economy. Besides the expected proliferation of small businesses, Hartman said another driving factor behind their products was that the average age of ownership of those small businesses is projected to go down over the next decade.
“As a result, we tried to envision a front-end user experience where it would be slick, quick and easy, focusing on how can we make it painless to get the transaction done in the least amount of time with the least amount of effort for both the end customer and the agent, so that they can go back to the rest of their business,” Hartman said.
With footprints in all 50 states and access to 30,000 insurance agents nationwide, Hartman said their ambitious distribution plan differs from a typical insurtech startup.
“We expect a very different trajectory than you normally see with an insurer tech company, which normally starts with one product line in one or two states,” Hartman said. “I have not seen any of the other insurer techs start with four products in most of the country in their first 12 months of operation.”
Half of SynchronoSure’s employees work in its office in Manila, Philippines, including the entire digital marketing and data science teams and most of the IT staffers.
Hartman said in its initial fundraising round in the third quarter of 2019, SynchronoSure raised a total of $4.7M for about 24% of the fully diluted common equity, leaving the company with a post-cap valuation of $19M. The valuation jumped to a little over $26M following a Series A round last summer.
Hartman said they anticipate a quick raise this spring and a larger Series B round later in the winter or early next year.