AI-Powered Underwriting Startup Arlo Secures $4M in Funding to Disrupt Small Business Health Insurance

Arlo, a level-funded health plan and underwriting technology company for small businesses, has successfully raised $4 million in its first public funding round. The startup, which focuses on businesses with fewer than 100 employees, aims to revolutionize the small group health insurance market through its artificial intelligence-powered underwriting system and value-based care principles.

Innovative Underwriting Technology Drives Growth

Arlo's co-founder and leader, Jan-Felix Schneider, a former team lead at Palantir Technologies, brings his experience in insurance data analytics and value-based care to the startup. The company's key differentiator is its machine learning-based underwriting system, which allows for accurate risk assessment and cost modeling for small employer groups.

"If you're thinking about what makes up your premium, it's always your claims," Schneider explained. "Premiums are a function of the claims. If you want to save on healthcare costs, you have to address the claims."

This technology enables Arlo to offer sophisticated solutions typically reserved for larger businesses, including the ability to model the effects of population health initiatives and enter into risk agreements with providers.

Addressing the Needs of an Underserved Market

The small group health insurance market, valued at $275 billion, has seen significant changes in recent years. According to KFF, more than a third of small businesses offering health benefits are now covered by level-funded plans. However, these businesses face challenges, including rising premiums and limited access to stop-loss coverage.

Arlo aims to address these issues by partnering with primary care practices to better manage population health and offering stop-loss coverage through a partnership with Nationwide. Syed Rizvi, Vice President and Chief Specialty Officer at Nationwide, commented on the importance of such partnerships: "New MGU relationships like these allow us to reach more producers, particularly those serving small to mid-sized employers that are increasingly self-funding and needing medical stop loss insurance."

Funding to Fuel Expansion and Innovation

The $4 million funding round, backed by venture capital groups Upfront Ventures, 8VC, and General Catalyst, along with angel investors, will be used to expand Arlo's team, particularly in engineering and sales roles. This investment comes at a crucial time, as small business owners face significantly higher health insurance costs, with premiums increasing by 33% since 2018, according to a report from JPMorgan Chase.

Kevin Zhang, partner at Upfront Ventures, expressed confidence in Arlo's potential: "With their underwriting technology, easy-to-use quoting for brokers, and a deep understanding of the small group market, Arlo is uniquely positioned to transform how small businesses access and manage health benefits."

As Arlo continues to grow, with "mid-eight figures" in premiums currently on the books and hundreds of employer groups underwritten, the company is poised to make a significant impact on the small business health insurance landscape. By leveraging AI-powered underwriting and focusing on value-based care, Arlo aims to provide more affordable and effective health insurance solutions for small businesses in an increasingly complex healthcare market.