SoFi Plans to Offer Life Insurance by End of Yearby
Startup will add product as soon as October or by end of year
Fintech lender looks to expand further beyond student loans
Social Finance Inc., a fintech startup that made its name by helping college graduates refinance student loans, is adding a new type of financial product: life insurance. The San Francisco company will soon start selling term life insurance to its base of mostly millennial customers, said people familiar with the matter.
SoFi expects to roll out the product, which pays out a benefit if a customer dies during the period of time covered by the plan, before the end of the year or as soon as next month, said one of the people, who asked not to be identified because the plans aren’t final. The company hopes to attract customers who haven’t used its existing services, the person said. SoFi declined to comment.
Life insurance could be an important new business for SoFi as established competitors face mounting pressure from digital upstarts that can underwrite much faster. SoFi could take a slice of the $159 billion in U.S. life insurance premium revenue generated last year, according to data from the National Association of Insurance Commissioners, a trade group.
People are more likely to purchase policies around certain life events, such as getting married, having children or buying a home, according to a study published last year by Deloitte LLP. SoFi may be well positioned to capitalize on that demographic thanks to its already sizable base of young customers.
SoFi started in 2011 by helping graduates from top-tier universities refinance student loans at low interest rates. The company has been working to expand beyond its roots with the addition of personal loans, mortgages, wealth management and other financial services.
Mike Cagney, SoFi’s chief executive officer, chairman and co-founder, has said his goal is to eventually render banks obsolete. Cagney, 45, aims to turn millennials into lifelong customers by making them feel like they’re a part of an elite community. SoFi refers to its customers as “members” and “HENRYs” (High Earners Not Rich Yet), hosting career coaching sessions, cocktail hours, dinners and other networking events. It even puts on dating events.
Venture capitalists and other technology investors are enamored of SoFi’s business. SoftBank Group Corp. led a $1 billion investment in the startup last year, valuing it at $4 billion, and it’s now seeking to sell an equity stake of about $500 million to help fund its rapid growth, people familiar with the matter said this month. Last year, the company issued $5 billion in loans and is on pace to double that this year, two of the people said.
SoFi uses a variety of criteria to underwrite its loans, which allows it to maintain a low default rate, according to the company. Factors include an applicant’s free cash flow, history of paying bills, education and résumé.