While working together at RBC Ventures, Adrien Niblock and Derek Szeto saw that the marketing costs of direct to consumer business models made them unprofitable for insurers embedding coverage in those businesses' products.
Niblock and Szeto realized that removing these marketing costs could make it possible for insurers to bring down pricing and get a better business model for embedding insurance.
"If you can embed insurance at the right point in time for the consumer, you also are choosing the good risk at the same time," said Niblock. "There's a lot of benefits to embedding insurance and placing it in the customer journey at the right moment of time."
In 2020, the colleagues co-founded Walnut, an embedded insurance platform that serves insurers, brokers and enterprise businesses collaborating on insurance distribution.
On August 7, the Toronto-based startup announced a new $4.6 million round of funding, led by NAventures, National Bank of Canada's corporate venture capital arm, and including investment by TELUS Global Ventures, Diagram Ventures, Portage, and Highline Beta.
"Distribution partners like fintechs and consumer brands now have their infrastructure where they can integrate with APIs and build these wonderful experiences for consumers," Niblock said. "Even though we started about four years ago, we believe the timing is right about now. Our goal is to show all the partners, the great executions and great consumer experiences, and try to expand as quickly as we can with executions that work really well."
One strength of Walnut's platform is its ability to leverage existing data to make users' experience more seamless, according to Niblock. "There's a lot of dancing that needs to happen between the infrastructure partner, the insurer, and the distribution partner," he said. "That's where we've started to garner our expertise. Our goal is to show partners and insurers how it's done and expand that out as soon as possible."
Walnut's new funding will go to expanding the business it has with existing partners, add more product lines and add distribution partners. The company has been helping its insurer and broker clients enable the embedded insurance offerings using APIs. Product lines that look promising include loan and debt protection products insuring policyholders against income loss, as well as creditor insurance offerings for consumers and financial firms involved in mortgage renewals, according to Niblock.
"With creditor products, which require continuous underwriting based on the balance of a loan every single month, we've been pretty successful," he said. "In Canada, we're the first third-party provider of APIs for embedded creditor insurance. We're finding categories where there traditionally hasn't been infrastructure and driving through so it can be adopted more by partners and by consumers."
