The embedded insurance industry is revolutionizing the way consumers access insurance products by integrating them directly into the purchase process of other services or products. This seamless approach not only enhances customer experience by offering relevant protection in context but also opens up new revenue channels for businesses across various sectors. While most embedded insurance arrangements are focused on either lead generation for carriers or as an embedded agency where the distribution partner shares a commission with the carrier, a novel area has emerged known as captive insurance, which is very much like creating your own insurance company. Authentic Insurance is an infrastructure provider that allows franchisors, associations, and software businesses to build their own insurance offerings for their existing user bases, capturing both the commissions and profits of an insurance program. Building an insurance company is not an easy undertaking but Authentic handles the actuarial work, domiciling, reinsurance, and licensing necessary. The company currently works with partners that serve businesses in several verticals including salon and spa, food and beverage, retail, fitness, and professional services.
AlleyWatch caught up with Authentic Insurance CEO and Cofounder Cole Riccardi to learn more about the business, the company’s strategic plans, latest round of funding, which brings the company’s total funding raised to $16.5M, and much, much more…
Who were your investors and how much did you raise?
We raised an $11M Series A round led by FirstMark Capital with participation from Slow Ventures, Altai Ventures, MGV, Upper90, and Commerce Ventures.
Tell us about the product or service that Authentic Insurance offers.
Authentic provides the infrastructure for franchisors, software companies, or associations to roll out their own insurance offering, also known as a “captive”, to their existing customers. We handle all the logistics of setting up a captive insurance offering: underwriting, filing rates with regulators, pricing, actuarial analysis, reinsuring, capitalizing captives, setting up a domicile, administration, claims management, and customer servicing. We’ve built our platform to adapt and tailor insurance coverage in real-time to increase addressability and competitive pricing.
What inspired the start of Authentic Insurance?
The idea came to me in a bit of an unconventional way: horse racing. There’s a lot of risk involved for horse trainers who are caring for the racing horses, and with risk comes workers’ compensation claims. In 2019, my family got involved in a captive called Big Stakes that aims to incentivize trainers to stick to safety protocols by giving them a piece of funds that aren’t spent paying off claims. After seeing how well this model worked, I began to look at the commercial insurance industry and saw that the same model could be applied to improve the industry and benefit the small business owners paying for the policies.
How is Authentic Insurance different?
Commercial insurance is a necessity for businesses but historically, small businesses have had to purchase policies through traditional insurance carriers, which can be costly and only benefits the insurer. At Authentic, we’re creating a new insurance model that makes it easier for businesses to get the coverage they need—and to share in the profit.
What market does Authentic Insurance target and how big is it?
The US commercial insurance market reached over $275B 2023 and it’s expected to nearly double by 2032. We’re targeting small businesses and franchises—within a year of launching, we’ve signed 10 partners, like Mindbody and Restaurant 360, that touch over 1 million small businesses.
What’s your business model?
Authentic offers captive insurance to franchisors, software companies, or associations. Similar to a “co-op” model, these member-owned captive programs allow for hyper-customized coverage and potential dividends when there are fewer claims, which can lead to cost savings for the business or franchise owner.
How are you preparing for a potential economic slowdown?
Generally speaking, insurance isn’t correlated to economic cycles and is generally more “recession-proof” than other industries. Since insurance is typically mandatory, it’s oftentimes the last thing a business cancels or cuts costs on. Our goal is to help our clients save money while still having the right coverage, even if we enter a deeper economic slowdown.
What was the funding process like?
Funding takes time, which I’m sure a lot of founders can identify with. For our Series A, I had met the team at FirstMark several times throughout 2023, and at that point, funding hadn’t been a topic of discussion. While having lunch with them in December before the holidays, they mentioned wanting to invest before we officially kicked off a fundraise. It took a few more meetings and sharing data on Authentic before we signed the term sheet. Overall, the process was as smooth as possible and we started 2024 with a ton of momentum.
What are the biggest challenges that you faced while raising capital?
Raising capital will really put your product and company to the test, and that can be hard at times. But, if you build a great product and company, fundraising will follow. I attribute our successful fundraise to what our product, engineering, and insurance teams have put together over the last 18 months. Having a strong team and a scalable product is crucial.
What factors about your business led your investors to write the check?
The way insurance is bought and sold hasn’t changed in over 50 years. The industry is in dire need of change to make the process of securing commercial insurance easier for small businesses and that’s what we’re doing with Authentic. When speaking with investors, they recognized that we’re truly changing the commercial insurance industry – and we’re the first to do it.
The way insurance is bought and sold hasn’t changed in over 50 years. The industry is in dire need of change to make the process of securing commercial insurance easier for small businesses and that’s what we’re doing with Authentic. When speaking with investors, they recognized that we’re truly changing the commercial insurance industry – and we’re the first to do it.
What are the milestones you plan to achieve in the next six months?
With our Series A funding, we’re aiming to grow across our business in the next six months—increasing our customer base and headcount, and rolling out new product offerings like workers’ compensation.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Creative and outside-of-the-box thinking will be your best friend. Instead of immediately hiring for what would be a “typical” role at a startup, look at other ways you can problem solve and get things done. In today’s world, it’s incredible the tooling that companies can take advantage of in order to gain efficiency and operate with less headcount, which is often the norm for younger startups.
Where do you see the company going now over the near term?
In the near term, we’re looking to grow and sign on more partners. Over the next year or two, we’ll be adding more products with the goal of eventually being able to offer all types of insurance to businesses, franchises, and associations. Right now, we handle everything you could think of when it comes to a commercial insurance policy and we want to expand that to other types of insurance a business might need, like health insurance.
What’s your favorite summer destination in and around the city?
NewsBar Cafe! It’s right under our office and I stop by multiple times a day!
