In the continuing plight of venture-capital funded dot-coms, online insurance distributor eCoverage hasshut down.
Many industry observers speculated that eCoverage's technology would be an attractive asset for a traditional brick-and-mortar insurer, but no buyer had surfaced at press time. "We tried to get an insurer to buy the technology for the past six weeks," says Jon Kelly, former vice president, sales and marketing at eCoverage. "However, any sale to an insurer is a six-to-nine month sales cycle and there simply was not enough time to complete a sale."
Also, eCoverage's technology handles all underwriting, policy administration and claims functions. "Our technology worked best across the enterprise," continues Kelly. "It is hard for an insurer to make the decision to throw out all its existing systems and convert to eCoverage's technology. Unless the company is looking to do exactly that, it is a tough sale." Kelly says General Motors' insurance operation will use some of eCoverage's technology. Royal & SunAlliance Insurance, a partner with eCoverage for auto insurance policies, will continue to manage the policies that have been sold, says Kelly.
As to why eCoverage shut down, Kelly says, "The overwhelming snag was money. We ran out of it. We had a plan that called for a series of capital infusions. Sales went up five-fold, but it wasn't enough to become self-sustaining."
Michel Orban, spokesperson and venture partner with RRE Ventures, a firm that had invested in eCoverage, says, "eCoverage had run out of the capacity to raise money. It is difficult to find money to fund dot-coms in today's market." Orban would not comment on how much RRE Ventures invested in eCoverage. Other investors include Accel Partners (Palo Alto, CA), E*Trade (Menlo Park, CA) and Softbank Technology Ventures (Mountain View, CA).
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio