Credible, a San Francisco online lending site owned by Fox News’ parent company, has acquired Young Alfred, a Philadelphia digital start-up hatched by two Wharton MBA students to compete with your neighborhood insurance agent.
The company’s name, Young Alfred — its informal slogan is “At Your Service” — recalls problem-solving fictional butlers called “Alfred” from the Batman franchise to the 1991 slapstick movie Hudson Hawk. The company is the brainchild of investment banker David Stasie and engineer-turned-investment trader Jason Christiansen, who met in 2015 at Penn’s business school, where their curriculum included inventing a start-up likely to make money in digital America.
“We thought about drone insurance. But drones were too new” and there wasn’t much data to estimate risk, the foundation of insurance, Christiansen recalled. “So we looked at renters insurance, then home insurance. We were amazed, excited, appalled by how big an opportunity it was, and how it still worked through all these local agents.
“We were thinking surely someone must have invested in a way to do this online by now. But no, no one did it really well. We figured, why can’t we build it? We were green. And focused. And stubborn.”
The companies won’t say what Credible paid. But it’s the latest in a string of deals in what has been a “torrid sellers’ market” for private businesses in general, and software companies in particular, according to GF Data Resources, a Conshohocken firm that tracks private-company sales.
Overall, the typical sale for companies worth under $250 million was priced at 7.6 times earnings — the highest since the firm began tracking in 2005 — as cash-rich corporations and private-equity firms fuel a buying spree.
Financial companies worried in the mid-2000s that young Americans weren’t buying homes (were they held back by student debt, or just forming families late?). But Christiansen figured that, by the time they had hired enough engineers to offer policies packaged for people accustomed to online convenience, “Generation Z would be buying houses and expecting a best-in-class online insurance-buying experience, and we’d have the pipes all ready.”
They collected start-up capital from Pear Ventures, ERA, and Newfund Capital. Then they applied for insurance licenses in every state, and put staff to work inputting all 50 states’ homeowner and auto rules into Young Alfred applications tailored for easy use. In late 2019, they raised $10 million from investors such as Google’s Gradient Ventures. They improved the software to make it more attractive to online brokers, and built an in-house broker staff to answer customer questions.
The hard part was persuading insurers to use a new online service. “You might think, ‘two young guys promising to work hard at this, why wouldn’t they appoint our company?’ But a lot of them saw us as two finance guys, shiny and new, why risk their career on us?” said Christiansen.
After a year and a half of rejections, one of the first to try Young Alfred was the nation’s oldest insurer, the Philadelphia Contributionship (known as the “Hand in Hand” for its distinctive four-hand-clasp marker on insured homes), founded by Benjamin Franklin and his partners in 1752. “An alumnus at Wharton connected us,” Christiansen recalled.
The Contributionship and two other early adopters “were just enough to get started.”
The partners claimed to offer not just convenience, but also accuracy.
“Insurance agents know a lot. They are well-trained,” said Christiansen. But especially for homeowners’ insurance, “the questions companies ask applicants are very detailed, and sometimes [agents] forget one. ’What breed of dog do you have?’ [Risks vary with size and type.] ‘Is there a screen around the porch?’ Companies told us they found that agents have errors in about 30% of applications.”
Young Alfred’s automated application didn’t go through if it wasn’t complete and verified.
As policies started flowing, more insurers signed up. The service currently offers 46 insurance carriers, and a waiting list as staff process more.
Haven’t online sign-ups provoked pushback from established agencies? Christiansen says carriers tell them they are not displacing neighborhood agents, but reaching new customers — young people buying their first homes or cars, digital-savvy retirees moving to resort areas. “We’re in all 50 states now,” said Christiansen. “Older people in Florida are very happy with us. We get the customers who want to make their own path.”
In the last four years, Young Alfred sold $6 billion worth of home and auto insurance for large and local underwriters.
If that sounds like a lot, it’s still a tiny fraction of the $40 trillion U.S. real estate insurance market, and that’s not counting cars.
Credible won’t say how much it’s paying for Young Alfred. That company’s online “lending marketplace” offers mortgages from a range of banks, and student loans from Citizens Bank, Wilmington-based College Ave., online lender SoFi, and others.
“We very much look forward to adding insurance products,” said Credible founder Stephen Dash in a statement.
Will Credible use Young Alfred to take over the agency business? “There’s so many of these” insurance software start-ups in recent years, noted Paul Melchiorre, a veteran Philadelphia tech executive who is a former president of iPipeline, an Exton-based online life insurance software company.
Melchiorre noted that San Francisco-based Lemonade, which went public two years ago, attracted a horde of initial investors — its IPO debuted at a higher-than-expected $69 a share, then more than doubled in a few months. But it fell sharply to below its initial trading price this year, after a series of quarterly reports showing expenses were nearly triple the company’s annual sales, and profits were not on the horizon.
“I think the real disruption in insurance is yet to come,” Melchiorre concluded. “Companies like Tesla and Amazon are likely to take over insurance over time, because they have all that customer data. They know your risks, your credit scores, the last time you went to the bathroom. They know when your wife gets pregnant before she does. Big Data companies could take over the whole insurance process.”
Even before its sale, Young Alfred had become less visible in Philadelphia. Stasie moved to Arizona as the pandemic shut East Coast cities, and hired a cluster of staff for the company there. Christiansen is raising his family in Connecticut.
Still in Philadelphia are Young Alfred’s lawyers, at Cozen O’Conner, though the acquiring company has counsel of its own. Also, the founders’ alma mater, out in University City, where students are thinking up more digital business plans.