Brazilian insurance startup Azos plans to offer basic life insurance for R$5 per month

RIO DE JANEIRO, BRAZIL – With R$13 (US$4.49) million raised from investors such as Maya Capital and Kaszek, the Brazilian insurtech Azos launched its product on the market in April.

Insurance is the new target of startup entrepreneurs and investors. After fintech companies like Nubank and Creditas proved that it is possible to conquer space in sectors held by traditional players, all of the ecosystem’s eyes are turned to the R$274 billion that the Brazilian insurance market handles per year – and that should still grow considerably to reach the level of more mature economies.

The newest company to compete in the sector is insurtech Azos, which began operations in April this year promising to offer a cheaper and more flexible service on the life insurance front. The company offers policies starting at R$5 (less than US$1.00) per month, for coverage tiers ranging from R$90,000 to R$2 million.

To price the product, the company only asks the customers to provide their birth date, weight and height, whether they have smoked in the past 24 months, and how much coverage they want. After the quote is submitted, the company asks a number of health-related questions, but does not demand certificates or exams. The whole process takes only a few minutes and the contract can be completed online or through a broker.

Business trajectory

The company has been envisioned since 2019 by the trio of friends Renato Farias (ex-director of international operations at DogHero), Rafael Cló (ex-leader of retail analysis at Kraft Heinz) and Bernardo Ribeiro (ex-marketing manager at Burger King).

The idea for the business came from a problem Cló had with his life insurance while living in the United States. With an expired credit card, he needed to change payment methods on his policy, but it took more than two months, between calls to the broker and insurance company to solve the problem. Outraged, he began researching the industry and saw a business opportunity to create a digital insurance company.

In April 2020, the trio raised R$500,000 with American and Brazilian angel investors, including the founder of the American insurtech Hippo, in order to get Azos off the ground. Studying international references, the entrepreneurs decided that it would be better not to try to be an insurance company right away, but rather to partner with large companies in the segment to be able to customize and sell their products in a “house brand” format.

In the United States, the model has some successful cases in the area of life insurance. Insurtech Ethos, for one, uses the same strategy of administering insurance plans and, in May, raised US$200 million in funding, valuing it at US$2 billion. Startups such as Health IQ, Bestow, and Ladder have also been gaining space in the segment and drawing funds’ attention.

Investments

In the case of Azos, it was no different. In October last year, when the partners had defined their business model, they raised R$12.5 million in an investment round with Kaszek Ventures, Maya Capital, Propel, and some other angels from the technology and insurance markets.

“Since we founded Kaszek in 2011 we have believed in the potential of insurance in Latin America. We see companies like Nubank and Creditas innovating in finance, but the insurance market remained stagnant. When we met the founders of Azos, who studied the market and had a clear product idea, we decided to support it,” says Santiago Fossatti, the manager’s partner.

The goal of the round was to have capital to hire a technology team and build the first version of the product, which was launched in the market in the first semester. “The funds were used to build a strong technology team and establish partnerships with leading reinsurance and insurance companies in the market to build new insurance products from scratch,” says Renato Farias.

Challenges

Despite the pandemic having driven an 11.4% growth in the sale of life insurance, the product is still a luxury in Brazil. According to Ibope data, only 15% of the population has some kind of coverage in this respect. But there is room for growth: in more mature markets, such as the United States, life insurance is used by 54% of the population.

To try to win over Brazilians, Azos will have to invest heavily in branding and consumer education. The partners say that, for this very reason, they will not give up on brokers to sell their product. Different from the American startups, which strongly bet in the digital self-service purchase, the Brazilian company found that it is necessary to have a salesperson explaining the importance of life insurance .

“We are still incipient in this respect, but we will develop a robust platform for brokers to sell our product,” says Rafael Cló.

Another challenge is competition with other startups. In December last year, the digital bank Nubank launched a life insurance product starting at R$9 per month. The difference is that, after eight years in operation, Nubank has raised over US$1 billion in investment rounds and today has over 38 million clients in all Brazilian municipalities. It is no wonder that the fintech secured 90,000 life insurance contracts in 3 months.

To differentiate itself, Azos is currently meeting with its first hundred customers and making adjustments to the operation. In addition, the company plans to launch new products in the next two months: one insurance for severe diseases and another for disability.

“We will allow clients to contract the three products independently, which is currently not possible in the market,” says Bernardo Ribeiro. The goal is to have the first 1,000,000 policies sold by the end of the year.

Source: Exame