How the AI race drove one software startup to create a fake insurance agency—and landed it in court.
Jan 30, 2026, 06:30am ESTDavid versus Goliath. In Insurtech , the odds favor Goliath. rtificial intelligence is meant to be the software industry’s great equalizer: agents and “vibe coding” tools that let small teams replicate what bloated companies sell, only faster and cheaper.
The threat of AI to the enterprise software industry is readily apparent. One need only look at the recent stock declines of giant software incumbents like Adobe and Salesforce, whose shares are down over 30% in the last 12 months. In a sleepy corner of the insurance business where little known cloud-based enterprise software companies compete for business from sprawling global insurance agencies, this disruption story has been turned on its head. Comulate, an AI startup founded in 2022 by two Silicon Valley engineers, has created an automation tool for insurance accounting that has won favor with major insurance agencies and brokerages. The company quickly hit 8-figure revenues and received financial backing from leading venture capital firms like Spark Capital and BOND, who hailed its “unprecedented” growth. The problem, according to industry incumbent Applied Systems of University Park, Illinois, is that Comulate’s explosive growth may be the result of fraud and theft. Applied, which is estimated to have over $750 million in revenues and is owned by private equity firm Hellman & Friedman, claims Comulate misappropriated its intellectual property by creating a fake insurance company called PBC Consulting to obtain a customer seat on Applied’s software program Epic. It then used that access to accelerate its own product development according to a lawsuit Applied brought against Comulate in the U.S. District Court for the Northern District of Illinois last November.Comulate isn’t taking all this lying down. The startup says Applied’s lawsuit is frivolous and filed its own antitrust lawsuit against Applied Systems in Delaware’s Chancery Court in December. . In Comulate’s telling, Applied and Hellman & Friedman are monopolistic predators that use their market dominance to crush plucky upstarts seeking to build products on top of Epic. Comulate alleges that after it refused Applied’s acquisition attempts, Applied launched a sustained anticompetitive campaign that included blocking Comulate’s access to Epic under their signed pilot agreement and making false statements about Comulate to mutual customers. Incredibly, Comulate admits it created the fake company PBC to obtain an Epic account that it used to help develop its product’s functionality for Epic-integrated customers. Comulate claims it had to do so after Applied allegedly refused to honor its signed pilot agreement to give Comulate access to its software development kit. As an agency management platform, Epic centralizes an insurance agency's day-to-day operations, from policy administration and client data to commissions. Blocking Epic access had the effect of preventing Comulate from refining its product. “I acknowledge that obtaining a sandbox account through PBC was not ideal,” Jordan Katz, Comulate’s CEO, said in a sworn affidavit in Delaware proceedings. “However, this was necessitated by Applied’s breach of the Agreement.” U.S. District Judge Manish S. Shah is hearing both cases, which are headed for discovery. Comulate has requested an expedited hearing. For now, Applied is allowing its customers to continue to use Comulate through its Epic system but has told them access will be cut off by the end of June. The fight between Comulate and Applied reflects larger dynamics roiling the software industry as AI agents andtools, led by AI developer Anthropic, threaten to take market share from software incumbents. Industry incumbents like Applied are working overtime to build their own AI tools and position themselves to customers as keeping with the curve; Applied claims that it’s already “one of the leaders in insurance artificial intelligence.” By contrast, upstarts like Comulate are eager to position themselves as the AI-native disruptors that can rapidly improve user experience. As the discovery process approaches neither side is pulling punches. “Comulate lied, cheated, and stole from us,” a spokesperson for Applied toldin an emailed statement, “and we look forward to holding them accountable in court." A spokesperson for Comulate said in a statement that Applied’s “willingness to deceive and harm its own customers to enrich itself is nothing short of appalling,” and that it is “textbook behavior for a monopolist that believes it is untouchable and that its customers have no other choice."Backend software for insurance firms is an unsexy corner of the financial services industry, but it has evolved into a highly lucrative one, with multibillion-dollar insurers eager to find efficiencies. Applied Systems, an early mover in the space, was founded in 1983. Over the last two decades, it has traded between private equity owners—Vista Equity bought it from its founder Robert Eustace in 2004 for an undisclosed price, then flipped it two years for a reported $675 million to Bain Capital, which sold it to Hellman & Friedman in 2014 for $1.8 billion. Under the $80 billion private equity firm’s stewardship, Applied has grown from more than 1,500 employees in 2018 to over 2,800 today and now operates in seven countries. In classic private equity fashion, Hellman & Friedman has juiced growth with acquisitions: Applied has snapped up over a dozen different companies—mostly small insurance software firms and distribution plumbing plays—since buying it. Applied had generated $388 million in revenue through the first three quarters of 2018,at the time. Assuming that Applied has grown in line with its peers, its annual sales would be between $750 million to $1 billion,estimates. Comulate, by contrast, was founded by two 29-year-olds living in San Francisco who met in college at the University of Michigan. Jordan Katz, a former product manager at Asana, and Michael Mattheakis, an early employee of fintech unicorn Brex, decided to start a company together in late 2021. Despite its founders’ lack of industry experience Comulate quickly won over the back-office professionals who were eager to eliminate hours of spreadsheet drudgery. The 30-person startup was generating over $10 million in annualized revenue last February when it raised $20 million in a Series B fundraising round led by venture firms BOND, Spark Capital and Workday Ventures, the investing arm of the $46 billion software firm Workday. A former Comulate employee who spoke withon the condition of anonymity to speak candidly said that insurance firms couldn’t get enough of Comulate’s automated billing product. “We came across this workflow in insurance where accountants were typing thousands of spreadsheets by hand,” recalled Mattheakis, Comulate cofounder and CTO, on thepodcast, during which he recalled an early customer “crying tears of joy” from their product. But Comulate soon ran into a hurdle—Applied and its Epic agency management system software, which is used by 81% of all large insurance agencies and brokers to run core agency-management workflows like policy and client administration, carrier connectivity and back-office servicing. To grow, Comulate needed to integrate with Epic’s software, but after Comulate rejected Applied’s interest in acquiring the startup, Applied stopped granting Comulate access to its integrating software, the startup claims. That’s when Comulate created PBC Consulting Inc., the fictitious entity. Comulate essentially says that Applied knew or should have known that Comulate had created a customer account, since it had performed demos for Applied employees on several occasions. Comulate “has never used any of Applied’s code or intellectual property in any of products,” Jordan Katz wrote in his sworn statement. Comulate tellsthat the PBC account “was created to avoid using customer data and access when demoing and testing Comulate's integration with Applied's Epic product.” But none of that explains the elaborate front Comulate created for PBC, also known as Phoenix Benefits Consulting. A phony companywith stock images and text appeared. Comulate also invented a fictitious insurance agent named Jordan Bates, who purported to work for PBC and who interacted with Applied Systems salespeople through email to create a customer account on Applied’s Epic. The fake insurer claimed to be a three-person team based out of Sacramento, California who wanted to integrate their existing software provider HubSpot with Epic as it sought to grow its business. PBC even paid for its Epic access with a credit card that used the fake PBC name and contact information, Applied claims in its lawsuit. Upon discovering that PBC was controlled by Comulate, Applied Systems investigated and found that Jordan Bates’ email was associated with the LinkedIn profile of a Comulate engineer named Riley W, whose headshot is a stock image pulled online. There is no such actual Comulate employee named Riley, Comulate confirmed toIn any legal battle, the wealthier party is likely to prevail. Applied Systems can bankroll years of scorched-earth litigation and sprawling discovery, while a startup like Comulate is liable to run through cash quickly—unless its VC backers chip in to fight the PE-backed juggernaut. Regardless of how the legal merits shake out, the dispute is a reminder that Silicon Valley’s move fast and break things mentality isn’t always a recipe for success, especially in a regulated, relationship-driven industry. When you build on an incumbent’s platform and flout its rules, your clever go-to-market hack could turn into a risk-the-company nightmare.
Fintech Insurance Industry Finance Applied Systems Comulate Trade Secrets Theft Insurance Agency Management System
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