Insurtech Root Lays Off 330 Employees as Loss Costs Increase
Technology company Root Inc., the Columbus, Ohio-based parent company of Root Insurance, announced yesterday that it has laid off approximately 330 team members throughout its business.
Co-Founder and CEO Alex Timm in an emailed statement cited pandemic losses as factoring into the decision.
“As the pandemic has continued to evolve, supply chain and inflationary pressures have caused historic levels of loss cost increases,” he said.
Employees were notified of the layoffs during an all-company meeting.
“We had an all hands on deck meeting for sales, which is never a great thing nine times out of 10,” said Robert Martin, former property/casualty inside sales agent at Root. “I had a bad feeling, but people were trying to be optimistic. It could have been anything from everyone has to take a pay cut to this, and this is one of the worst outcomes.”
Timm said the most difficult part of what he called an organizational realignment has been saying goodbye to employees throughout the business.
“I am deeply grateful to all Root employees, past and present, for their continued commitment to our vision of disrupting the car insurance industry,” he said.
He added that he believes the realignment will drive efficiency and increased focus on Root’s strategic priorities going forward. These priorities include continuing to execute pricing changes that address the increase in insurance costs while building its embedded insurance product, Timm said in a public statement published to Root’s website.
All impacted team members are being supported with financial and career placement aid, according to Timm’s statement.
Martin, who worked with the digital auto insurer for six months before being notified of his layoff, expressed disappointment in not being able to move forward with the company.
“I wanted to be invested,” he said. “I was told I would have the possibility for a promotion in April.”
He refuted the company’s claims of pandemic losses, saying he believes the layoffs were a function of over hiring and overspending.
“They over hired,” he said. “This was an underwriting failure and a marketing failure. They overspent. They didn’t fire underperformers. … They made consistent bad choices, and they cost people their jobs.”
A Root spokesperson declined to comment on these claims but said more information would be made available after Root’s Q4/full year 2021 earnings call scheduled for February 24, 2022.
Despite consistent reported losses, Root has pursued a continuous growth strategy, with Carrier Management reporting in March that the digital auto insurer was executing a national expansion as it reported higher expenses in sales and marketing, technology and related development and general administrative costs.
Root said in its second earnings report as a public company in March that it had plans to more than double sales and marketing investments for 2021 after slowing spending in 2020 due to COVID-19.
However, by November, Carrier Management reported Root had lost more than $415 million from January through September 2021, almost double the same period a year ago. The company also took year-to-date hits on net premiums earned and total revenues.
Timm and Daniel Rosenthal, the company’s CRO, COO and CFO, wrote in Root’s Q3 2021 shareholder letter that the company plans to rework how and where it spends marketing money and pursue “more cost-efficient distribution channels,” along with a reduction in customer acquisition costs and operating losses in 2022.
Root projected losses for 2022 somewhere between negative $505 million and $55 million as well as improved full-year operating losses in 2022 based on operational changes, according to its Q3 2021 shareholder letter. The company said repeatedly in the letter that the biggest way to get there is by way of a marketing rethink.
“We are confident we are building an enduring organization poised for future growth,” Timm said in his public statement regarding the realignment. “This realignment will further focus our efforts on differentiating and diversifying our distribution and continuing to improve our insurance operations and customer experience.”
This report was originally published by Carrier Management.
Chief Content Officer Andrew Simpson contributed to this report.