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  • May 2022 (Revised August 2022)
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LOOP: Driving Change in Auto Insurance Pricing

By: Elie Ofek and Alicia Dadlani
  • Format:Print
  • | Language:English
  • | Pages:29
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Abstract

John Henry and Carey Anne Nadeau, co-founders and co-CEOs of LOOP, an insurtech startup based in Austin, Texas, were on a mission to modernize the archaic $250 billion automobile insurance market. They sought to create equitably priced insurance by eliminating pricing factors that disproportionally affected people of color, such as credit score, income, and education. The company used sophisticated AI algorithms to analyze which roads were more prone to accidents and employed proprietary technology to track driving behavior. Moreover, the founders believed in providing a sense of community and in building a mission-driven brand that people loved, thereby altering the antagonistic and distant relationship that existed between an insurance company and its customers. By the September 2021 Texas launch, the company had developed a waitlist of over 30,000 people. In March 2022, as the first policy term expired, the co-founders had to figure out which policyholders to renew and at what price to renew them. They also wondered if they could motivate drivers to become safer on the roads by investing in rewards and gamification. Going forward, by the end of 2022 Loop had plans to enter nine additional states with its revolutionary car insurance model, and contemplated removing several other pricing criteria that could be discriminatory, while incorporating metrics that might provide discounts to customers. Longer-term, the company needed to decide which strategic direction to pursue—whether to expand their fledgling company vertically by adding complementary insurance lines, like homeowners insurance, or expand horizontally to other financial services, like auto lending, that were plagued by structural biases against minorities. Given the recent lackluster performance of several high-profile insurtechs, Henry and Nadeau knew that, to achieve their goal of unseating the entrenched incumbents, they had to get these decisions right.

Keywords

AI and Machine Learning; Technological Innovation; Equality and Inequality; Prejudice and Bias; Growth and Development Strategy; Customer Relationship Management; Price; Insurance Industry; Financial Services Industry

Citation

Ofek, Elie, and Alicia Dadlani. "LOOP: Driving Change in Auto Insurance Pricing." Harvard Business School Case 522-073, May 2022. (Revised August 2022.)
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About The Author

Elie Ofek

Marketing
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Related Work

    • May 2022 (Revised August 2022)
    • Faculty Research

    LOOP: Driving Change in Auto Insurance Pricing

    By: Elie Ofek and Alicia Dadlani
Related Work
  • LOOP: Driving Change in Auto Insurance Pricing By: Elie Ofek and Alicia Dadlani
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