Ep23 – A conversation with Jay Bregman, CEO of Thimble

An eye-opening episode where Jay Bregman, CEO of Thimble and Nick discuss how the post-pandemic economy will shift how a lot of small business gets done and will open the door for more on-demand insurance products. A lot of new entrpreneurs will emerge. Business for them will be inconsistent and uncertain and so for these business, insurance must adapt to their schedule vs the other way around

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Transcript

Nick
Okay, I'm recording

Jay B
Hi Nick

Nick
Jay Bregman. I'm admiring the scenery behind you. Please tell me that's not virtual.

Jay B
Unfortunately it is. It is. But I'm here in downtown New York City in Soho, so

Nick
yes, well, that looks like Montana or somewhere wonderful. I'm in I'm in 90 degree Florida so I that actually looks quite inviting, especially with your sweater on.

Jay B
Cracking snow this weekend, even in New York, so I can't but

Nick
it's like, as I was describing to someone yesterday on Twitter, northeast weather is like, the spring comes it's cold, cold, less cold. Quickly put the air conditioners in.

Jay B
I think that's about right kind

Nick
I like that. So, Jay, I start all of these by giving, allowing the guests to have a little bit of an elevator pitch a platform. So why don't you introduce yourself and your company and describe what it is that you do?

Jay B
Sure. So, Jay Bregman, founder and CEO of Thimble. So we make insurance simple. So small businesses can succeed on their own terms. And what that means is we have a very flexible on demand policy, small business policy that allows you to buy anywhere between an hour and a year of insurance. We allow you to pause that insurance...to buy it month to month if you want. And so it's just a much more flexible, differentiated evolved product than the one size fits all annual policies currently sold by everybody else.

Nick
Yeah. So have to ask you, in these pandemic times. What's it like? What's what Your what's your portfolio and your business model looking like

Jay B
What's so interesting to us is we have always had the most flexible policies available, you know, so half our policies are sold for for less than a day. But 40% of our policies are now a our month to month product, which basically allows you to get a continuous coverage, but you pay for it only one month at a time. So you buy one month policy, then if you like it, you get a two month policy, 2 month policy, etc. That has grown astronomically. So we're now in 48. States with that product. And it is selling phenomenally because small businesses or even slightly larger businesses have never faced greater uncertainty about what happens next month. And so even, you know, companies that might have had an traditional annual policy are now finding that all of the payroll information they gave is no longer valid, that they don't even know if they're gonna be in business next month. And so they would rather pay for a month to month solution a flexible solution than they would an annual policy. So we're seeing all kinds of new customers come into our universe, which, you know, I think is really great. And I think that will persist that anxiety about either starting a business, many of our customers are just starting a business for the first time or managing a business through uncertain times, he's likely to really persist. And I think that's great for our model.

Nick
Yeah. So when you were when you were designing the company, beginning the process to, you know, put the necessary pieces in place. Can't imagine that you thought that this sort of phenomenon would happen, but perhaps this, this type of event is sort of...did it sort of justify did it confirm a lot of the theses that you had around your potential business model?

Jay B
Right? I think when we thought about the business, we were thinking mainly about people that were just getting started in business, right? There's so many different types of people who are trying to establish their brand of success in business. That could be because they're learning to be a photographer or a hairdresser, or a personal trainer. Some of them might be only doing it one or two days a week while they grow up. And so there's always this uncertainty when you're starting a business about, you know, what is life gonna look like next month or the month after? What are your payroll going to look like or your revenues. And basically, we're a solution to that uncertainty. What we have found is just as the level of uncertainty has gone up, that has now kind of transmitted itself to even bigger businesses such an every small business really now is an even bigger businesses are facing unforeseen uncertainty about what's going to happen next month in terms of payroll that's actually made them very similar in buying habits to The embryonic small businesses. So what I think this is done by introducing this new uncertainty is it's leveled the playing field between big and small, and a lot of products to have value across the spectrum. And I think that's, you know, it's just very, very important. Because, again, you know, success is really relative to what's going on in the environment. And I think, you know, committing to a insurance policy ahead of your revenues or your exposure bases. You know, it's just something that many businesses don't want to do. Yeah.

Nick
So and do you do you think that with your particular model, as we, you know, potentially roll over to a new normal that this could be the standard style of how insurance is bought and sold, like your customer base could get very comfortable, or do you have a little bit of nervousness that they'll go back to the old normal and want a year policy?

Jay B
No, I mean, look, we sell your policy. So it's not a big matter, and not a big issue for us, we want to have the biggest spectrum and the most flexibility. I mean, for example, we just introduced a pause feature. So basically, not only can you buy your policy on a month to month basis, but if you want, you can actually go into our app, and you can pause the policy for up to 30 days, suspend the coverage, suspend all payments, etc. You know, to me, this is a much better solution than a lot of the other small business insurers out there that have just, you know, oh, your APR payroll is 25% less. Yeah, that's great. But what about May, right, like so to us? Basically, this allows you a temporary reprieve of both your coverage and your payments, which is, I think, important. And look, I think that the reverberations of what is going on in the market with COVID will persist for a very long time. And you know, we look at the growth, the dominance of companies like USAA, Progressive and Geico. All were founded around major cataclysmic events be that the Great Depression in the case of USA or WWII in the case of Geico and Progressive, we don't think that's an accident. We think that basically, that is a fundament that those sort of cataclysmic events like COVID fundamentally reset people's barometer for risk, and therefore have been looking for different kind of companies and different kinds of solutions.

Nick
Yeah, yeah. I actually think that's, that's what's gonna happen in the life insurance space as well. Like there's always been like some hand wringing about young professionals not buying life insurance. I think this is the this is the event that changes their mindset on Well, I can't go into another pandemic or something else I should take care of that now. So I almost think it is a...we will not go back to normal it will go back to a new normal things I think things will have to change in and in all of our spheres. Regardless of it, not even just insurance just but i think i think insurance as well as as much as where I feel like we're withstanding this. I don't see how we don't come out different.

Jay B
I think that's absolutely right. You know, I think it's kind of a just a cognitive reset in terms of the way people perceive risk, you know, what is the worst that can happen? Now, over time, that may fade? Right. But I think for the next couple of years, maybe decades, people will be talking about this event, you know, when the streets went silent in New York City, and nobody thought it could happen, but it did. And therefore, when they think about protecting themselves against risks that might not be as apparent to them today. I think they will have this muscle memory.

Nick
What the economics of your particular model given that people can turn it on and off or people can buy it in short, swaths, right, is it possible that the economics workout in such a way that they're buying it in anticipation of risk. Like I'm going, I'll, you know, I have this job coming up, I have the potential for more risk coming on. So I'm going to buy the insurance now. Do you does it play out that way? Or do you do you find that the insurance is being purchased just like any other insurance, the way that gets purchased? It's just the you know, they have different revenue streams, so they have to purchase it in a different way.

Jay B
Yeah, I mean, look, most people are buying and most meaning 60% plus are buying because of a request from a client. So basically, they're a photographer, they they get a new client that is doing it holding an event. The client says, Hey, you got the job. Just send me your certificate of insurance. They either go on Google or call your broker and we're in both of those places. And then basically, we get them set up with a policy. I could just be for the better, or it could be, you know, on a longer term basis, they pay a little bit more for the flexibility and the on demand nature of the policy. But, um, you know, but but ultimately, because it's a third party liability policy, it's not protecting, you know, first party losses, there isn't really as much of an issue. Yeah. You know, moral hazard.

Nick
Yeah, I get the light bulb sort of went off in my head as you were describing that. And then like, in those particular situations, why would they buy a year policy? Why would they buy someone that's on 24 hours a day when they know, Hey, I got this job. I don't even know when I'm going to get the next one after that. So why should I buy a year policy? So yeah, and those is probably quite a bit of that type of work going forward. That could also be the new normal to write in terms of how people engage the workforce. More on demand work, more, more folks driving for Uber, more folks doing delivery, more folks having instead of nine to five jobs, small pockets, you know, I got a small job on a weekend that could that the whole workforce could change too as well...

Jay B
I think it already is really changing. And I think the nature of small business, you know, the nature of the idea that I want to, you know, start a small business. So I'm going to jump right to getting a main street shop, and I'm going to work 40 hours a week in my shop and hire a couple of people and then go get business insurance. Those days, just to the extent that they ever really happen are pretty much over, you know, people will work their way in and out of these kind of businesses. You know, we have businesses that basically go up and down the spectrum all the time, you know, based on what's happening in their lives, what's happening in the business, they might have to take care of a family member, whatever it is, but this this, there's been this blurring of personal and professional that I think is where Thimble really sits. It's you know, you're your professional life, but on a personal basis.

Nick
Yeah.

Jay B
Taking into account you as a person as opposed to us the court the shop that has, you know, five employees. Yeah.

Nick
So talk to me about pre Thimble. What were you doing? And connect the dots for us? How did you get to Thimble?

Jay B
Yeah, sure. So I started two businesses before Thimble, but the last one was a ride sharing ride sharing company in London called Halo that had investment from Richard Branson and was sold to Daimler a couple years ago. And one of the things that I noticed this was, you know, in 2011, the term gig economy didn't really exist. But the idea that people were starting to take work from apps and different sources and working in different ways, was really starting to happen with with the mass proliferation of mobile and other factors. And so I just thought it was really interesting that this change was underway, but all of the core business services that you needed to actually start and grow a business were unadapted right? And insurance was perhaps the most unadapted of any, you know, type of, you know, type of service, huge market, massive percentage, you know, of business revenues go into it. But the idea was, look, whether you're a one person business or a fortune 500 company, you get the same one year pay-in-advance type policy just doesn't seem to make a whole lot of sense in the modern world. And so I teamed up with Eugene, who I've known for about 10 years was a consultant to Halo back in the day, but it started a business called Quinsey, which was an e commerce and logistics business that own diapers.com and calm that was sold to Amazon in 2011. And we got together to do this. And you know, we've been really enjoying the challenge of actually really reimagining the insurance product and building new admitted products that people really love.

Nick
Yeah. So Talk about the entry into insurance. How did you? What sort of partnerships Did you need to form to sort of get this going? And you brought up admitted? So that's the added challenge of dealing with regulators. What was their reaction to the products?

Jay B
Well, so that I think the last part first, the regulators have always been tough but fair, but certainly, I think very welcoming to new technologies, that favor that can can increase the amount of insurance in the market. So we have we have always found that regulators were looking for ways to help us get this approved rather than the other way around. And, you know, so and I think they're even more that's even more true today. Meaning that basically, I think, in most states, regulators are even more interested in products that can address pain in the small business market today because of how much pain there is in the small business market because of how much havoc the shutdown said every people want new solutions. But our first our very first product that we came up with a general liability product, anywhere from an hour to a year was admitted product. And we worked with Markel as the underwriter of that product. So we, we developed the filing of the license and the filing, they filed it on on one of the papers, we've had a great partnership with them very deep partnership with them. They are, I think, a brilliant, sophisticated company that shares a lot of our values. And so we've come to really appreciate and deepen that relationship over time into other products. And yeah, so the the process of getting these products out there is as you know, as you may have heard is really, really challenging. I mean compared to almost any product, other product category out there admitted insurance products are tough, every comma...every word has to be precisely right in the way that it's sold in the product itself, in the policy in all 50 different 51 different, you know, jurisdictions to take into account. It is a really, really challenging area to innovate. But the payoff is the customers really appreciate it when they get something different. And they really appreciate it. The fact that 99 out of 100 products are exactly the same can't really differentiate and except based on price, but there was this one that's really special.

Nick
Yeah. So the the product itself is very new. The concept is very new, going hour by hour, day by day, for instance. And, you know, as you mentioned, admitted is really hard to have you run into any hurdles, where it's just like, oh, shoot, we were not pricing this correctly. We need to make a change and, you know, or did you come out of the gates kind of sort of with the with the right set of rates anyways, and you didn't have to do that I'm one could because I'm trying for the audience sake I'm trying to, you know, the admitted part is so difficult and a lot of it, myself included have gone E&S...very concerned about the admitted part. So the the concern, how consistently are you having to go in and refile? Yeah. Because you've caught like, oh, our rates just just aren't up to par, we're gonna have to change them.

Jay B
So look, I mean, I think our experience has been that, you know, people are happy to pay a little bit more for our product. It's a premium product. And, you know, it's the difference in a lot of cases between paying a $5 minimum, which is our minimum and a $300 minimum for a year that they didn't need in the first place, in many cases, or a year that they didn't really know that they needed. So they just really wanted to buy a month at a time but nobody would let them do it. Do that. You know, you have to let them do that. I think we've listened to the customer. summer's over time. So we've gone from being able to buy just a anywhere between an hour and a year to being able to buy month one month at a time. Thimble monthly is the product that we call it now pausable. And you know that we view that as an evolution allows us to service now the entire spectrum of people that want continuous protection, but don't know what's happening next, which is pretty much every business in America.

Nick
Yeah.

Jay B
For people who, as you noted before, in your example, they they want more of an event based product, at least for now. But over time, actually, a lot of them do graduate to, you know, the Thimble monthly product and start buying once a month and some of them may go back to the our the product, it's really fine. We cater to the entire spectrum and business lifecycle. And that's what we view is really special about the product set.

Nick
Yeah, from a successful entrepreneur that's come into insurance from outside of it. Sny aspects of it that you're just like that this really needs to change?

Jay B
So look, I think that a lot of the, you know, a lot of the incumbent providers will use the regulatory complexities almost as an excuse not to do anything differently. So basically, the attitude will be Well, the reason we don't do all this is because it would be a huge regulatory challenge to do it. And yes, it would be a regulatory challenge, but it's not really the regulatory challenge that's the biggest challenge. It's the changing mentality, this is a very calcified, you know, barnacle encrusted type industry. And there are very few companies out there that we have found, that are really, really interested in breaking the mold even if that means maybe cannibalizing some of their existing, you know, business to do it. We've been very happy to work quick with those companies. But, you know, we've been, you know, you know, we have seen basically the gamut of people say this was impossible from a regulatory perspective, etc. And until you actually do it, you can't really prove it. That you were right.

Nick
Yeah. So what else is ripe for disruption here? Where could your model in, you know, globalize into?

Jay B
Well, you know, look, I think one of the things that is starting to happen, which we always knew was going to happen to us was a lot of our smaller businesses are actually being successful and growing up on you know, and they're, they're hiring people, etc. So, we've been trying to keep up with how do we adapt the product so that it can scale up with people who need professional liability, people who need Inland Marine coverage, you know, people that need care, custody and control because they're in an industry like pressure washing, whatever it is that that should have that. So, we are we have been trying to grow out the product portfolio smartly, but also grow the number of professions. So, you know, we are we are constantly expanding the number of professions we have about 120 right now, I think next year, you'll see Yes, with with many, many more the scale and scope of small business I think it's just incredible. And also I think the the fact that basically the personal and the professional are really starting to merge I mean, I'm working at my house you're working out of your house used to be a fringe thing, but now it's everybody's doing well, what are the implications for my own insurance versus my small business insurance versus everything else? It's these a lot of these questions have not been answered yet. And we certainly want to position ourselves to be helping customers, you know, as these this new world evolves.

Nick
You know, one of the challenges of working with small businesses...I remember speaking to someone who works specifically with tech startups in providing insurance for them and this was a conversation I had with him on that was you know, you get to a particular size and then all of a sudden you have the you know, the the big brokers will want to come in it's like, you know, with with their resources to be able to throw that. Have you thought about or any concern about, you know, accounts leaving because they get to a particular size? And, you know, they'll you'll have larger resourced companies that will throw benefits at them.

Jay B
Well, I mean, we haven't really found that yet. I mean, we're so far on the low end of the spectrum, that, you know, it's, that's what we have found actually is we have thousands of brokers that we work with as partners. And we have actually now not only brokers, but we also have, you know, aggregators like Appachalian Underwriters and Iroquois, etc. that were working as well, Nationwide. And basically, the idea is that those brokers get requests from time to time or small businesses, and it's just a lot of work. I mean, they gotta, you know, they got to fill out the applications. They got to take all the information about the business, that they're going to get quotes, bring them back for $300 minimum premium business to make a small commission on so what we've found is that they really like the fact that they can, you know, get set up on our platform instantaneously send a link to the broker or bind the business themselves, and basically get customers set up in an instant, on a better platform that's mostly self service where they don't have to do anything, but they are still able to earn industry leading commissions. So we think that, you know, that brokers will be partners and, you know, on the options, we do have bigger businesses that come our way we, you know, we could give them to our broker partners. So I think there is a symbiotic relationship there.

Nick
Yeah. You brought up distribution with the brokers, any any DTC opportunities.

Jay B
Yes. So with with what we do, we have a full direct consumer, you know, outfit we have an app where we're the only app in the app store that allows you to buy business insurance. We're being featured by Apple in the Finance apps we love, okay. It's very, very popular over half of the customers download and use the app to manage their policies. So, so yeah, we are, we are a multi channel, omni channel, organization, and we want to be where the customers are. So as we said back to that example of, you know, the photographer that, you know, that basically gets the customer that wants to insurance, they're either going to go on Google or call their, their broker. Those are the two places that basically we want to make sure that we're there when they do that, and we're the easiest, quickest and most flexible way for them to get the insurance that they need, and then get that job.

Nick
Yeah, I think part of the challenge that a lot of folks that are listening to this may not recognize with that is that that's a tech challenge for you keeping track of all of that because you have your DTC and your your broker business in keeping track of all of that. It's a lot of transactions...it's really complex. So you add the regulatory environment as well, where you have a lot of eyeballs watching to make sure you're doing it. Right. Right. I think a lot of folks that look to come in, almost think of that as like, well, that's the easy part. And that might actually be the most challenging part is managing that pipeline all the way through to get the policy. Can you talk a little bit about that?

Jay B
Well, we wrote our policy administration system from scratch, because nobody could support the type of flexibility that, you know, that we have. And so we've always been of the view that having our own tech stack that is scalable, you know, and, and, and basically, and flexible and our own basically can allow us to do things that a lot of a lot of the other companies find, you know, find difficult, because we've been native of it, and we've always had an app from pretty much day one. This is just the only world that know, but we understand that a lot of companies, you know, that are using off the shelf systems just are have immense challenges to do things that we do varies.

Nick
Yeah. Could you describe how you how much time was spent? on on the different aspects? for like, say, again? I think it's, it's understated, like how complex that part of it is, did you instead of going into specifics, did you find that you were spending more time on the actual under building the underwriting part or the the wrapper around the to actually manage the business?

Jay B
Yeah, it's hard to separate them in our case. But you know, that the policy management and underwriting all of these kind of functions are, you know, extremely complicated. They're now multi product. They're everything's specific to a state. They're revisions that happen in states. So we're talking about years of development with dozens of developers and 10s of millions of dollars. have been spent on this. But we believe it's the best system currently in operation for not only the shorter term, but also for the longer term policies because we have the capability to to basically to sell and to allow people to manage their policies by an app but your business insurance there just there's nobody else that you can let alone as a competitor.

Nick
Yeah, that's a that's marvelous. I think the lessons learned here are, you know, coming away, it's as, as tech solutions come in folks that are listening to this, it takes years, right like this is as much as this barnacle. Would you call it barnacle?

Jay B
Barnacle encrusted!

Nick
Barnacle encrusted, that is so good, because it's so true as much as That's true. scraping the barnacles off and starting from scratch, a lot of hard work and, yeah, the opportunities are really big and I salute you for spending, you know, for having the wherewithal and the patience to kind of sit through it because I see a lot of folks coming in and they're there. They want to move. Everybody wants to move quickly. But there's there are gatekeepers, and part of that is, if you want, if you want to have control over your tech, you might have to build it yourself. And it could take years to do it.

Jay B
Yeah, this is it is a very, very challenging, you know, industry in small business in particular, right is really it's like selling to thousands of different customers types rather than selling to one unified whole, like it might be in car insurance or

Nick
Yeah

Jay B
Or you know, homeowners insurance. It is really highly idiosyncratic. It's very challenging, but it's also very rewarding. And, you know, we think that right now, we are going to see one of the most interesting times for the small business insurance market ever because, in effect 75% of the businesses in the country are going to be startups again, you know, you have been talking about the new skill for CEOs is not how to restart businesses but to start businesses because they gotta look at everything from the ground up, you know, what is their? What are their costs, what, what's their insurance, etc. Nobody's ever seen this kind of event where everybody starts to look, insurance gets back on the menu for every small business in America at the same time. So we are very interested to see what happens over the next year as a, you know, as a small but growing player in the mark.

Nick
Every business is going to be a startup or a small business again, and that's the way they're gonna have to think about it the new normal Jay Bregman. I appreciate you taking time out of your day. Thank you so much.

Jay B
Thank you, Nick. I really appreciate it.

Nick
Yeah. So for those that are listening, stay safe. Don't forget to subscribe. If you want to connect to Jay, to Thimble or see the transcript for this particular podcast don't forget to go to the show notes. Jay, thanks again.

Jay B
Thank you so much, Nick.