Studies have shown that Hispanic drivers face higher auto insurance premiums than the U.S. average. Now there’s an insurtech looking to change that.
Sigo incorporates some of the most popular digital innovations that have swept the insurance industry over the past few years, including mobile-enabled distribution and telematics. But it is tailoring those innovations to serve Hispanic and Latino customers by offering them in Spanish and changing the underlying formula to determine rates.
While race and nationality are specifically excluded from being considered in insurance rating and underwriting,
“We’re trying to level out the biases in this product, and then introduce incentives for things like signing up for telematics,” Solari says.
Coming from a Uruguayan family with relatives who didn’t speak English, Solari said he was moved to start the company after starting a financial services career on the investing side, then thinking of ways that he could make a difference in his home country.
“What caught my eye about the insurance industry here in the U.S. was the struggle for some of my family members and people in my community when it came time to get auto insurance,” he says. “It seemed kind of silly to me that my aunt wanted to get insurance online, but then she was forced to go to a store because they wanted to inspect her ID and inspect her car.”
Because most companies offering insurance for Spanish speakers use agencies, it was adding a layer of cost to that community that was being removed for communities that could more easily use digital distribution. That most digital sales were only available in English didn’t help.
“This is the second-largest Spanish-speaking country in the world,” Solari says, noting that as many as 75% of Hispanic and Latino Americans prefer to speak Spanish, even if they can also speak some English.
Sigo worked with Socotra to build a policy administration system, and with the Mexican telematics provider Saive to offer its usage-based component. The company raised $1.5 millin in seed funding in April; it’s looking to get final approvals to go live in Texas first in summer 2021.
In the early days, Solari and co-founder Julio Erdos got licensed as agents and sold insurance products over the phone, in Spanish, dialing up customers and finding out what kinds of coverages they needed and what roadblocks they faced from legacy insurers.
“We learned who the customer is that is responding to our ads, the type of insurance that this customer wants to buy -- they're not buying increased limits and full coverage, they're buying basic liability, maybe with your comprehensive and collision on top of it,” he says. “Then we iterated and adjusted, figured out kind of what the pain points are, and that’s when we built our own product.”
Companies were “dinging a recent immigrant for not having a credit score, or surcharging them for not being eligible for a US driver's license,” Solari says. “What I'm betting on is that the Latino market is much more like the normal distribution of customers in the market, and so there's no reason for this community to be overcharged. Our targeting and being Spanish first is how we reach this customer that is disproportionately put in this bucket because of these little leftovers in the insurance industry.”
