Prior to the pandemic, most life insurance searches began online but more than 90% of policies were secured through an in-person interaction with a broker. COVID has not only served as a boon for the industry as consumers paid more attention to their financial security but also a catalyst for digital transformation. Virtual sales capabilities for agents and brokers, digital applications, electronic delivery of policies, and underwriting automation are all key priorities where significant investment is being made. Afficiency is an insurtech infrastructure platform that brings these life insurance digital capabilities to the buying process with a set of APIs, at scale, for its distribution partners whether they are brokers, agencies, or even neo-insurance startups. The company offers a variety of policy types that include term life, whole life, mortgage, and income protection with plans to expand its product selection offering. For carriers working with Afficiency, the platform allows them to rapidly deploy new products with limited resources that are flexible for today’s digital consumers. For example, for employer-linked products, Afficiency will handle premium payments through seamless payroll deduction functionality.
AlleyWatch caught up with Afficiency CEO and Cofounder Mark Scafaro to learn more about the business, the company’s strategic plans, latest round of funding, and much, much more…
Who were your investors and how much did you raise?
We secured $7M in a Series A investment round led by IA Capital Group with participation from Impression Ventures, SBLI (The Savings Bank Mutual Life Insurance Company of Massachusetts) and Western & Southern Financial Group. The round was significantly oversubscribed and brings the total raised by Afficiency to $10.2M.
Tell us about the product or service that Afficiency offers.
With Afficiency’s digital life insurance platform, it’s never been easier to offer 100% digital in-session policy decisions. Afficiency enables distributors and other trusted brands to white-label and distribute Afficiency’s life insurance products in a customizable way. We can bring our suite of products into our partners’ native environments with our proprietary APIs.
On the other side, carriers can spend up to three years and millions of dollars building a new product, or we can do it for them in less than six months for a fraction of the cost. Afficiency owns the pricing, technology, underwriting, and distribution responsibilities, streamlining the ability to launch new products quickly. We have built a full suite of life insurance products across term life, whole life, mortgage, and income protection and have plans to offer universal life insurance.
I got exposure to a company that was getting into direct-to-consumer life insurance. It became clear that there was significant demand for life insurance, but there was too much friction in the life insurance buying process. My cofounder, Ravi Arasan, and I saw an opportunity to improve the life insurance experience as many traditional players struggled to bring new technology into the buying process. We believed we could bring a fresh perspective compared to many conventional life insurance companies.
How is Afficiency different?
At Afficiency, we’re reinventing how to sell life insurance by taking the friction out of the cumbersome process. Our ability at Afficiency to focus on product design and quickly innovate products allows us to stand out. We create tailored products that fit the distributors, carriers, and customers. We solve many of the industry’s pain points by enabling a digital application process and leveraging predictive analytics to make in-session decisions. Applicants will never need a medical exam.
What market does Afficiency target and how big is it?
We target the individual life insurance market in the United States, and we’re expanding into group life ecosystems and into some accident and health products. The individual life insurance market generates more than $10 billion of new annual premium every year. As we expand beyond individual life, the market opportunity grows significantly.
What’s your business model?
Our business model is to partner with risk-takers in the insurance industry, such as carriers and reinsurers, and manufacture new, innovative life insurance products. We put these products on our platform and serve them to the distributors who sell insurance.
What are your post-COVID office plans??
We’re opening up a new office right now, but we know we’re in a new work reality compared to pre-pandemic. We’re not expecting everyone to come into the office every day as we want to create an environment where we can give people flexibility and look to get the best of both worlds. We want to allow people to maximize their productivity outside of the office and create an environment where the team can get together in person, collaborate, and creatively brainstorm innovations.
What was the funding process like?
The funding process is all about building relationships and trust with prospective investors. That takes time and patience, but thankfully, I connected with past contacts from the last few years to help ease the process.
What are the biggest challenges that you faced while raising capital?
One of the biggest challenges we faced while raising capital was getting investors to understand the intricacies of the life insurance buying process, which is a complex ecosystem to navigate. We also have a unique business model that navigates this complexity; therefore, those that aren’t intimately familiar with the industry need more time to fully understand.
What factors about your business led your investors to write the check?
We’ve created an innovative and unique use of technology that stood out to investors. We have a capital-light business model, which was appealing to investors. We also have a business model that generates a lot of reoccurring revenue over a long period, which investors appreciate.
What are the milestones you plan to achieve in the next six months?
We plan to launch several new insurance products and significantly increase the number of policy sales. To achieve these goals, we need to strengthen our team by expanding, which will be a significant priority for the next six months.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
As a business leader, it’s essential to become clear on the part of your business model that is core to your success and long-term vision and focus on making that work. If that core area of your business works and you’re not getting distracted by new products or innovations, you will avoid wasting resources and slowing down your funding process.
Where do you see the company going now over the near term?
Over the near term, we want to expand the insurance products that we make available to distributors and roll out new capabilities that make it easier for our distribution partners to sell those products. As we onboard new team members, I see that building out and reinforcing a strong culture is critical so that we don’t stray from our mission and lose our energy. This will be a key near-term focus of ours.
What’s your favorite outdoor dining restaurant in NYC?
Baar Baar in the East Village.