Root Insurance, an Ohio-based car insurance startup with a tech twist, said Wednesday it has raised $100 million in a Series D funding round led by Tiger Global Management, pushing the company’s valuation to $1 billion.
Redpoint Ventures, Ribbit Capital and Scale Venture Partners all participated as follow-on investors in this latest round.
The car insurance company, founded in 2015, plans to use the funds to expand into existing markets and make inroads into new states, as well as hire more employees such as engineers, actuaries, claims and customer service to support increased scale.
Root provides car insurance to drivers. Not exactly a new concept. But it establishes the premium customers based on their driving along with other factors. Drivers download the app and take a test drive that typically lasts two or three weeks. Then Root provides a quote that rewards good driving behavior and allows customers to switch their insurance policy. Customers can purchase and manage their policy through the mobile phone Root app.
Root says its approach allows good drivers to save more than 50 percent on their policies compared to traditional insurance carriers.
The company uses AI algorithms to adjust risk and sometimes provide discounts. For example, a vehicle with an advanced driver assistance system that it deems improves safety might receive further discounts.
“Root Insurance is leading digital innovation in U.S. auto insurance,” Lee Fixel, a partner at Tiger Global Management said in a statement. “This industry is ripe for change, and we are excited to invest in a team that has the expertise, vision, and momentum to deliver real results. We look forward to growing our partnership with Root and helping them expand their footprint across the United States.”
The company has grown from its home market of Ohio into 20 other states in the past two years. The company plans to expand to all 50 states and Washington, D.C., by the end of 2019.
Drive Capital and Silicon Valley Bank are also investors in the company.