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Q&A with Insured By Us and Cover Genius
Ben Webster is CEO and Founder of Insured By Us, an insurtech connecting travel insurers with customers. Insured By Us has 15 brands on the platform and close to US $100m GWP in only the fourth year of operation.
Chris Bayley is Co-Founder of Cover Genius, a global insurance platform that enables ecommerce sites to sell insurance products. In only 2 years Cover Genius now writes over US $20m GWP per month. The business is winning accolades including Smart Companies' fastest growing Australian company and KPMG’s FinTech global top 100.
What makes Insured By Us and Cover Genius special is the fact both business are bootstrapped (no external investment). Dexter Cousins of Tier One People recently caught up with Ben and Chris, where they shared their secrets to bootstrapping an Insurtech.
Can you tell us a bit more about your business?
Ben Webster: Insured by Us is a white-label travel insurance platform. Travel insurance tends to fall to the bottom of the list for general insurers, mostly due to the tight margins in travel. Travel insurance is a one-off purchase. Consumers don't have a lot of brand loyalty. They shop around and that means travel insurance falls to the bottom of the priority list.
It is low-touch for insurers, underwriters and brands who are distributing the policy. The Insured By Us platform allows the brands to bypass all the technical problems and focus on distribution strategy. We enable the brands on the platform to establish a distribution strategy and model that works.
Chris Bayley: Cover Genius began four years ago with Angus McDonald (CEO and Co-Founder) and myself having this vision of empowering the world's largest e-commerce companies to sell insurance products. As we see it, the market is at about 1 percent penetration. Cover Genius has developed two critical technology platforms that bring connectivity to big eCommerce companies wishing to sell or optimise their insurance products. We are the pipes, not the plumber!
A sweet spot for us is global insurance, wherein we combine our platform capability with extensive global underwriting capabilities (we are an authorised representative in over 60 countries). e-Commerce sites can very quickly sell insurance all around the globe from a single API call.
What inspired you to launch an Insurtech?
Chris Bayley: I previously ran the insurance team at Google. So, coming out of the Google business I could see the commercial opportunities for selling insurance online. It was just a matter of finding the right model.
The ancillary revenue for eCommerce sites is significant. However, it needs to be done at scale, and to do it at scale you tend to need partnerships with the big e-commerce players. Initially Angus (McDonald) and I took a reasonably cautious approach because we were largely bootstrapped (Cover Genius is not VC-funded, and the small rounds to date have been funded by London-based insurance executives including Jim Sutcliffe, former Chair of Sun Life Canada, and Julian Roberts, former CEO of Old Mutual).
Ben Webster: I was first introduced to the world of insurance when I was one of the first employees at Travel Insurance Direct. Back then, we were making bets on the platform selling 10 policies in a week. In 2018, the business is writing over 10 policies every minute! We built the Insured By Us platform based on the lessons I learned at Travel Insurance Direct. Since launching Insured by Us I've been working four days per week. The first two years I worked from home, so I could be there when our first baby was born.
How did you grow the business without VC money?
Chris Bayley: We were extremely focused and spotted an opportunity in a sizeable niche that was being overlooked by the large insurers. The niche we identified was car rental insurance. It's worth US$7 billion globally, US$6 billion of which is profit.
Compare that to travel insurance, US$21 billion gross globally and about US$12 billion profit. So, the car rental market is 50 percent the size of the travel insurance market. And there was no one doing it. None of the big Global Insurers had customized car rental access products. None of them were able to sign deals with the largest distributors. It was totally overlooked. And when we engaged global insurers to provide policies for our early clients, their inability to provide capacity in short-time frames and other archaic processes all got in the way.
So, we took it upon ourselves to go and find smaller agile underwriters. The early versions of the API were very well received and the early release of our XCover platform was one of the world’s first APIs for insurance distribution. So, we were able to go from doing a couple of small clients in Australia to having the largest global travel sites (and a major deal with Booking.com) within 6 months. Gross premiums have increased from a tiny amount in August 2015 to an expected monthly GWP of $30m by 2018 year end.
Ben Webster: I guess you could say I am a serial entrepreneur as I am co-founder of two other Insurtechs, 365 Roadside Assist and Agile Underwriting. We are growing 365 through brokers, fleet services and retail partners. I personally like roadside because it has a nice predictable model, we know the frequency and severity of claims. Roadside is also not a regulated product, which is why insurers use it as a ‘foot in the door’ product.
Agile is adopting a slightly different model. We're attracting underwriters by providing some equity in the business. By offering 'skin in the game' we can attract people away from large insurers. The Agile business is growing, and the goal is to become a $100m GWP agency within five to seven years.
We see Agile as a counterpoint incubator for the large incubators. If someone has an intuitive idea we have an AFSL, access to the Lloyds markets, access to all kinds of capacities across all lines of business.
Does your business mirror a traditional insurer in terms of structure? i.e. Claims, Underwriting, Actuaries?
Ben Webster: We are very Developer-heavy because we are a technology platform. The make-up of the team is changing as we seek to own more of the value chain. As an example, we have just built an online claim system, and gradually we aim to bring more of that in-house. We're finding that when you outsource the claims function to a third-party administrator, it doesn’t suit your business as well as if you bring in-house.
It's not hard to find claims people who want to do claims, it's not hard to find content and marketing people. It's very difficult to find good developers who have any domain knowledge about insurance. It's very, very difficult to find any actuarial skills or anyone with any data science or machine learning skills as well.
Chris Bayley: We have a great Tech team, many of whom were in the founding team of Viator which sold to Tripadvisor for US$200m. They had an excellent vision for a microservice architecture, well before the word was coined.
Our team resembles a tech company more than an insurer. We primarily hire machine-learning and data-science specialists, software engineers and developers, sales, marketing and account management.
What have been your frustrations when working with incumbent insurers?
Chris Bayley: Neither myself or Angus come with a traditional Insurance background, which has probably helped us in achieving what we have. Looking at Cover Genius from an incumbent’s angle and seeing the scope of the challenge, I can understand to some extent why global insurers would think building a global platform is not possible. But we have done it in four years.
We see it as our job to build a new platform mainly because large insurers are not that good at providing the technology to enable eCommerce partners to sell insurance. It's difficult for them; technology platform development requires a lot of work and a skill set you will not find in a large insurer beset with legacy systems.
Ben Webster: Legacy systems are a problem, but those challenges are solvable. I find working with large insurers and the incumbents massively frustrating. They're so risk averse to trying new things which makes it difficult to get any venture off the ground. We launched a couple of products with large insurers here in Australia. Those products were live, selling and had customers. But they were pulled from the market because of internal political reasons within the insurer.
To get the products live involved a two-year journey and after just a few months they were pulled. That is when I literally threw my toys out of the cot and formed Agile. The lack of appetite for risk from large insurers is my biggest frustration. A perfect example: Agile picked up most of a large insurer’s Aviation book, worth around US $15m in premiums. This insurer was prepared to drop that business altogether. For Agile, US $15m of premiums - that's an entire business division and they we're just going to drop it because it just wasn't worth their time. This insurer couldn’t make it profitable even though there was only a team of two or three people working on it
Chris Bayley: The nature of partnerships has changed over the last five years. Startups like Cover Genius exist to resolve pain-points that are inherent for companies who would otherwise need to partner with incumbents.
If your business model is to power insurance offerings on the world's largest e-commerce sites and you're the world's largest e-commerce site, who are you more likely to partner with? If you have grown an internet business to that sort of size and scale you're looking for like-minded businesses. eCommerce businesses know inherently from their own experience and by the nature of the industry that they're in, that it's going to be the little guys who can make it work.
When you're pitching your service to someone who understands you can do it - and you come with an attitude of wanting to make it happen - that's how eCommerce companies partner. The alternative is big corporates who put everything through an RFE process. That doesn't get you into the position of co-creating a solution. It doesn't get you into the position of aligning mutual interests.
What has been your secret to building a successful Insurtech?
Ben Webster: Hiring and retaining the right people. The structure and flexibility we offer our employees is very attractive to both women and men. Surprisingly, it is not as attractive to younger people. They don't see the value in the flexibility and prefer to work in a place where there’s beer and vodka in the fridge, people stay back for drinks or go to the pub.
That is not Insured By Us. We always say we work to live and not live to work. Our team is distributed around the world. Remote working is the priority. We have people in Sydney, Cape Town, London, Scotland, Japan and will soon have someone in the US. Because we're remote-first, all systems and tools are online.
We give our people the freedom to do their job and get results.
Chris Bayley: We deliberately decided not to seek outside funding, which gives us the freedom to run an efficient, focused business. And we do not have to worry about external investors. The lesson we've learned is it is better to have the founders running the business, not out raising money. It makes a huge difference.
Angus and I know all the internal workings of the product and operations, and all the internal workings of how we get new partners in place. The execution risk is reduced immensely. I think that's probably been a cornerstone of our success, having the founders around.
Angus and I have complementary skillsets, which I used to think meant having someone technical and someone commercial, but we're both commercial. I am more product-focused and Angus is more partnership-focused. Both of us being commercial helps in the way we communicate and how we manage our expectations.
Ultimately it is like a successful marriage. Which means making it through difficult patches and remaining close. You must keep celebrating all the little victories.
What words of advice do you have for Insurtechs just getting started?
Ben Webster: I'm an advocate of starting your own business and bootstrapping, ie; not taking any external investment. I will always want my children to start their own business. But there can be significant barriers to get started. I was fortunate in that I had domain knowledge both in insurance and in technology. I also had contacts in the industry. But the first two years were hard. We’re four years old now and I've only just started paying myself a proper wage. But that's the life of a start-up. Right? I was underpaying myself for a long period of time.
I've learned this the hard way, going into business for yourself is not for everybody. Every day is a grey area. Some people can thrive on and hack it and other people can't.
Chris Bayley: Follow the money. Figure out who can be a big distribution partner for your business, go and talk to them and then invest in the operational and technical scale.
Ben Webster: Many people will point to regulation as a barrier and it is, but I'm more of the mind that regulation is a good barrier to have and that you need to earn your stripes. I don't find regulation a big barrier, I find the appetite for risk from the underwriters is the biggest barrier.