Worldinsure Limited, a provider of new business processing software to the life insurance has closed shop and is in the process of liquidating its assets.
"WorldInsure did not go bankrupt, but it is in the process of liquidating its assets and closing its operations. It is selling off to other vendors," says John Hele, President and CEO of Worldinsure. He explains that the closing is a result of the slow sales environment. As a result, the company is closing all its offices, which altogether employed over 30 people.
A good start
The privately held company started up in 1999 and was headquartered in Bermuda. It also had a subsidiary in Boston and a Canadian office in Toronto.
The goal of the software developed by Worldinsure was to simplify new business processing and to improve underwriting efficiency for insurance companies.
WorldInsure was also one of the companies interested in partnering with Life Company Central (LCC), the initiative looking for a common electronic platform for life insurance.
On the onset, Worldinsure had strong backing. It had $31 million in funding and was backed up by strong investors such as: Borealis Capital, XDL Intervest Capital Corporation, Dorset Partners, CIBC Capital Partners, Princeton Holdings (a majority shareholder of The Guarantee Company of North America), Sun Life, New Millennium Internet Ventures Fund, BMO Nesbitt Burns Equity Partners, Bayshore Capital, Gottschalk+Ash International and eLab Technology Ventures Inc.
As well, Worldinsure struck a deal in 2001 to provide RBC Insurance with a secure e-commerce new business platform. The interactive life insurance application software enabled RBC Insurance to streamline new business activities by gathering and verifying client information as well as automatically ordering underwriting requirements.
In late 2002, Worldinsure signed Sun Life as a client. Worldinsure provided its new business processing platform for Sun Life's U.S. operations. The system was meant to improve Sun Life's underwriting efficiency and provide distribution channels with fully automated case submission and status tracking.
Mr. Hele explains that the status of the Sun Life and RBC deals are being discussed and Worldinsure is figuring out what to do. Stephanie Petroff, a spokesperson for Sun Life states that the insurer is aware of the situation and is looking for an alternate solution.
LCC let down
LCC was counting on Worldinsure for technical support, says Tracey De Leeuw, Project Planner and E-business strategist for LCC. "We really had high hopes that they would be able to live so we could connect with them and use the stuff they had already built. They were one of the early [technology] darlings because it made so much sense."
Like many of the dot-com companies they burned through a lot of money, explains Ms. De Leeuw. "They may have some technology to show for it but it did not have the users and you need critical mass on any kind of business model."
She points out that one of Worldinsure's primary venture capital partners, XDL Intervest Capital, a company committed to providing funding to entrepreneurial companies involved in technology, ran out of money.
Tech bust victim
"A company like Worldinsure has to count on its venture capital partner to be strong and to ante-up more money when they need it. Worldinsure ends up being a victim of the technology meltdown, not because it is not a good company but because its venture capital partner did not have enough money to give them," she notes.
She adds that often times venture capital partners go in together and share the risk. "CIBC was also an investor in XDL Intervest, so if CIBC lost money because of XDL and it had gone into Worldinsure because of XDL, then it becomes a domino effect."
However, Tony van Marken, a partner in XDL Intervest says that though it is true that CIBC was an investor in XDL, it is untrue that the XDL fund ran out of money. He explains that the XDL fund had invested 65% ($155 million) of the funds it raised in 18 different companies. It was the second largest shareholder in Worldinsure, behind Toronto-based Borealis Capital.
Instead Mr. van Marken points out that the XDL fund is closed and is not focused on new investments. "XDL has not run of money. Venture fund cannot run of money. At the time of closing it has a legally committed amount of capital. ... We have not made new investments in the last year.... We are not actively investing in new deals, and our funds are reserved for existing companies," he states.
Instead, Mr. van Marken says that the challenge that Worldinsure faced was getting more insurers to take a risk on such an innovative technology concept. He explains that the market was not ready for it. In the 90s, customers were prepared to use innovative technology to have an edge in the market. Today rather, the market is witnessing a downturn and budgets are cut.
"As the market has deteriorated, insurers seem less and less willing to use technology to improve the way they run their business, they just don't seem to be innovative," states Mr. van Marken.
He adds that the venture capital partners were providing a certain amount of funding on the assumption that a company would win customers and generate sufficient revenues. In this case, it did not generate sufficient revenues to do that. When asked whether XDL would have continued to support Worldinsure if the company did not close, Mr. van Marken answers, "If market conditions were better, than I think investors would have put in more money, but we did not have that in our favour."
Mr. van Marken notes that Worldinsure would have had more success if it were part of a bigger company. "Ultimately to be successful, you have got to be part of something bigger. The other issue is that insurers say, ‘this is great product, but you are a tiny company and we like to do business with bigger companies.'"
He adds that if the Worldinsure software ends up in the hands of a significantly larger company that has a very well established brand name, than it may see better results.
He says that Worldinsure is in process of selling the rights to its product to another company and is getting a lot of interest from other companies. Mr. van Marken did not disclose whether or not the interested party is Canadian.