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TORONTO, Feb 22 (Reuters) - One of Canada's largest insurers, Power Financial Corp, is investing in a Toronto-based startup with global ambitions to automate key segments of the insurance industry.
Collage, Canada's first cloud-based human resource and benefits platform, said on Wednesday that it received C$5 million ($3.8 million) in seed financing from venture capital firm Diagram.
Diagram is financed primarily by Portag3 Ventures, whose exclusive backers are Power Financial Corp and some of its subsidiaries, including insurer Great-West Life.
Collage is part of the emerging "insurtech" space within the financial technology, or fintech, industry.
The company offers its software free and earns money through commissions from insurance companies as a registered insurance broker. It aims to simplify and modernize the "pen and paper" human resources industry, making the process and benefits accessible, particularly to small businesses. The multibillion-dollar market is under-served and growing, Diagram Chief Executive Officer Francois Lafortune said in an interview.
"It's big enough in Canada to make it a substantial business," he said, "but the real prize here is to go broader."
Formed last year, Collage is using Canada as a "proving ground" to work directly with insurance companies to find new ways to approach HR and benefits management, said CEO and co-founder Elijah Moore.
"Instead of saying, 'Hey, you guys are old and stodgy, and you move slow,' we're actually trying be cooperative," Moore said.
Collage plans to introduce insurance products not yet available in Canada or the United States, and is eyeing growth beyond Canada as early as this year.
One of its U.S. counterparts, Zenefits, was once a high-flying startup that raised $500 million in financing in 2015. The company laid off 45 percent of its staff almost two weeks ago and has faced insurance violations and fines.
Moore and Lafortune say Collage is different, noting one of the co-founders is a licensed expert and instructor in the field.
Diagram, publicly launched last month with the support of dozens of entrepreneurs and senior executives, will work closely with Collage to help it expand, using the fund's own expertise in insurance.
Moore said Power Financial and Great-West Life were unique among large financial institutions "in the way they're actively trying to disrupt themselves." Insurance companies have traditionally lagged in venture investing, he added.
$1 = 1.3137 Canadian dollars Reporting by Solarina Ho; Editing by Lisa Von Ahn