RIO DE JANEIRO, BRAZIL – It was while playing soccer in an amateur team in San Francisco, U.S.A., that Indian Dhaval Chadha met his future partners in insurance startup Justos, Mexican Jorge Soto Moreno and Spaniard Antonio Molins. The trio, who held leadership positions in technology companies such as Classpass, Netflix, and Airbnb, decided to set their stability aside mid-last year to venture into a business in Latin America.
“We only knew that we wanted to develop some data-based business in the region in the finance or health sector,” says Chadha. Before moving to Silicon Valley, the entrepreneur had lived in Rio de Janeiro for 7 years, where he founded a consulting firm and an investment company.
The ideal opportunity emerged when the partners were investigating the Latin American insurance sector, which is constantly growing, but still has low penetration and is dominated by traditional companies. With the goal of using technology and data analysis to offer a cheaper auto product, the entrepreneurs launched insurtech Justos in October last year.
The company got off the ground with an initial check for US$2.8 million in a seed capital round led by Kaszek and with participation from Big Bets and 7 unicorn CEOs, among them David Vélez, from Nubank, Sergio Furio, from Creditas, Assaf Wand, from Hippo Insurance, and Fritz Lanman, from Classpass.
Brazil, with its fleet of almost 70 million cars, is the first market in which the startup will operate. The opportunity here is enormous: about 70% of vehicles traveling in the country have no protection against theft or accidents, according to data from the National Confederation of Insurers (CNSeg). With the mandatory costs of IPVA (motor tax) and licensing, in addition to fuel and service expenses, insurance is a luxury for a portion of the population.
Justos’ strategy to conquer clients is to offer a product that is between 20% and 30% cheaper than the market average using driving data to price the insurance. Today, the market uses demographic data, such as gender, age and location, to determine the price, but the startup believes that those who drive better should pay less. The model is similar to that used by U.S.-based Root Insurance, which raised about US$725 million in its IPO on Nasdaq in October last year.
For the past 7 months, the company’s team of 20 people has been working to develop the technology that can perform this driving analysis on clients based on the movement of their smartphone. The startup is also building artificial intelligence tools for faster analysis and reply to claims. According to data from the government regulator Superintendency of Private Insurance (SUSEP), issues related to accidents take an average of 48 days to be solved. Co-founder Antonio Molins, who has worked as a data scientist in companies such as Netflix, Airbnb, and Clarity, leads this part of the operation.
Justos’ insurance will provide coverage for total loss, partial loss, theft, burglary, flooding, and will also offer winching, locksmith, tire change, and electrical breakdown services. It is the client who will determine the coverage level. Later on, the company’s goal is to allow clients to “disconnect” insurance coverage when they do not use the car for more than two days, in order to reduce the policy’s cost.
The service does not yet have a defined date to start operating, but the insurtech guarantees that it will be available this year in the city of São Paulo. To gather the first interested parties, there is a waiting list on the website. The partners’ plan, after the launch, is to raise a Series A capital offering to continue expanding the business.
While Justos does not launch its product, other insurtechs are operating in the segment. One of them is Pier, which received a US$14.5 million investment last year, and today offers auto insurance starting at R$16 per month. Another is Thinkseg, which since its foundation in 2016 has accumulated over 30,000 clients on its customizable auto insurance that works on a “pay-to-use” model.