Beam raises $80M as the dental insurer looks to keep up rapid historical growth

This morning Beam, an insurtech startup that provides dental coverage to corporate employees, announced that it has closed an $80 million Series E. Mercato-affiliated Traverse led the investment, with Nationwide insurance joining the deal. Both are new investors in Beam. Prior investors Drive Capital and Georgian Partners also put capital into the funding event.

The investment comes after rapid growth at the company, a common theme amongst neo-insurance providers. The startup cohort often leans on digital information collection to better information on consumer behavior. The information allows companies like Beam, and auto-insurers incent behaviors that lower costs like brushing, or safe driving, while having more information to inform their risk underwriting activities.

Once the neo-insurers have enough data to prove their underwriting models, they can rapidly scale their businesses, something investors covet.

Beam CEO Alex Frommeyer said in an interview that the dental insurance business, which lacks the occasional catastrophic impact of a home insurer having to cover the cost of a house, for example, is an attractive slice of the coverage market. Per Frommeyer, his company has “sub-70s” loss ratios, meaning that it spends less than $0.70 per dollar of premium it receives on paying claims.

We lack specifics on its combined loss ratio and loss adjustment expenses, but the loss ratio itself points to enough margin in Beam’s core insurance product to possible create an attractive business; some neo-insurnace providers that have been well received by investors are struggling to get their numbers to even similar levels of performance. Add in Beam’s self declared revenue growth of 600% in the last three years, and “net revenue retention rate of 100%,” and it’s not hard to see why investors wanted to put more capital to work in the company.

Beam’s business is interesting for more reasons than merely its economics. It is also a consumer hardware player, manufacturing its own toothbrush to track, and encourage via promotions, its covered members to brush as frequently correctly. And the company’s software for enrollment, claims, and the like has become popular enough that Beam offers other insurance products via its platform to some customers, in addition to its own dental coverage.

Regarding its new investment, Frommeyer said that thanks to dental insurance’s lack of mega-claims, it doesn’t require as large a capital reserve as some insurance types. That means its new funding is largely earmarked for growth. The cash is likely welcome. After doubling its member base in both 2019 and 2020, the company has an upward climb ahead of if it wants to match the result again in 2021.

While the insurtech market has proven attractive for public investors in some cases — Lemonade’s post-IPO performance, and Root’s IPO pricing, say — there have been bumps. Root’s share price has taken a beating in recent months, and MetroMile, which went public via a SPAC, has lost ground in recent trading sessions.

Still, the market for insurance is huge, and with startups trying to apply tech solutions and modern digital software to the market, there’s plenty for investors to favor. Let’s see how far Beam can get with another huge check.

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