Why we invested: Newfront
At B Capital, we seek to back generational companies with broad platform potential. Newfront has a unique opportunity to accomplish this as the most innovative commercial insurance broker in the U.S., serving the enterprise and mid-market customers that generate 98% of the industry’s revenues.
Commercial insurance is fundamental to the broader economy, enabling any company to operate over long periods of time despite a wide variety of unpredictable risks. As a result, commercial insurance comprises one of the largest markets in financial services, with $900 billion in addressable premiums and $120 billion in broker commissions paid annually in the U.S.
However, the industry has proven deeply resistant to innovation. Customers are not onboarded digitally, and thus their data is not maintained centrally or intelligently. As a result, there are tremendous lost opportunities across the customer experience – from onboarding through policy renewal, risk analytics, and claims. Why does this remain the case in 2022?
The answer is that customer relationships are very sticky and largely held by incumbent organizations that are 100+ years old. The top 5 commercial insurance brokerages in the U.S. are public companies commanding over $230 billion in aggregate market capitalization, but founded between 1828 and 1939 and sporting an average NPS score of 3 (according to Customer Guru). Beyond these public incumbents, at least 10 private commercial insurance brokerages generate over $1 billion of revenue.
Newfront is the sole disruptive insurance broker catering to large enterprises and mid-market businesses. Fundamentally, Newfront’s founders understand that large enterprises will always need to work with a human broker, as their needs are nuanced and policies don’t fit a template. What the industry really needs is the “bionic broker” – the most talented brokers in the country powered by the best technology stack.
Having painstakingly converted hundreds of pen and paper processes into software, Newfront is equipping brokers with proprietary software that enables them to grow their books at 2x the industry average rate. This technology further enables Newfront to recruit the most ambitious brokers who will become the “rainmakers” of tomorrow. Additionally, customers are delighted by a smarter digital experience, as demonstrated by Newfront’s industry-leading NPS score.
Given the stickiness of broker relationships and Newfront’s unique value proposition, the company boasts enviable net retention metrics and growth while operating profitably. As they build an important distribution channel, Newfront will also have opportunities to innovate up and down the insurance stack – across product, capital, claims, and risk management.
We’re beyond excited to be partnering with Spike, Gordon, Kurt, Brian and the entire Newfront team on their journey to transform risk into opportunity for businesses across the country.