This Week in Coverager (7/24/2020)

This week, Shefi, Avi, and Nick discuss:

  • The Hippo Series E Raise
  • The Branch Insurance Series A raise
  • Tesla’s potential insurance expansion

Watch here:

 

 

Transcript

Nick
Hi everyone we're live for with This Week in Coverager. The week of July 24. I do

Shefi
you know that better than we do.

Nick
It's salmon pink shirt Friday. So I have that going on. I usually end the podcast, telling everyone to be safe and to wash your hands and wear a mask. I'm going to start it that way just in case people don't get to the end. So don't be a dope. Just wear a mask. It's not that big a deal. Come on. Wash your hands. Be respectful people...Now...let's let's jump in. Shefi, Avi, Happy Friday. Good morning.

Shefi
Good morning. Good morning, everybody.

Nick
Yeah, it's it's good to see you. Another really packed week. With news like it news that we're not maybe in volume, but I think importance, and I think we're going to be spending most of the show talking about that. So I'm going to kick it over to you Shefi. What is the first topic that we're going to talk about in This Week in Coverager.

Shefi
So clearly Hippo because of the the size of the rounds, so Hippo announced $150 million series e round. So you guys all know Hippo, but I did a little bit of a timeline for you. And I can't believe that in 2017. I wrote this. This is something about personal growth, but it still sticks but in 2017 I wrote Carrie Bradshaw meet Lemonade and Mr. Big meet Hippo. And I'm not that big of a fan of Sex in the City. But the whole idea was back then Lemonade, renter's insurance, Hippo targeting homeowners and somebody with a little bit more of a substantial income. I think that statement, still ages well we are seeing Lemonade do a little bit more in the home space. But if we quickly go through what Hippo has accomplished over the years which is it's been a few years right so we first wrote about we first covered Hippo in 2016 back then it started with $14 million in seed round. One of the founders work was RPM ventures which has a connection to Boost so you understand what one point Boost & Hippo had a partnership. So it was look for the ecosystem of the startups because that tells you their potential or how easy it for them to tap into new partners. A quote that's worth mentioning via Asaf was you know, we took everything that's wrong with the current state of home insurance, the confusing forms, the the outdated policy terms, the agent as middleman and fix it. I know Avi gonna get to that right. They didn't really fix the agent as middleman, maybe something wasn't broken and they probably discovered that along the lines. But they had a in 2017 a short experiment with AI chat bots on Facebook, which they saw that with a lot First, if you remember him as a vendor, they took that down, right. So they start something they learned or move on, but they're very targeted in terms of what they're focusing on still 2017 we're still in beta. You know, obviously now executive hirings, they went live in California. That was their first state. And but I really like your tagline, right? It was a superior in protection, superior in prevention. I think the focus, you know, obviously, they give you a lot of add ons to their policy. So if I think about it, they mentioned appliance repair or rebuilding cost protection, work comp for nannies, so they do they do go into coverage and try to make it unique. In terms of superior and prevention, they're always talking about smart home. I think smart home to Hippo is basically what AI is To Lemonade, it's a way to capture attention at the end of the day if we, you know, move forward to 2020. And in the press release, they mentioned that they've given or sent over 400 smart appliances devices that is still a portion of the segment that they're reaching. right because it doesn't translate into 400,000 policyholders. So that piece is more hype to me. But back then it's SoFi & Swiss Re were partners. They eventually went on and added their state in Arizona, you know, fast forward. 2018 Spinnaker is an insurance partner. They do have quite a bit of acquisitions. Right. They acquired Spinnaker, Benar and Sheltr. So I almost think that this funding was probably should have been announced with the acquisition of Spinnaker because we're talking like very close timeframe here. And, you know, we don't know the pricing of any of these customers it is this is still a private company. So they're keeping data to themselves but still an interesting play. In terms of vendors, they work with Simply Safe, Atturo, they work with Neptune for flood, and there is Zesty.ai. So they really do like to talk about the technologists in them, less about the agents in them. And with that, I'll kick it over to Avi.

Avi
You know, Hippo, I think, to give them credit, in my opinion, their biggest success was working with agents. And if I look, for example, at Clearcover, on the other hand, trying to recruit agents and not being so successful, Hippo is...if you go to Facebook groups, you see people really loving the product, and why do they love the product? Of course the price, they find it to be competitive in some areas, and the technology, they're happy that they could quote pretty quickly. But you know, it's still the same insurance company Hippo still sends out people to meet agents to see if the're a fit. I understand they're having some issues in Texas where they're not quoting in some zip codes, because of losses and things like that. So it's exactly the same, but really giving them credit, being able to work with agents, which is really giving them to growth. That's their number one, revenue generators. It's not direct. It's not the 90 seconds or 60 seconds, where you would think, oh, consumer would say, let me just go online and save a lot of time. And no, it's the agents that are driving the growth for them. But, you know, I had a thought and it's interesting, and you look at Lemonade versus Hippo, and I always thought there was some kind of competition between the two companies, at least between the founders, or at least one was looking at the other. And I think it was 1.5 billion valuation. This latest round, and you look at Lemonade. It was rumored that when SoftBank invested in them, it was around 2 billion valuation or something like that. I believe Hippo is reaching 200 million in premiums. Is that right? What? What I sent him to 270 Lemonade. How much do they have the right bill 450 something like that when they know they're nonetheless 100. And yeah

Nick
125/130 it's higher now. But yeah, so I'm yeah.

Avi
So look at the difference and in the valuations and how much money Lemonade raised versus how much money Hippo raised. So Lemonade got around, that was what $300 million to Softbank last round, right. That was the amount. And you look at Hippo, so it's so interesting to me how I feel it's really driven by the founders, the whole valuation, not the market. It's not the market. It's the founders because clearly the home insurance market is bigger than the renters market. But, you know, Lemonade was able to attract more dollars. When they went for their IPO. Their market cap was, you know, I think it's settled on like 4 billion or something, which is really amazing. But I think, you know, Hippo they're very goal oriented. They know what they're doing. They know where they want to be. I'm not sure it's going to be enough to reach that valuation of Lemonade. But but they're on the right track.

Nick
It should be it!

Avi
Well, yeah.

Shefi
Not necessarily!

Avi
Next year...

Shefi
So I'm starting to think how they're not competing directly with Lemonade more and more as I delve into this because Lemonade attracts the first time insurance buyer, which is a lot more challenging in my mind, then taking somebody that is, you know, getting a mortgage and has to buy home insurance, which typically isn't mandatory.

Avi
I agree with I agree with that

Shefi
That's one. The second thing is, I know, you say they know what they're doing. They've also started they wanted to do things that didn't really mature, right. They wanted to launch as a full stack insurance. That didn't happen. So

Avi
but but but by saying, Yeah, by saying they know what they're doing. And I'll give you an example compared to other insurtechs that are sitting and waiting for, I don't know, God to help them. They said, we're going to go after agents, we're going to work with agents, because we have to, and they were very quickly to not, you know, say this is not an avenue we want to explore for a lot of Insurtechs it is too late now to work with agents because other insurance acts have already captured that space. So Hippo was saying, This is not working.

Shefi
And they don't apologize.

Avi
No, they don't really

Shefi
Yeah. And they show results. So obviously, with all their investment with some of these recurring investors, they move on. You know, the word on the street is whatever it makes sense for Hippo. makes sense for Hippo as vendors, it's not entirely a win win situation. And I'll keep that as that right. So they're shrewd to your point. They go after their target goals, like they'll try and Maybe even if they fail, they haven't they're not that many failures yet yet they'll move on. But Lemonade is going is going the route of having multiple products, which I don't see Hippo mentioned at all. So I don't know, maybe we'll be surprised, but they seem to be targeting on the home insurance front, right. Obviously, with these acquisitions, their their hands are tied with operations are talking about adding 100 more folks and to their new office in Texas. So lots going on.

Nick
So I sort of view it this way, right? Well, I put the two I put Hippo and Lemonade. Let's just put those 2 side-by-side cause I think we're going to introduce a couple others shortly. Both are on digital substrate. I'll use Daniel Screiber's term. Right, Digital's substrates, so they're their digital to the core. Started from the ground up. Here are some differences. So at like You said Lemonade is focused on a lot of first time buyers, mostly renters market, they do do homeowners, but they're struggling to get into that space. I think there are some reasons why...Hippo went homeowners first. Homeowners is like $85 billion market. renters is $5. Hippo getting a piece of the homeowners market a bigger piece, I think is much more substantial and much more likely to actually occur. And they are, they are dramatically actually. So Lemonade made. They use ISO forms. There was a, you know, policy 2.0 really hasn't kicked in yet here in the States. So their coverage form is very similar to any other renter's insurance, whereas Hippo has detoured on coverage form. They have redesigned the coverage form to reflect modern society so it's the language in the form is you'll see more words related to digital data and things like that. Whereas, you know, old isoform still talks about furs and stamps and certificates and stock certificates and currency. Hippo, Hippo changed that part of it. And I do think, I don't know if they'll ever be able to get the expenses under control. But you can see this transition where Shefi you said Lemonade focused on AI Hippo on like the smart devices, but smart devices are real. And it is potentially a value add like there's a rope.

Shefi
Hold on. Of course smart devices are real. The question is how real are they in the insurance value chain and one acquiring new customers to mitigating claims? Okay, because Hippo if that really was a big part of Their value proposition, they wouldn't have had to work with Roost, Notion, Kangaroo and keep on adding vendors. And by the way, Notion was just recently acquired by Comcast. So these, these partners are struggling with their own entity just be able to stand on their own. And I do think you know, customers that care about their home, their they care about their home, regardless of the insurance proposition. There's certainly an element of first we care about security than we care about home leakage. I mean, just in the same context, Flo was acquired, and it's a really higher price point. So the whole Smart Home property telematics is a conversation with it within itself. Tons of Flos, tons of black holes. And what I mean by black holes is carriers that go into a pilot in, you know, two states, two and a half states and that's it. You don't hear anymore about what happened, what the results are. So you know, The minute you hear from Hippo about what it actually looks like, working with Notion and working with Kangaroo in actual dollar signs, then I can take that with just more seriousness. But for now, I think it's a marketing hype.

Nick
It may be but I think they still I think someone has to figure out how to put the pieces together. So the smart device Yeah, smart devices aren't going away.

Avi
So I wonder, Nick, but if you have like, for example, customers today that have a Ring camera, right? I they said that it's lowering burglaries like, you know, kind of reducing the amount and all that Yeah, and and in that case, every home insurance company that did not provide that ring camera is benefiting Of course, right because the customer is still paying the same price. They installed the Ring themselves and they're all happy because less people are entering unwanted people entering their home. So I wonder if this is not going to be something where again, whoever cares, cares, puts it there because I don't see Hippo buying someone a Ring camera. That's so expensive.

Nick
No, but but I think so...the economics haven't been worked out yet. Right. Yeah. Let's not talk about the ring camera because i think that's that's not going to move the needle. I think I think let's go to Shefi's example flow. Flow does move the needle. Internal water it my my interview with Laurie Connor from the Action Group, right. Internal water damage by far exceeds fire damage. Internal damage is a measure of

Shefi
commercial or residential. He was talking about commercial primarily

Nick
both, but it's okay.

Yeah, but I think Shefi part of that is that they don't know yet.

Avi
Oh, for sure. They don't know. Yeah, but

Nick
10 to 10 to 15% is, you know, like okay, let's, we'll make it we'll give them some sort of economic benefit for it. But we don't actually know how, how this is going to affect claims. I think they need the loss experience to sort of justify it, but listen, it's probably a little bit of confirmation bias. You You know, my long term vision for insurance is that there would be more of a partnership between risk mitigation, risk prevention and insurance. And Hippo has been the one company that has been a little bit more forward looking in the policy form. And I envision that like, giving the device, the Nest and then giving a discount, yeah, I it's clumsy. What I want to see is specific language in the policy form that says, you will use this, it will be turned on, and this is the kind of thing it there has to be more of an interplay with the contract language on the policy form. For me for it to work, but Avi even in your case where Hippo doesn't give them away, or whatever, someone that does buy a Nest could realistically say hey, I just spent You know, a couple hundred dollars on this thing and this homeowners company is actually going to give me a discount. There it is. It could be a marketing tool as well. And I think that is a big difference between what they're doing and what Lemonade. what Lemonade is doing. Lemonade is making impact on the margin. I see Hippo making much more substantive substantial doing much more substantial experimentation within the model...policy forums, coverages. Rethinking it

Avi
you know, you know, it's an interesting really debate and kind of in a way Hippo is coming with this like Swiss Army knife that can do this and peel bananas and tomatoes and it's a toothpick and flashlight and all that. And he's really taken the effort to really sit down and look at the policy coverage and add you know, air conditioning and smart home things like that warranty, usually the Home Warranty companies will take card and he really does that. Hippo does that but if I look at Lemonade and you know at the end of the day Hippo if you bring now the best creative person to work at Hippo, okay, you give them an unlimited budget and you tell them Okay, you go Be confident you go say we're better than the rest just like lemonade did. They don't have that confidence. You know why? Because it's not going to work on that audience. It's not going to work on homeowners. What first time renters insurance or having the confidence to say this is going to cost you $5 and it is and it is again, we talked about this. Where else do you see an insurance company putting the price and standing behind that price? Lemonade? No one else really you don't see anyone else even you know, Travelers starting from or Yeah,

Nick
anyone I think that's gonna change I think

Avi
it might be but for Lemonade now. I think that's where Lemonade for investors and you know for IPO sake And all that, they can prove that they have a bigger potential because they control their destiny with Hippo that is reliant on agents. He doesn't control his destiny. That's some agents would argue that they own that client. That's what they believe that Hippo thinks this is my customer, right? These aren't, I'm writing that risk. So you're going into this now debate, you'll have other insurance companies saying to that agent, hey, listen, here's an incentive. Come bring all your Hippo clients to us next year. So it's a really difficult situation for them. I think as Shefi said, like that claims smart home, that was their AI as Lemonade. It's not as attractive to me. I am not saying that a smart home can't prevent claims. I'm sure it can. I'm sure it's gonna take a long time to see what the actual dollar amount is and if it's really is worthwhile because if you're giving out to a million policyholders and prevented claims to you know, 2-3% is that worth it? Maybe Maybe not. But it's just amazing to see two companies, with kind of same, you know, mission to disrupt insurance in a way, taking two very different approaches. One going really deep, working with agents, talking about how their policy is better. And one talking mostly about price and customer experience because you know, Hippo's claim process...quote process in my opinion is better than lemonades when I quoted home insurance on Hippo versus Lemonade, Hippo knew to tell me that the roof on the Brady Bunch house wasn't replaced since the 70s. Lemonade didn't even ask for that. And Hippo said we cannot cover you because you didn't replace the roof. So it was faster. But again, it's all at the end of the day. You look at it, you have to really look in the mirror and say, Can I get excited about this? like can you really get excited about Hippo or Lemonade? No, but Lemonade really is, you know, controlling their destiny controlling the message, they will come to investment, say, agents, we're going to give out every year on a commission. Where's the profit, the whole concept of saying we're digital customers come to us, we don't have to pay that hefty commission. Obviously, they pay a lot of marketing. But it's two different approaches. And it will be interesting for an IPO the fact that he's saying that they're going for an IPO. So an acquisition is off the table. And that, to me is like Why couldn't you find like a progressive to say, Hey, we really like what you're doing. Let's give you that money that you want. Here is the reward, or is it again a too high valuation? Because obviously, they're not profitable. They're spending a lot.

Nick
So it's probably it's probably too high of a valuation.

Avi
Exactly. So exactly, but

Nick
I I can get excited about it. Because I think

Avi
I'm excited if I was Asaf, if I would be now the CEO of Hippo.

Nick
Yeah, yes, of course. But I'm viewing this beyond just The Smart Home smart devices, the acquisition of Sheltr, for instance, I don't know if this is true. I don't I don't have any, I'm not privy to any information over there. I wouldn't be surprised if you start seeing some of the warranty insurance leaking into the homeowners insurance, where their their view of the the, their solution is beyond just risk transfer. We're going to help you take care of your home. And we're going to protect your home.

Avi
This week. I forget the name of the company Coverager Story. I believe State Farm invested Liberty Mutual invest in your Homey. Yes. I thought that was very interesting to your point, Nick, going beyond just like protecting but also making sure the person's home is well maintained. So it's an app that allows people to you know order contractors on demand. And now they're going into the claims. They're selling insurance companies, let us handle your home insurance claims. We have already people download the app will do it co branded, they take pictures, they take videos, kind of streamline the process. And also you'll be able to dispatch contractors like to go fix that refrigerator or that leak or that toilet or whatever it is. and insurance companies. I think it was Liberty Mutual, State Farm, the Hartford as well invested in the company. So that is

Nick
the only difference. Yeah. The only difference though, is that Hippo like Lemonade can pilot and get into production faster.

Avi
Oh, for sure. For sure. So that

Nick
Yeah, yeah, that's an advantage. And similar to I remember listening to the CEO of Metromile, talking about this, you know, auto insurance company with the device and he was talking about how well the device can tell you when you need an oil change, or when something's wrong with the car If something is wrong with the car or the brakes that could leak potentially lead to an accident. So we're we're going down that road. So it's how do you pilot these things and get them into production faster to figure out what the appropriate economics are and get them into the business model. That's the part I like more about Hippo than Lemonade. I don't think Lemonade is, is bringing anything that's new to the table

Avi
of course. No kidding.

Nick
No, no Hippo is Hippo is inserting elements. And basically changing the business model of insurance and going toward, you know, frankly, going towards the path that I think we should have been going. So that's probably why I like them better. But Shefi there's the, you know, Avi brought up you know, two different approaches. There's a third approach. There was other news this week of another company that raised money do you want to bring that up?

Shefi
Okay, so branch right branch announced their first round $24 million, and the concept of Branch's bundling home and auto insurance. So that's one piece. There is also a community piece. And let's see if I remember the community piece, the safety pledge

Avi
for safety for people that are under insured or can't afford to get insurance. It's called safety I believe it was called Vouch in the beginning

Shefi
It used to be called Vouch. That's right. I don't know in how many states this is actually live. So a small subset of the proposition there but at least are there I know from speaking with one of them is that community is going to be a big aspect for them. Right. So they, they do want to take back insurance to its roots and do good and the stuff that we we've been hearing. It feels like a bit too early to comment because there's just not hasn't been much coming out from From the startup yet, which is expected because it's still early stage

Avi
I, you know, I, I, sometimes I argue with Shefi about this, about the community and the charity and going back to roots and all that. Most customers don't care about that. If they want to give to charity, they'll give to charity on their own the whole Lemonade social give back. That's bullshit, okay, most customers are not moved by it. They don't need you to donate 10 cents on their behalf at the end of the year. They give more on the you know, to the subway to homeless people or they volunteer all of that. So, if you're an insurance company, and this is again, where I disagree with Shefi we always argue, don't think being charitable on behalf of consumers is gonna get you anywhere. It's really not unless you really do something I don't know out of this world. So I don't buy that I don't buy the whole community. Their biggest insight which was I'd like for them to be focused and I think it's a good thing is they believe that customers who bundle are more loyal, more profitable down the road and obviously, you know, we see Progressive with the Robinsons and then Geico is now all of a sudden, like, oh, boy, we need to have our own Robinsons. That's great. It's good to be focused. We always talked about how insurance, you know, it's very hard to be a generalist, like you really need to find your area and Branch found that. Now the question is, can they get those clients? That's the question. That's that's the ultimate question. And I wonder what they're doing and we discussed before the show, are they going direct? Are they looking to work with agents, if they are looking to work with agents, they need to kind of stand in line because there's a few big insurance companies ahead of them. But I assume their technology is going to be an advantage and I know they really have cool tech where you can actually quote quickly and you know, get the price. So I think that's a good advantage for them. Yeah, but that's

Nick
that. That's the problem with bundling. So there's I don't think there's any doubt anyone would say that. Folks that bundle are going to be more loyal. It's more difficult to break that, you know, break them from that. And,

Avi
by the way, Progressive, by the way, says these customers cost more to get.

Nick
Yeah, I'm not sure. Yeah, I'm not sure. I'd have to think about that. I'm not sure. But, um, let's talk about bundling. Right? I'm a huge fan of bundling, I think, in insurance there...I think there are two ways for an insurance carrier to optimize their risk, right. And one is to spread it out geographically, but also to offer non correlated coverages as well so for single buyer to maximize the amunt of premium that you're collecting from them, I think is a great strategy. So I appreciate the bundle historically, what does bundling mean? So I had for years an auto and homeowners with Travelers, two separate policies, two separate underwriting systems. You had to I had to go through both sets, it wasn't like one set of questions. That's a problem. It's, you know, stacking time on top of one another. Um, you know, secondarily two different billing systems. So I'm getting two different bills, pain, the pain the butt I'm getting a bill. It's like, which one is this for? Got this complicated policy ID number. I don't even know which one this is for. That's a problem. Then it gets two coverages. They're two distinct policy forms. So there's no almost no, there's no overlap. whatsoever. Some one covers one thing one covers the other. So I, I think the first two that I talked about, I think branch addresses, right? Single entry in, right covers both auto and homeowners you have to do if they do two underwriting systems, Joe Emison, probably listening to this, he's probably designed it. So it's done. It's abstracting, abstracted from the user, they don't know what's happening. So that's ideal in terms of time and simplicity. The billing should be one bill to, to get it over with. I don't know if that if there's any dovetailing of coverage. But what I find interesting here, and we talked about this at the beginning, this is a, so it's a digital more digital focused company again. So it's now seeing all of these startups we knew Lemonade wasn't going to be the only one that was there's a string of these coming on they did their digital from in the DNA, from the core, right, and they're figuring out a whole bunch of different ways to be faster and more efficient, and all of that. And they're all taking different routes. So Lemonade started with the renters, and they're going to claw their way up the ladder. Hippo started at a bigger market, and they're looking to kind of chip away at it with a more modern form, etc. And here comes Branch, that's saying, we're going to bundle you know, we're going to go after the auto/homeowner and acquire those customers do really good for them, and have a more loyal, more stable, less volatile premium, over time, we're going to add another in this conversation. But Shefi that's what that's what I find most interesting about the Insurtech now and what and what I've been telling investors in Insurtech, is that this is different than tech investing in tech investing. Most of your ideas most of your investments are going to fail because it's more have a winner take all model in tech, in Insurtech, all three of these companies are going to survive. Right there, you know, they might get acquired or whatever. But I think they're all going to acquire customers they're going to grow, they're going to be, I think they're going to be fairly effective, as effective as the industry, maybe more, maybe less. But I don't think these three companies are going to fail. Like they're that that's the difference. The probability of outcome is very different in Insurtech and that's what I find so interesting, is that I think there's less upside, because it's not a winner take all but it also reduces the downside. If you can get in and get past a certain threshold you're likely to survive. That's what I find most interesting about this. They're coming at it from different angles, and they're probably all gonna make it

Avi
Nick, do you think? Question a quick question. Do you think Hippo should acquire branch?

Nick
I have no idea

Avi
as a way to get into car insurance?

Nick
I don't know.

Avi
That would be interesting. I know Lemonade probably wouldn't do it because they think they can build the world themselves. So they have that approach, but Shefi Yeah, are you saying

Shefi
Maybe Root should acquire branch?

Avi
Maybe Root?

Shefi
Because Root isn't the home and auto insurance space. So I think this is one thing I would tell investors. These Insurtechs are more likely competing with other Insurtechs than they are with incumbents. So everybody wants to make the story of this is 100 year old incumbent slow to innovate, not nimble, setting their ways don't have technology don't have the know how. But what you're looking at is, you know, at the beginning, for instance, Hippo and Matic to my in my mind were very much alike because it just Matic had the comparative angle, but they were targeting homeowners through the mortgage or origination process, right? The API's are b2b2c All and now Hippo has graduated and, you know, two of you believe that are competing with Lemonade. I'm on the fence on that one. But you're seeing, you know, Root versus

Avi
competing competing in the eyes of investors in the eyes of the public opinion of insurance. That's That's why we say for sure, at least that's what I mean. Yeah,

Shefi
yeah. Clearcover American Family is an investor both in Branch and in Clearcover. Obviously Clearcover isn't about bundling but it's becoming more and more challenging. And to your point in terms of failing nobody's rooting for anybody to fail but but in reality is we haven't, in insurance you don't typically see a lot of failures. I mean, the average is so low like a lot of people can succeed in the industry and I think that's what people find the traffic. Yeah. So you know, I for now, this is I mean, I want to keep this on a positive because this is all you know, everybody has this is all a milestone for specific companies, right Hippo milestone Branch. Yes. huge milestone. I think that the third company that we're going to talk about, so yeah, congratulations to all of you. Right. That's, that's what I would say. I want to

Avi
I want to add a point about Branch. And this is where they'll need to have patience because and again, this is Hippo is the the use case for that. They can't rely on Everquote to generate leads for them, because Everquote is promoting their car insurance, not bundling because they know that poor people, they may own a car, but they're still renting and, you know, we want to save them money, Branch's looking for a specific audience that should be not everybody, of course, should be more kind of fine. And like when it comes to their expenses, finances and all that. So the process is going to take longer, they'll have to work with agents because no way that they're going to get these customers online. So it's going to be a slower process. It's going to take them time to kind of build their book and attract the customers. So I think it would be interesting to see how they operate. And I find that always, you know, in startup world that patience can really throw you off off because you might think that because it's going slow that you're failing that you're not doing it right. But it's just the nature of it. It's going to take time. And you know, you mentioned about you know, you don't you don't know if you see like Lemonade fail, and Hippo fail and Branch fail. Right now, Lemonade is a success story. Right, but 10 years down the road, we don't know how they will be. And again, they've returned that investment to their investors and the founders, and that's obviously a success story. But if you look at it from Is this a successful insurance company, time will tell and I'm still kind of how they have these great prices, and they spend a lot on marketing. And the last is as he said, most of the losses are now by reinsurance company. So when they say No more. That may kind of be a problem for them. And the same thing for Hippo. Because look when you rely on agents, and that's, that's the problem like in today's day and age, and we're going to get to the third company, where you mentioned Metromile. And we'll get to that you really can't be too confident, because there's another entity that's between you and the customer. So that's a problem. You really need to be able to say, I have a brand. I own the customer. I have the best product. Hippo doesn't have that,

Nick
But so I'll push back a little bit on that because that's, that's been well known, you know, since for for decades and generations, that's when you know, carriers that use agents don't really own the customer. The problem is the carriers that go direct. There. It's David Wright, one of my friends, former reinsurance broker wrote a great article once talking about brokers and carriers. carriers can't afford to have too many bad accounts come in. It can be devastating to their book. Brokers don't care. Brokers need to brokers need to put accounts wherever they can put accounts. So, at the end of the day, as much as the agents own, the own the customer, right, they own a lot of bad customers. And so it is it is incumbent upon the carrier that is working with agents to have treat the agency system as their salesforce as if they were in house and educate them, train them, meet with them, incentivize them. There's this conflict that sort of develops over time and I think that conflict Yeah, that conflict goes away if you decide to go direct, but going direct has its own problems. It's really expensive. You have to devote a lot of internal resources to acquire those customers. And still, you have that problem where you can't accept all the customers anyways.

Avi
But but you know what was interesting now, I recently leased a car. And I went with Gabby, just because who wants to like I went on progressive.com I went on Geico, I think went to Liberty Mutual. And I eventually went to Gabby. They compared and Progressive was on there, Travelers was on there. And then I went to Jerry. So I bought from Gabby, but then I go to Jerry because like because I'm never sure that I make a good choice.

Nick
I haven't heard of either of those.

Avi
So so they're very popular amongst I would say like the digital bro consumers. And Jerry, I think I haven't seen Then amazing flow like that you just put in your phone number, and they get all your information they know your driver's license, they know the type of car you have. And they just say confirm, confirm, confirm and you can edit very quick and behold, you know, Travelers was there as well just like they're on Gabby and Progressive was also there and Plymouth Rock and another company. And, you know, for Travelers and Progressive as he said, Make going direct is very expensive. They've also figured the secret of like, we really need to be everywhere with agents and I wonder if you know, brands will go that route will they be on these comparison services? Or you know, it's it's kind of like agencies, because there's a lot of traffic coming in a lot of customers, but you look at Travelers approach, and you know, they want to be very competitive. So actually, their price on Gaby was one and their price on Jerry was different, a little cheaper. So I tried to switch but they said no, no, no, you already have the higher court. We got you. So we're not gonna let you but There's really, it's you've got to be everywhere. As you know, we always say, and I think that will be key for every insurance company, if you really want to grow, and I feel like for insurance there are going through more. Yeah, they're going through more because again, there's no pressure.

Nick
But to both of you let me let me before we go to the final company, let me ask you Shefi, Avi, you have seen a broad swath of these insurtechs coming in, if you were running those and you and you had to choose between going direct, using agents or a combination which would you choose?

Avi
combination, which is a combination

Shefi
going direct part time?

Nick
Yeah, I would choose agents. I like it. Yeah. I and you know, and I have I have a thought process around that which is just that's the sales is really hard. So I want to be very picky about which agents I go to, which is what, which is what, you know, my day job, that's what we do. I'm very picky about who we choose to partner with, in those kind of situations, but it's hard it's, it's, we talk about all the time distribution and just how expensive it is to acquire a customer. And, you know, it's that that's, that's the interesting part. So I'm not I'm not rooting for failure. I actually think the three companies we just discussed, I think all three are going to be just fine. Once they get a customer, I think they will the they will have good enough retention to be able to hold on to it. My only concern is valuation. I think the valuations are just astronomical. For what I think the ceiling is on this, but I think all all three companies are going to survive. So those those are three approaches. There's a Fourth approach. There was another big company that announced this week Shefi. Who is that company?

Shefi
Yes, well, Tesla had an earnings call and basically they were kind of laughing to themselves about we're going to get one insurance question and of course they did. And as you know, Tesla is offering insurance in California to of course to its drivers. And it's through relationship with State National. So they they didn't say much but of course just like Elon Musk, everything is big and grandiose and he was talking about he was making the promise that he's going to build a major insurance company. And this is a very early what what we're seeing right now is just the very early beginnings and getting a feel for insurance and he you know, his love for actuaries that understand math. So I, you know, obviously, there were, there's also a lot of job postings, not a lot, I would say maybe five or six job postings around insurance, one in Berlin that I saw, I think there's one here in the us there. There. There's mix and match, obviously wants to watch. And I do remember with General Motors way back when in the days entering the insurance space was very successful for them. So he did. So this company has a history of upsetting car people car people, and he's currently upsetting insurance people. I just want to take the other approach that, you know, you do expect outside entrants to come in and be successful. I don't think, you know, insurance is like building rockets. So one to watch for sure.

Nick
So what do you think he's gonna do? It's, is it is it an expansion of what they're currently doing? So they'll be focused on Tesla car owners and insurance for Tesla car owners. Are you think there's something bigger here?

Shefi
Bigger like, mass motors mutual?

Nick
Yes.

Avi
I think Yeah. All right. I think The confidence comes and he always talks about it, give an insurance that's suitable to the Tesla car with the safety features and the demographic and all that work. That's what I think. I think it's funny because the when on the conference call, they were saying that this insurance version is 0.9. Not even like version one. And the reason I think he's saying that is because I feel he really feels that the price point should be more attractive because we saw this when they launched. You know, you could argue that Tesla car owners are like really devoted to the Tesla brand, really devoted. And they didn't go with the insurance offer they got immediately if there was it was more expensive than Progressive or Geico, for example. So he knows that it's a, it's about price. He knows that he can create a car that is more expensive than other cars because a car is different than a piece of paper. So that's, I think, where he wants to go first. But I think it's going to be something every car company is going to strive for. Can we and because now there's a when you go on Liberty Mutual, for example, they ask you, oh, what safety features does the car have? Does it have the lane assist? We'll give you extra points for that. Every car company that builds cars and uses technology, I think they're going to come and say, Can we make more money selling insurance not necessarily be the carrier, but partnering with a carrier that is interested to work with us because they know that we have good cars, and obviously the driver is a different question. But that's I think, where they're going in you talked about, you know, Metromile, being able to pilot and Hippo and the speed and all that. Good for them until the actual company that owns the product comes in and says, Well, let us show you how quickly we could pilot. Sure. Yeah, and I think I think that's what it's going to come to and I just this week, there was a story about another connected car company and how they're all going away from the dongles because apparently it's more cost friendly and user friendly to do over the air updates as they're talking about now. And Tesla started with that. Once that happens, then it's really up to the car company to say, hey, insurance companies were open for everyone, or, hey, let's find someone company that could give us a price. And when someone is buying a car or leasing the car, do you want the insurance like you should buy this insurance? Because we'll tell you, we have the confidence, it will be cheaper than any other company. And if they have that confidence to say, and they could show it, people will buy and it's a lot of it's not so much about making the money. I think when Tesla went into insurance, Jeff, if I'm correct, they really had an issue where a lot of people were not buying the car because of the insurance because it was hard to get the insurance. So he wanted to solve a customer experience problem not so much about making money and I don't know if he's gonna make money from insurance, maybe maybe not.

Shefi
So He is a bit of a celebrity, you know. And if we think back to the days when Lemonade got some backing from Ashton Kutcher, and, you know, he was tweeting a bit about Insurtech. That's the status of Elon Musk, right? And people were complaining about the price. in their mind their price of insurance didn't correlate with the value proposition of a safer car. And if you you know, we talked a little bit about American Family, American Family in its portfolio has a company called Avinew, which is all about smart insurance for smart cars, right? Still in emerging mode, not quite sure. I mean, they've been an emerging mode. In my mind, it seems like forever. But to them Tesla starting to offer insurance is basically they're taking it's taking away a pie of their target market. So it shouldn't be because you know, it's not that big of a challenge. Do I think he needs to build a carrier. I absolutely don't think that's necessary, but he needs a partner that will be willing to incorporate his data and so a lot of this these These insurtechs are they boil down to data? And so my final point about this conversation, when we look at Hippo Lemonade branch, who has data that is the easiest to work with. And I think that's Lemonade because they're targeting a very homogeneous group of people. And it's still just the renter's insurance which makes your valid point is a smaller, you know, market than home insurance, but building insurance the right way, which is why I say I would go with digital but part time and nothing of this grand valuation just a different way to build an insurance company, then, you know, I still I still lean towards the Lemonade model. Yeah, final point, everybody.

Nick
final point.

Avi
I think at the end of the day, you know, you should have your data. If Lemonade or Hippo or Branch The thing is that Not the game. The game is not Insurtech or insurance companies, the game is every company in this world and automakers have the data. Smart Home manufacturers have the data banks have the data, FinTech companies have the data. Insurance companies are not even in the game. They're in the game when they're able to get into that distribution partnership. So if you're able to do that good for you, if you're not able to do that, you're in a lot of trouble. And, you know, it takes time and I was speaking this week to someone that was trying to get their product insurance life insurance company's product on his platform. And the life insurance company was saying, well, we don't like to be compared. We don't want to be a commodity. And they feel like a lot of insurance companies right now they feel that they're fine. Because you know, it's kind of their kind of little punches they're getting, it's not not a knockout because no one cares about insurance for the good and for the bad. So it's going to take your time but one day You may wake up and say, oh boy, what happened? Where did all the people go? Why didn't we grow? And that's to me at the end of the day, that's what it is. Whoever has the data, whoever has the customer will win insurance is a product that's necessary and it will be integrated in some way or another maybe Progressive will buy Tesla well they can't they don't think they can with the valuation but maybe someone will I think they were talking about Berkshire Hathaway maybe working with them in some way or, but that's what it is. And I really don't think that insurance companies whether you call Lemonade Hippo or branch for the long run for now, go for it. Make an exit make an IPO make your investors happy, make customers happy, but I don't see any real you know, Game Changing models here.

Nick
Okay. Shefi What was your final point, your final point?

Shefi
For sure.

Nick
Okay, my final point For different companies for different models, all four will be successful. You know, just a question of degree, but great conversation, guys. Thank you. Be safe. Wear your masks, wash your hands. Shefi, Avi Have a Happy Friday. happy weekend and happy weekend everybody.

Shefi
Thank you. Bye, everybody.

Nick
Bye everybody. Beep Beep

Transcribed by https://otter.ai