Podcast: Insuring Your Sharing Economy Startup

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We had the pleasure of speaking to Cover Genius‘ Head of Insurance, Graeme Dean, about the future of InsurTech and how to insure a sharing economy platform…

Chaz:              I must admit I’m especially excited today because not only do we have an Australian and quite a good friend, a very entertaining chap, anyway. We welcome Graeme from Cover Genius. How are you?

Graeme:          Yes, good. “Quite a good friend”?

Chaz:              Let’s call you a 100% best friend but we’ll leave it there. What I’d like to do today, which may be slightly different to some of our other podcasts, is really dig into the technology that’s within the insurance market and how that’s going to affect not just insurtech as a whole but how insurance eventually flows into all other markets. Before we whizz into the details there, talk to me a little bit about yourself, who’s Graeme. Talk to me about Cover Genius and where you see insurance going.

Graeme:          Yes, sure. I’m Head of Insurance for an insurtech start-up called Cover Genius. I am Australian so I moved over here with my family close to two years ago now. We’re an Australian-founded start-up and it was quite evident that we needed to set-up operations in Europe, get the insurance capability for our European partners that we did land and obviously build out our language capabilities, and London’s so good for that that we were able to cover 20 languages and things. So we’re very much an insurtech business, so technology at heart but then basically a distributor of insurance products. So we’ve had some really early success in the travel insurance and car rental insurance market. Then I guess more recently moving into things like sharing economy as well.

Chaz:              That’s where I wanted to start as well because obviously we are running a sharing economy style series here and obviously insurance is really the big question in sharing economy. How do you insure these marketplaces? So for you certainly coming over from Australia, how do you see the insurance market evolving within the sharing economy?

Graeme:          It’s a tough one because there’s a lot of unknowns, but also within the sharing economy it’s not just one vertical, so you’ve got the home sharing sort of vertical, you’ve got the car sharing vertical, stuff sharing, which is what you guys are doing. Those verticals are going to not only grow but kind of probably go horizontal and make their own verticals within those subcategories. So the problem with this sharing economy and having insurance tied to it is that it’s such a highly regulated industry, so you’ve got all of those hurdles but then not only from an insurance point of view but from local legislation and regulation around for example the car sharing stuff. So things like third-party liability is going to be different in each country and each market.

Chaz:              That’s what I was going to ask. For a company to expand, insurance technology has to literally be the hardest. What is your process? So let’s say when moving out from Australia over to Europe, how do you become aware of different regulatory environments and regulatory changes to set-up operations? What does that procedure actually look like?

Graeme:          I’ll give you a little background why we exist and some of the issues in the insurance industry that we’re seeking to resolve. So whilst there are obviously really big insurance companies and global and international companies like an Allianz or an AIG, there’s actually very few, if any, true global insurers where you can actually deal with one insurance company. So if you’re a global platform like an Airbnb or a Fat Lama in two or three years’ time…

Chaz:              Six months [laughs].

Graeme:          Nice. So, basically you need a contract with an Allianz in the UK and then if you’re launching in France you need a contract with Allianz in France and then in the US and then in Australia. It’s just not practical for an online company like you guys. If you want to turn on a market, effectively, if you’ve got the capital you’ll just turn it on. So it’s obviously not that easy from an insurance point of view but it’s just not practical going round and getting 13, 14, 15 contracts with insurers with one company. So you’re then dealing with the country head and the poor guy that might be running the New Zealand Allianz office is maybe getting a very small piece of the pie and then he probably doesn’t want to do it and sign-on to that risk. So the reason we exist is very much around we go and get the complicated bits around licensing and regulation and multiple insurance underwriters supporting us from a global point of view, and then the partners only have to do it once. That’s really one of the main reasons we’re kind of seeking to resolve…

Chaz:              To be honest, I absolutely relate to that. It really helps. I think the insurance market and the timing at which Fat Lama is trying to enter the market is pretty handy because the big question was the scalability of not just operations and product but actually on the insurance side. If we decided that this was going to work reasonably well abroad, what was our process of moving forward? Well, it was just very difficult.

So the other thing I wanted to touch on was something a little bit more exciting. Obviously, Fat Lama is doing a lot of work around artificial intelligence and machine learning, or at least trying to. How are those kinds of technologies going to affect the insurance market, if at all?

Graeme:          That’s a lot of stuff that we’re doing as well. The reason that we’re a technology business and we like working with other technology businesses like Fat Lama is because not only are we trying to capture the right data to actually optimise the whole process and the insurance product but you’re also doing that from a consumer level as well. So the more data that you’re capturing, the more data we can get fed in to our machine learnings and tying in things like social platforms. So basically it’s two things. One is there’s optimising the actual kind of sale, but then there’s also optimising the actual risk for the insurers. So not only do we optimise the conversion rate and make sure that we’re able to maybe get the best price and the highest lift in take-up but also the risk, so then the claims are going to be better and the insurers are actually going to win a little bit in the long run as well. A lot of the time, insurers can be a bit nervous around these insurtech businesses coming in and I guess stealing their core distribution, but really they’re only going to be enhanced because all the learnings we’ll get from the machine learning, we can tie-in things for social platform data that we can get from third parties as well as the data that you’re getting. So you’re building a bit of a risk profile that all just gets fed back into the underwriting and the whole process is optimised.

Chaz:              Completely and I think that’s massively helped us. Coming back to what you were saying about social media, what we’ve looked at and I think it is really important, is this digital reputation that people are slowly starting to acquire and the transparency of the online marketplaces, the Airbnbs, even social media, the LinkedIns, the Facebooks. People’s reputation, more and more are starting to follow them. If you’ve got a reputation on one platform, you soon have that reputation on another platform. How is that going to benefit insurers if at all? Can you guys maybe link in to that reputation and that will then change risk profiles and so on?

Graeme:          Yes, it can. We’re actually in discussions with one of the big Telcos in Australia, and they’re doing a similar thing in that they believe that they have some of the best data in Australia and what we’re trying to prove is that they can actually base on a lot of the data that they’re actually getting from all of their customer profiles and actually putting that into, ‘What does it mean from a claims point of view? Is this person high-risk? Low-risk?’ and really segment those kinds of customers and then feed that back into a real insurance offering.

Chaz:              Looking at Cover Genius, what does your customer base look like at the moment? Where are you trying to evolve and where are you trying to hold back from?

Graeme:          We really have a global head on. We’ve got operations in Oz, UK. We’re launching in Austin Texas in a week and a half’s time. Then just really expanding that kind of operations footprint so we really do have the insurance capabilities to be a global partner for our partners. Again, we’re working with a lot of our online travel agency businesses. The likes of Priceline Group and things like that. So that’s where our sweet spot has been and now we’re talking to some of the bigger sharing platforms in the homeshare space as well.

Chaz:              So how do you see your customer base evolving? Are you going to really stick to that core what you’re good at, the travel space, or are you going to look to evolve into other areas?

Graeme:          Yes. We will. I guess another interesting bit that we’ve learnt in recent months is that a lot of the insurers are now saying, ‘That’s great what you guys do but can we just have the tech bit?’ rather than the full stack, is what we do for some of the other business lines. So we’re now saying, ‘Okay, maybe we’ll listen to the market and actually offer the technology-only solution to insurers,’ because they’ve already got the clients, they’ve already got the insurance capability, obviously, but they don’t have the data side. They don’t have the analytics. They don’t have the advanced API and things like that. So now we’re actually going, ‘Well, we could just do that.’

Chaz:              So that was the thing. A lot of our listeners are sharing economy enthusiasts but a lot of them are tech-based businesses obviously or outside of sharing economy, that is. When you say ‘full stack’, talking about your products, what does that offering actually look like?

Graeme:          When I refer to full stack it’s really saying that we’re doing everything along the customer value chain. So whether it be obviously the design of the insurance product, handling customer support in multi languages, doing their own claims. We have our own claims team in-house. Obviously, all technology, data science, and really controlling the whole process end-to-end. I think a lot of the other tech platforms obviously have a similar mindset because if you’re controlling the whole process end-to-end, who’s going to win in the end is the customer. So a lot of the old-school insurers, they still outsource claims to a third party, or they’ll run a course in a team out of Manila just because it’s cheaper to another company. We don’t do that. We keep all of it in-house. Yes, there’s a higher cost to that but we think that the whole process is optimised and the customer ends up winning anyway.

Chaz:            That brings me on nicely. When you say this old-school way, certainly what we found, and I know that a lot of friends and friends of friends that we’re working with or for or running other technology businesses that are looking for insurance products, the underwriters at heart are very archaic. They’re so old-school and very relationship-driven. It’s a very relationship-driven industry, whether you’re in the UK or, I’m assuming, Australia and New Zealand or Austin Texas. How do you go about developing those new relationships, particularly as you expand? An Australian walking into the likes of Lloyd’s of London or AIG, are you even allowed in? I’m not sure.

Graeme:          I have to be escorted in. They make me put on a tie and jacket [laughs].

Chaz:              I think I saw you walking into in board shorts and a vest the other day [laughs]. How do you deal with developing those reputations really from nothing?

Graeme:          It’s still very relationship-driven. I guess early on we had to be a bit more of a hustle to kind of get some of these big insurers to back us in a sense. Now, after time, you’ve actually realised, I guess we’re able to show proof points on our value and that we have a good customer base. We’re already selling. We’ve got distribution. There’s a lot of insurtechs around. There’s a lot of hype around it, but there’s very few actually doing anything at this stage. There are even big names like Lemonade. They’ve raised $150 million sitting in the wings but they’ve only launched in one state in America. That’s only in a couple of weeks. So there’s a lot of talk about insurtechs but it’s nice that we’ve actually got a bit of core revenue coming through and key clients and things like that. To get back to the insurers, though, what’s important to us is having flexible insurers and insurance underwriters because we need them to be dynamic. We need them to be moving quick. We need them to be able to really lift with us because our partners are tech partners and they expect it. So it is difficult but that’s why we’re agnostic around who we work with from an underwriting point of view because we need them to be dynamic and flexible.

Chaz:             As I said before, I honestly couldn’t agree more. To round up that point then in terms of Cover Genius specifically. Obviously, you’ve mentioned some other players in the market, some players that have raised a significant amount of capital. You as a business and we don’t work with each other directly but I certainly know some of your clients reasonably well and everyone speaks very highly of you guys. What’s your USP in the market? If there were one or two things that you really feel are outshining everyone else, what are they?

Graeme:          Number one is the global bit. I know you’ve spoken to a few insurers and things for your own stuff. They might have some reasonable operations here in the UK but outside of Europe they simply can’t do. Again, that doesn’t really help you as you expand into Australia and America, which obviously you’ve got your eyes on. Having a truly global presence, that’s a really big key to us. We win pitches against insurers at the moment because even the bigger insurers, like an AXA or an Allianz, can’t accommodate the global bit because they’ve got to tie-in their colleagues over in Australia or whatever.

Chaz:              And it’s slow.

Graeme:          And then it’s slow. Yes, exactly.

Chaz:         Again, to round up, I really want to say thank you very much for coming down, Graeme. I think that any technology business that is looking for insurance products, on that note what’s the best way for anyone to reach out to you?

Graeme:          You can reach me at Graeme@covergenius.biz.

Chaz:             Fantastic. Thanks a lot for coming down. We’ll look forward to speaking to you soon.

Graeme:          Great. I’m enjoying watching the evolution of Fat Lama too.

Chaz:              Thanks a lot, mate.

Graeme:          Cheers, guys.

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