Business Description

Overview Root is a technology insurance company founded on the idea that car insurance rates should be based primarily on driving behaviors, not demographics. We are revolutionizing the archaic car insurance industry by using modern technology, data science, and telematics to offer fair, personalized rates to good drivers. We primarily reach customers through two channels: our direct channel, where we target consumers with what we believe to be a great insurance product at a great price, and through our partnership channel, where we meet consumers at contextually relevant times, such as during the car purchasing experience or through independent insurance agents. Our primary focus is the United States personal auto insurance market. We have built our company around the principle that each individual has unique behaviors and that customers should be in control and rewarded for their actions. For centuries, traditional insurance companies have grouped people into risk pools and long relied on the ‘law of large numbers’ to produce acceptable pricing on an aggregate basis. Root is different—we have the ability to use technology to measure risk based on individual driving performance, prioritizing fairness to the customer. We are fundamentally reinventing insurance through technology, data science, and a strong focus on the customer experience. We believe the approximately $350 billion United States personal auto insurance market is ripe for disruption. Traditional methods of pooled risk assessment are not personalized and inherently less precise given individual behavioral data is underutilized or not widely measured as a component of the insurance risk assessment process. We believe traditional systems and processes have become outdated and are increasingly disconnected from the needs and expectations of modern consumers. Our initial focus on auto insurance reflects how well-suited we believe the product is for fundamental improvement through technology and we believe Root is the innovator best positioned to drive this transformation. Auto insurance is required for the vast majority of United States drivers, and we believe it is typically the first insurance product purchased by consumers. As a result, our auto-first strategy establishes the foundation for an expansive lifetime relationship with the opportunity to add other personal insurance lines as customer needs evolve. Our technology platform is scalable and supports future product expansion. Our advantage is derived from our technology-enabled approach to the customer lifecycle. We engage customers at a point of high intent across multiple channels, provide a seamless and intuitive product experience, and utilize sophisticated data science to fairly price our policies. As a full-stack insurance carrier, we have the infrastructure and flexibility to design products and to distribute, underwrite, administer, and pay claims. Our model, supported by proprietary technology, allows us to adapt more quickly across the value chain, provides design and feature discretion, and we believe enables us to innovate and iterate with more speed than any of our major competitors. We see this flexibility as critical to introducing new capabilities, responding to macroeconomic conditions, reinforcing customer centricity and driving growth at favorable unit economics. In practice this means we own and control an end-to-end insurance experience and have near complete operating autonomy, subject to regulation and agreements with our partners, to grow our business. As we continue to mature, we expect an increasing proportion of our premiums to be earned from customer renewals. Renewal premiums, referring to premiums from a customer’s second term and beyond, generally have lower loss ratios as compared to new premiums in the customer’s first term. As a young insurance company, our results are disproportionately weighted toward new customers. Our technology and data science-driven approach allows for rapid response to macroeconomic trends through quick, appropriate rate actions. This, paired with our ability to continually enhance underwriting and segmentation to price better drivers more fairly has contributed to stability in our gross loss ratios. 1 Our Industry Insurance is one of the oldest and largest markets in the world, touching every corner of the world and protecting many of our most important assets. Our primary addressable market today is United States personal lines insurance.…