This Week in Coverager (7/31/2020)

This week, Shefi, Avi & Nick debate:
– PURE’s new community program to increase retention (PURE Gold)
– Lemonade looking for acquisitions
– Rocket, fintech encroaching into insurtech
– Agent/broker survey

Watch here:

 

 

Transcript

Nick
And we're live...This Week in Coverager, July 31st. We are in hurricane season I am in podcast headquarters in Naples, Florida, ground zero for hurricane ISAAIAIAIAIA, don't even ask me to spell it. It's like all vowels.

Shefi
But is it a female or a male name?

Nick
I don't even know. I don't know.

Avi
They're all females.

Nick
Yeah. So hurricanes coming down. I wanted to give a shout out to my wife, who what you can't see it who is reminding me that? I have to say good morning gorgeous to her. She has the complimentary good morning, handsome and I'm going to be handsome because this will be The last day of my COVID hair. I'm going to get this shaved off. So, so welcome. You're

Avi
lucky you're lucky you still have hair. That's what I can tell you cherish it.

Nick
Well, it's long. So it's covering. It's like that, that spray stuff that you can cover the spots. My hair's long, so it covers a lot of the the bad areas. So we'll just we'll leave it like that on July 31st. It's a early Friday morning. Shefi Good morning, Avi. Good morning.

Avi
Good morning.

Nick
So in This Week in Coverager. I'm going to kick it over to Shefi for the week's top story. Go Shef.

Shefi
Top story. Okay, so within the context of insurance, the top story or the most clicked story was the introduction of PURE Gold by PURE the insurance, the insurance company for high net worth individuals. I don't know exactly what that's like, but I can sense it. Anyway, the whole idea was PURE Gold is Basically a loyalty program. And the idea is that if you are with PURE for 10 years, you may qualify for some money distribution allocation later on. So why does that make sense? Well, basically, this is a retention strategy they don't want now. So we live in the world of the internet, even the high net worth individuals like to shop and it doesn't necessarily mean that if you have a lot of money, you don't care about money or vice versa. It's just it's all over the place where human beings were complex individuals. Some of us like to shop for a and not for B, some of us shop all the time. But the idea is from PURE standpoint, how do we retain those that are loyal to us, especially because the market is more competitive. So interesting. Definitely the the Coverager audience paid paid attention to it. And when I think about this, everybody's Coverager audience everybody's competing with one another. So who's who knows who's going to be one to kind of duplicate this strategy or think about it. Avi always likes to point out to me that especially during COVID, this is becoming more and more a game of retention. Especially because you know, simply bought you want to hold on to what you have. So that was within the context of insurance. That was a popular story. Outside of insurance. This is a bit too soon, but definitely one to watch Rocket companies announces plans for IPO. We first started writing about the company, Quicken Loans, which is part of Rocket company, when they acquired dictionary.com. And to me that was a perfect example of somebody that is in the mortgage, loan space, etc, etc. All of a sudden buying dictionary.com going out of their core, especially because they wanted to use the platform for advertising. So we're talking I think, the the IPO price range is like 3.1 billion, but they've got so many sub brands so they operate in used auto sales platforms, digital media. They obviously have a platform for title insurance, right? So if they're going to continue to struggle because of COVID. And by struggle, I mean less revenue, it's so easy to just focus more on insurance or especially areas of insurance where they think that they can earn an extra buck. So that would be my insurance, non-insurance focus. The other thing we've heard, and this is the last thing from me today, I think, is a birdie told us take your advice, right? Lemonade is working on their acquisition strategy. This isn't the first time we're telling you this, right we there was an instance before where there was a gentleman working for Lemonade. He's no longer working there. And part of his job was to look at, you know, relevant acquisitions for the company and was not going to look like but right now Lemonade is under the public eye and the public may understands differently, probably insurance. Nonetheless, one one to watch in turn, you know everybody's watching Lemonade but this area specifically in terms of who they're going to acquire, what's that going to look like so.

Nick
Well that is I know a lot to unpack. Avi PURE you've been kind of you've been the Nikita Khrushchev of retention business banging your shoe against the UN table and talking about how important is insurance is essentially a retention subscription business you can potentially keep keep a customer for a very long time. And I'm not surprised like for from PURE perspective, I know PURE I know Ross, Buckmueller, the CEO and what he's built there from scratch. And it's a to me PURE is a is a benchmark for other companies. When I tell when I hear startups trying you know when they Quiz me on, you know, should we do this? Or should we do that I always tell them don't focus on Lemonade. That's really not repeatable focus on PURE that was built from scratch in a pre digital error and look what they've done. And you know, the the market share that they've been able to carve away from Chubb and AIG in the high net worth space. And a lot of it is renewals, and and the way that they treat customers.

Avi
You know, I said, and I still say it, I think insurance is the best subscription business. There is because you always need it. You know, unless you, are you. Yeah, it's really the best subscription business and I was speaking to the CEO of a Insurtech startup. And he really likes the PURE model. He's, he's a member. So that means he has some money.

Nick
so he understands firsthand Yeah,

Avi
Exactly. And he He didn't come from insurance. Now he's in insurance. So he really likes the model. And it was interesting to me and I was talking to Shefi about it. So it's not easy to build that kind of sense of belonging and like this member's club and you know, it's a thing you need to really like be special to be able to do it and it's your won't see many you'll see really like the leaders and then not not much elsewhere. And we were talking, for example, like, Hippo, they're offering of the maintenance service, helping people repair things around the home, over the phone, you know, to save the money. So I was asking Shefi do you see a rich person getting on the phone trying to fix their AC they're gonna bring a repair guy because they can pay and you know, they don't want to be bothered with it. Unless it's someone I don't know. Someone that really likes to do these handiwork around the house. So for the

Nick
For the PURE customers, the repair people live in the house, the guest house.

Avi
That's That's nice. That is nice. You know? So that's the thing. And I wonder now like, if you look at, for example at Lemonade and they're very well kind of accepted within the the tech community, those startup founders that go on for an amazing exit and now they qualify for a PURE you know, membership. Do you think they will go to PURE because all we have so much money? Or do you think they would prefer the tech provider, the one that they stuck with as they grew? That's an interesting question. I wonder, I wonder what the future for PURE looks looks like. And because I think it will impact other companies that are trying to attract that client base.

Nick
Let me let me quiz you both. Who's the largest writer of high net worth individuals in the United States?

Avi
Chubb?

Shefi
I thought it was AIG.

Nick
State Farm. Do you know why? why they they State Farm got them before they were rich. And then when they became rich, they just never switched over. I can tell you from someone who has sold a Chubbs Masterpiece policy there's a there's a big difference in coverage. The way the Chubbs, the PUREs, the AIGs, Nationwide has a private client group PURE. They, they're, it's different. You know, all you need to do is look at like California, most of those companies have some sort of like private firefighting. So during times of wildfire, they'll come and like foam down your house or do things of that nature. It's it's a different product. And so to your point, Avi what you're just saying, Yeah, like if, if you if you are wealthy, you have a different set of exposures, a different set of responsibilities, a different set of liabilities as well and those companies were have specifically designed their product for that kind of customer so I think it does matter I don't know if PURE still does this but I remember you had to pay to get membership Like you'd pay to get in it was it was a it was it was a status symbol, but it's a reciprocal meaning of like a mutual style.

Avi
You get the money back

Nick
You're part owner once you're in you're part owner and you're basically it's like a factory mutual. All the factories kind of get in you all insure one another. All these high net worth individuals are essentially insuring and reinsuring one another, so there's a bit of a status that comes with it. I am not wealthy.

Avi
Not yet.

Nick
Yeah. I have ambitions. You'll get there. Um, so I don't I'm not exactly sure. I I do. I do have Some Private Client brokers that I can speak to about this, but it's a it's a different field a different world than you know what we traditionally talk about what the Hippos in the Lemonades and all of that. PURE is in a different stratosphere.

Avi
Yeah, you know, I think, really, if I look at another company in the insurance space that is trying to replicate that model, in a way, not specifically going after high net worth and in a different space. One that is really trying to cater to a specific group is Vouch, insurance, technology, startups, there's like the whole like, you know, you have to raise to be funded to get an amount of funding to be able to qualify for their coverage. And I think it's very smart. Because once you do create that sense of community and belonging, it's beyond the price. That's what I think. Because again, they're telling you listen, you've you've built a startup, you've raised money from investors do you really want Want to take that risk? You've bought this beautiful painting? Do you really want to take that risk?

Nick
Yeah, exactly.

Avi
So I think it's really interesting. It's not easy to execute. I really like as I said, once Vouch establishes themselves as the go to, you know, technology startup insurance provider. It's not gonna be very easy to move them. Doesn't matter who comes in it's going to be very difficult. Well, so yeah.

Nick
Shefi I just interviewed on so Thimble just came I published like two three weeks ago broadcasted, on the Coverager Podcast, foreshadowing Next is coming up in the next couple of weeks. Good good use of words there. So I think Avi's onto something and I think that is where so Hippo with the with the smart devices and the maintenance, Lemonade with the charity angle. Yeah, like you. You can't just sell a an insurance product. I think there's a tremendous amount of value in building community and it's to me though it's Is it real community or is it like Minnesota nice, you know they smile to your face but behind your back they're not so nice. I think what PURE has been doing this for so long. It is truly a community like it's a reciprocal mutual style thing. There now they have PURE Gold. I, I think that particular customer base wants that. I'm not sure how much traction Lemonade can get with the with the charity or Hippo with, you know, the types of things they're doing, but I don't think they have a choice. What do you think?

Shefi
So two comments I'll make one comment is, so Avi thinks of Vouch and I think of Root simply because the way I The way I see this as you want what you can't have. And PURE has that because not everybody can get accepted to their program. And when I think of Root what I thought was really brilliant the first time they created their model is not so much the telematics is basically saying, we may decline you.

Nick
Yes, yeah.

Shefi
Right. They're kind of really upfront about it. And that creates a sense of, let me see, let me see what I'm worth to them what my score is. So that's my that's my first comment. And I think in terms of marketing, then that's a thumbs up. The second is every time I hear community, you know, obviously in Coverager, we talk about the community all the time, and I may sound controversial here, but but try to follow along. Yeah, so I, we love communities, it's just it's hard to measure communities and the question to me is did that community exists before the insurance element came into the picture? And an example is Lockup for the from UK when where they do the bicycle coverage, right. And they always like to talk about the community. Typically fitness and vitality the same in the same mindset, right? If you're a community of runners, you're a community of runners with or without the element of insurance, right. So that can be used to establish a community. The question is, do you want to belong, right? Do you want to belong to a high net worth club? And and it's a conflict. The there was there were surveys out there, right? And Chubb said, well, they're not comfortable with the term and I don't even know what term they are comfortable with ambitious or whatever it is, but nobody wants to be called the ultra wealthy. And what does that even mean? What does that even mean? Because you know, Mark Zuckerberg is ultra wealthy. And then you got Thomas Toll, right that we just covered Acrisure and their acquisition of Telcos AI insurance business, right. So you've got this billionaire that wants to play even deeper in the insurance space. He he was still he's he's come from the entertainment industry and you get more familiar with Israeli millionaires than I am with American one, but I'm catching up. So this is a sense of, is this really a community? Because I remember when I was I love reading reviews. There's not No no, not Oh, there's not a lot of reviews in the senior market space. But there are reviews on companies like PURE, and you can see when they're frustrated with the claim didn't go right. And, you know, we said how much technology do they want to use? I heard from an adjuster that there's obviously all this 3d virtual inspection tools. They don't want that they want people coming into their home and doing the job for them. They're not going to walk around with their smartphone camera. Right. So you've got people that are used to service and service is something that is it's, it's hard to measure. Right? It has a great you obviously thought that you should talk about the example with that company. That's No, no with that cleaning service,

Avi
the cleaning?

Shefi
lady that brings her dog to the office.

Unknown Speaker
The lady that brings her dog?

Shefi
it's popular in New York City, I'm not helping you here.

Nick
Regardless...

Shefi
Yeah.

Nick
Avi, while while you're thinking of it, yeah. While you're thinking of it. So Shefi you're hitting a good point, right? Like, I think it's it's delicate, right? You can't it

Avi
Yeah. It's an intersting debate.

Nick
You can't force community...

Avi
And you know, you know, it's interesting Nick, when you think about that, and as you know, Chubb did a big survey, I think it was last year. And they found that even high net worth individuals begin their search for insurance online. And as Shefi said, some do not want to be in that category. Like, you know, something like if I was rich, I want service. I don't care. I wanna I want everybody to know that I'm rich. I don't want to be bothered with my presence or whatever. That's how I want to be.

Nick
Shefi where did you find him???

Shefi
We're related by blood.

Avi
But that's the thing like some people care about that status symbol. And when you look at Tesla, for example, and you know, people that own Tesla are comfortable, we could say that at least. And we talked about the insurance and people said, I don't care if it's Tesla insurance. It's more expensive than Progressive, it's more expensive than Geico. And I wonder if this is kind of a new generation of you know, the Robin Hood investors that don't want to pay that extra fees, although they're making money are they happening thing? Yes.

Nick
It's been happening. So it was in I think it was in the 90s. That book, The Millionaire Next Door, came out and talked about, you know, the vast majority of millionaires sort of blend in you would never know you know, they their favorite vehicle's a pickup truck. You know? And I think there's something to that Avi. I think there's, I think there's a group there that don't feel wealthy, they're in they're uncomfortable being stigmatized with that. And so they just go about their everyday life and Shefi I think that's why State Farm is the number one writer, I think it's that group that bought a $200,000 home. And now they're worth $10 million. And they have a $1 million home but it's like I like State Farm their...it's affordable. And so they stay

Avi
and maybe that's why Pure has its limits, and they haven't grown to be like every wealthy person is ensuring with Pure because you know, also at the end of the day, and this is an example with LeBron James that I always find interesting. He has money, you know, he's he's well, and he didn't pay for Pandora premium. He has to listen whether you working out with the commercials, and he said, I'm not paying. To him, it was a waste of money. And, you know, we always contradict ourselves like I would spend a lot on food. But when I know you remember the story, I had to struggle with shoes, which you wear every day. Like you can't put $100 on shoes, but you'll go and have a meal for 50/$70.

Nick
Yes, we're irrational.

Avi
Exactly. And that's the thing like and I at the end of the day insurances insurance. I really like what PURE did because it catered to some that say, Hey, I'm out there. I'm successful. I want to be part of a club. That's great. But yeah, it's a very interesting concept.

Nick
So Shefi, let's so try to hold on to that a little bit. We'll anchor ourselves to that and transition to the next topic, which is Lemonade, potentially looking to make acquisitions, which is what we we've discussed for the last two weeks, it's like with their stock price being where it is. That would be the smart thing for them to do is to use that high stock price as currency to buy stuff. Do you think they'll you think they'll buy acquisition into market share new business or maybe acquisition to more communities related stuff?

Shefi
If they're smart, probably the latter. Because that's what the public had bought into Lemonade is isn't necessarily a public that cares so much about insurance and KPI and old metrics. And I we still see this debate going on. Meanwhile, it's been a successful IPO and kind of you know, the train has passed the station. So let them play to their strengths and their strength is talking about, you know, being a B Corp and you know, AI and technology just trying to be more of that than burying themselves deeper into insurance and their technology has imitation. So right so it's, it makes sense for them to use AI and pet insurance and renter's insurance. It's great to be a different game when we're looking at home insurance and not to mention them insurance the competitive space but If you look at everything that was happening in FinTech and, and maybe some elements of Prop tech, you know, so I think our The grass is always greener. In the case of Insurtech versus the rest. It's absolutely true. So why why?

Avi
Yeah, I think, I think first like their acquisition, I think they'll look, you know, kind of like as a crowd pleaser, because they want to acquire a company that investors will say, Oh, this is good. Let's buy more Lemonade stock, the value goes up again. And everybody's happy. I think Lemonade's biggest strength. And we talked about this is the price point. So if they could find a company that caters to people that are price sensitive, and maybe they have that could lower their customer acquisition costs. Maybe you know, a money management app in the FinTech space, or something in that area that could be smart because that will also allow them to create relationships with maybe other insurance companies for other products, because, you know, they can make the whole experience a little better and technology and all that stuff. But, you know, the FinTech space is, is getting to be very crowded, and a lot of banks are paying attention, and they're launching their own services. So you look at, you know, monzo and, you know, it's, it's very hard when you have like, you don't charge much, and you still bring all these people in, but you're not making money off of them and then comes Chase, and Citibank, and I was like, Okay, we'll do the same, you know, and you stay with us because it's money, you know, who cares? Money is money, no fee, no fee, no, no big deal. And so it's gonna be difficult. I don't know. I think if I was Lemonade, what I would do, very difficult.

Shefi
A lot of options. If you were Lemonade you have a lot of options...

Nick
They do if the stock price stays where it is. They do have a lot of options. So they and they can do all of the above right? They could do more market share. They could do community, they can go into a new line. They have that. I'm thinking, you know,

Avi
Do you think it will be from insurance, the acquisition, do you think they will acquire an Insurtech? startup? Maybe what do you think or outside of insurance?

Shefi
So here's my I'm still surprised on that. So why hasn't PolicyGenius on Lemonade form some sort of a partnership? I would like to see that happening.

Nick
Should we connect them?

Shefi
No, they can do their own job.

Avi
Why? Why would you think it would be a good connection?

Shefi
Because so there, I saw this debate on Twitter, right in terms of you it was kind of going along the lines of you have to aggregate in insurance or people want either an aggregator play or it's a network effect and people were commenting whether Lemonade has a network effect or not, and I think the consensus may possibly elements or variations or to degrees. But in terms of being an aggregator in insurance, you don't have to be an aggregator when the price point is so low like the $5 renter's insurance. But if you're moving up if you're moving towards home insurance, or if you're talking about clients that have multiple, you know, multiple product needs, right, then maybe it makes sense. No, it does it, it makes sense to partner with somebody like PolicyGenius. PolicyGenius can have a more stable technology partner, assuming Lemonade wants to be fair in how they structure their commission or fees to those that refer business to them.

Avi
That's interesting. So,

Nick
yeah, I was thinking of the, you know, the S1 and the whole principle of graduating customers. So the whole principle of we're going to get them as renters insurance. And then when they mature and they move to homeowners, they'll stay with us. And frankly, I just think that's too much too long of a timeline.

Avi
Unless Unless Lemonade helps people buy homes,

Nick
That's interesting.

Avi
They can give their money. Why not? They have it.

Nick
They don't have it. They have, they have a stock that you know. So, to that, you know, they're they're going to have to make acquisitions. That's the only way they're going to, in my opinion to,

Avi
you know, the, the mortgage industry you think about being at the right moment. So companies like My Take and Coverd so they work with big mortgage lenders across the country. So when someone comes in and says, okay, when I buy a home, they go in and they put in the information and they get quotes from different insurance companies, you know, at the point of sale or at the point of the bank, for example, and people go on and they buy and they can get the insurance. So, you know, I think for Lemonade to be on that platform, they could get there and if they're comfortable with their price point then probably the client will say, yeah, let's let's go with Lemonade, although you talked about the whole concept of AM Best rating and if that matters,

Nick
that's a it's a big problem. You know, I, you know, I shared I shared that article with you yesterday, but just in the past week, I've been getting a lot of phone calls and just having conversations about this, and it's they just don't have a big enough balance sheet. So, even though Demotech is accepted by Fannie Mae, the big issue is that lenders have are not going to change their tech systems. So lenders have a checkbox AM Best rating. What is it? Oh, Lemonade doesn't have one...can use them. Right. big, huge problem. And I think the balance sheet that they have becomes problematic as they try to go to homeowners. So for me on an acquisition level Maybe they try to acquire a cheap balance sheet, maybe they try to acquire an AM Best rating. You know, somehow they acquire a company that already has one and then piggyback on like a reverse or reverse public, you know, you, you you buy a public company to go public versus you doing an IPO type of things. So, no, it's, you have a lot of options. I think Shefi is right, like they could they could do a whole bunch of stuff here.

Avi
I think if you look at Experian, for example, and Experian gets people hooked up on the whole credit score, check your credit score, improve your credit score, and all that. And then they make a ton of money from their whole lead gen business from other products and services. They presented their user base, they think Lemonade really wants to make money without the whole like, oh boy, can we write this business or we're gonna lose money or this or that. Go beyond insurance go into other financial products that you can do. I think it's going to be hard work for them to get into that space. But the money is there, again, but it's not as automated that you would hope not not all the time and all that stuff. But yeah, they have options. I think, you know, they have the money, they have options if they really wanted to shake up the industry. And this is an idea and if it happens, I'll ask for my referral fee. But Root and Lemonade, joining forces to disrupt the hell out of the industry. I think they're there. They're both very good at attracting customers, even though it comes at a cost, right? It's, it's not cheap, but they have the guts and the money to say we don't care. We're going to get that client and they get them in volumes. And you know what? The success, forget the IPO and all that. The success is that people in the insurance industry big companies are paying attention there. They care about Root and Lemonade. They talk about Root and Lemonade, so I think that would be an interesting move. I don't think it's going to happen but I feel like you know, Lemonade has a limit with with only the renters and as you told you mentioned, the home insurance with their capital and the reinsurance structure is going to be very difficult for them to just go in. But But yeah, they have the options and if you really want to blow up it's Lemonade and Root

Nick
Shefi I get an idea....

Shefi
Okay...

Nick
they should buy Blackboard....

Avi
Now. No, no, the underwriter the underwriter Yeah, the underwriters are Blackboard. They're saying the risk that the profits, too hard to do...

Nick
Isn't AIG winding that down like doesn't that

Shefi
Blackboard plays more into the middle market crowd.

Nick
So don't they have an AM Best rating?

Shefi
Well, yes, they do. Ah, right. But it's through AIG. Want to do it?

Avi
Yeah. I mean, I mean For how much?

Nick
No, I think No, I think what Because you're it was prior it was Hamilton right? Yes, yes. I think I'm pretty sure that

Unknown Speaker
there's a lot

Shefi
in this kitchen that's called Blackboard and I think that's part of the problem

Nick
I'm gonna give Lemonade some free advice I would buy I would buy a cheap am best rating find something where you can get an AM best rating and expand on that. I think that'll open many more doors my opinion. Just I'm I'm a connector, you know?

Avi
Yeah, my advice is if you're not going to go with the Root which I think you should buy a media company that's my advice to eliminate this recording. This is on record, right.

Nick
This is this is recording

Avi
by a media company. They'll open it by the athletic by the athletic and give out the subscription, no more subscription, but it's

Nick
Here's some foreshadowing on one of my upcoming podcasts. The company I interviewed poached A creative director from a very, very large media company.

Avi
So they know how to get attention

Shefi
Stay tuned

Nick
Stay tuned. Stay tuned. Yes. So Avi, you brought up, you know, potentially going into other lines of the products. Shefi, Rocket, which is from Intuit. So I think a lot of people will be familiar with Rocket mortgages and stuff like that. So that's, that's the other way, right? So that's like FinTech that it could start encroaching into Insurtech.

Shefi
Proptech, FinTech, everybody's eyeing everybody walls are coming down. And so question is, what are you going to do about it? Obviously, if you have, you're at the front if you have the technology to work with other partners. And we...just watch the space. I mean, we have been we have been covering stories outside of insurance for a really long time now because that's the only way to make sure you're ahead of what's coming. And again, insurance is a in itself and its DNA, insurance is a great product as Avi said it's subscription needed. Customers are indifferent I mean, look at Amazon how he's talking about his customers. Right? They're constantly unsatisfied right here with Fincher and sir constantly sought silent. What more can you want? Unless you're, you know, you're really

Nick
Yeah, that's a good point that I think that nicely ties back to the community. So I think we're going we're seeing it right Tesla, Amazon, Rocket, there's going to be encroachment in and I think if you're if you're in the Insurtech space, working in the other direction, I think community becomes vital, because I think a lot of these fintechs and other models like other frameworks, other lines that are trying to encroach in, you know, they're going to be transaction based.

You know, they're gonna, you know,

yeah, yeah, no. So they're not looking for community they're looking for quick. We're already selling you this, hey, buy this insurance from us. They're not really establishing a community. So I think it becomes even more vital. If you're on the Insurtech side that to keep the subscriptions going, you can't just sell them insurance. It's got to be something beyond that, where people feel like they're part of a community they have a stake in something that's a little bit bigger than themselves.

Avi
You know, I had this. I had this theory A while ago. And if you look at the old successful business people in the 70s/80s/90s, and then you look at the new successful business people in the 2000/2010/2020. So it went from jocks, the best salespeople with the confidence here. A product pay for it, to geeks, Jeff Bezos, Mark Zuckerberg, the Google founders. And geeks, not because they love computers and all that, because you know, they are geeks. And if you think about the way of the geek versus the way out the jock, a geek doesn't have maybe the confidence to come in and say, here it is, or let me ask you out on a date, one time, they will give you clues, because they want to increase their chances. And if you look at Amazon, if you look at Google, if you look at Facebook, their own platforms, they're saying, look, we're not here to sell you our product. You don't have to pay we don't care if you buy an Amazon toilet paper or batteries or you go with Duracell or whatever that is. They want to be our best friends. And it works because they're not fixed on you have to buy Amazon you have to subscribe to facebook, facebook, you know, it's still free. You want to buy you know, for the third party apps you want to buy a tractor to put in your farm bill. Sure, we'll take a commission of that Google here we're looking for, look, you want to go and look for AOL email, not a problem, we'll show you the results you want to yahoo email will show you the results. And that's the idea. And I think when you look at insurance, it's a transactional business. It is price driven. You'll never get to the place where you're mainstream unless you really have the best price by a significant amount. And that's why you need to look at how do you please a broader audience, and that's where you go beyond insurance, help them compare, show them other things, you know, be their friend. And that to me is like the ultimate answer. If you want to grow an insurance, you can't do it with insurance. You have to think beyond insurance. And we asked this question a few weeks ago, we said what if the best way forward for insurance companies is not insurance? What if you could make money not from insurance? Would the CEO of the insurance company be mad? Would the investors be mad? What are you doing? Aside from the premium I mean, here's $2 billion, but it's not from insurance, they won't be mad. And I look at a company and we're doing some research on behalf of a client, Norton lifelock. Before that, it was lifelock. And before that it was semantics are semantic. But lifelock semantic is the company behind behind Norton. And the antivirus and the sales went down because people aren't buying as many PCs as they used to, you know, they have their smartphones and iPads or whatever. And they really wanted to hold on to that business. So they bought lifelock. And they bundled lifelock with the antivirus. Yeah. But they're targeting a very, you know, like a senior demographic kind of put it in a nice way. The people that still are afraid, still have these computers, the Windows computers and they need the antivirus and all that. But that's, you know, that's not the way to move forward. You have to sometimes let it go, you know, say okay, I've been reached my limit here, where can I make more elsewhere? And that's what it is. That's what

Nick
but it's our opinion is so this is I think this is what we've been talking about the last few weeks. You know, I think that, you know, Lemonade is trying to do it with the charity angle building the community and saying, This is bigger than us. You know, I still like the Hippo approach, I think there's something there to, hey, we're not just gonna come in and protect Yeah, help you with your home after it's damaged. We're going to start building a business model that's going to protect your home before it gets damaged.

Avi
It's a step in the right direction. And definitely and I know people are very happy with the fact that you can go on the phone and you know, they'll give you some friendly advice, how to repair stuff around the home, and it's a money saving product, and people love money saving products, and that's great. Does it have scale? Is there a lot of competitors in that space? Yes. So you need to kind of see I but again, it's a step in the right direction for Lemonade community so it will give back I think that's That's bullshit. I said that I don't believe in it. But but it was a step in the right direction for them for the IPO. Yeah,

Nick
the the the point Shefi is that they're, I don't think anyone's coming in and saying, you know, we're gonna create a Mutual Insurance Company just sell a policy. Oh, yeah, there's a, there's an effort here like how do we, how do we differentiate ourselves? How do we add some level of community or something, a hook, a gimmick, whatever

Shefi
gimmick gimmick works, they may have a, you know, a definitive time in which you can play that game because as you say, even with PURE when it announced gold, it was talking about the charity element. And I know I was, I've been saying this and, you know, Avi, and I disagree. I mean, I frankly disagree a lot, but it's it one it just shows you that the space is complicated to you do have a lot of opinions and it's a matter of at the end of the day, what you believe in and what you're going to execute with confidence which is really important, and the charity element sticks because how many people know the name of Travelers CEO versus how many people know the name of Lemonade's CEO? You know?

Avi
Do you know why the charity stinks? So let me tell you why the charity stinks it because people say

Shefi
one thing and

Avi
no, because people are too embarrassed. People are too embarrassed to say that we got this company Lemonade, because it was cheap. It was $5 people don't want to look cheap. That's a thing. It's Yeah, no, it's an excuse to say, Oh, I bought from this company because they have a give back. Come on, you really think that those 10 cents is gonna make a difference? You give more on a daily basis? I bet you if you really care about charity, you do that? I think it's an excuse. I think people don't say what they really believe in that's that's the thing you need to let it go for a lot of people yeah. But you know what, it's Lemonade knows they reached their limit with social give back. They know it and we know it because everybody's looking. Eventually people are gonna open their eyes. They're going to say you said your social, how much did you give to charities? How much did you give? And you know, we know a few things and all that But it's so

Shefi
I just I mean, how can one person is intelligent the crowd is stupid? I don't think people are going to ask that question.

Avi
If you ask Jeff Bezos

Shefi
It's not going to ask Lemonade. How much did you give for charity compared to Travelers? They're not going to think.

Avi
But But once the price goes up, that premium goes up, no one is going to say, Well, you know what you're giving to charity anymore. So, Nick, you said they're gonna have to increase their prices, right? So when that time comes, and they increase their prices, they're going to lose clients. It's very simple. And when that time comes when the person moving from a building that does not require renter's insurance to a building that says, okay, you don't need it, and he's going to cancel that person is going to cancel because they didn't want renter's insurance to begin with. So they have a limit. Lemonade has a limit. They had a great story that took them somewhere. Now, the question is, now it's time for the real business. Now it's time to show that you're real.

Nick
I would like to ask the audience Hopefully you've lasted this long. For those of you that are out there, if you recall, if you can recall any stories of carriers that grew incredibly fast, where it is either way where they were successfully growing very fast

Avi
Primerica

Nick
Or the opposite, if you could share those dm, you know, reach out to the Shefi or myself. I think we're gonna dig into this a little bit more because just my experience, so 25 years of insurance, except for Geico, it never works out well. When you run an excessive combined ratio sooner or later, you can't just say Okay, time to raise prices, because, like what Avi said, most of the time, they're, they're good. If there's a if there's a equivalently rated company somewhere else, they will they'll move. So I don't know if the community elements go To help on that, but in my experience, just watching the industry, companies that have grown faster have had combined ratios in the hundreds to get market share with some sort of toggle switch. We're okay, we got our market share. Now it's time to, to back off. There's always some impediment. It's always a regulator comes in throws a wrench in it. Or you know, something happens with your reinsurer, your rating goes down and then you get into a death spiral. But I, I want to hear at both sides. I can only think of Geico. But I can name a whole bunch of companies like Kemper and Arbella in New England that grew too quickly and harm them.

Avi
So from an agency standpoint, Al Williams which turned out to be primerica eventually become an insurer, they grew really fast. And the reason they grew really fast is two reasons. One, they did you know, the whole MLM. And they recruited a bunch of agents, but the other thing is, they came in at a time where Whole Life Insurance was the most popular product and they said, Hey, by term by term life, it's more affordable, you'll have more money. And it was a product that people really adopted it made sense for them and they grew so fast. They grew faster than Prudential. And then I think I'm not sure if that's the case but Prudential has a company that's called primerica pra m erca. So I don't know if it's they said oh, you say primerica we're gonna do primerica you know, stick it to you? I'm not sure maybe maybe not. But they grew really fast because they had a great product. Lemonade doesn't have a great product they have not with a 5000 renter's insurance but it's not a great product for everybody. State Farm is the same price. So once the as you said, Nick, the prices will go up. Customers will go down and But again, it's now was for them the real business. Let's see what they do.

Nick
I would like to end by asking the audience if you are a commercial agent or broker, we're running a survey. I'll have Shefi and Avi you kind of fill in the details, but we want to get your finger on the pulse, how you're using technology? How you're interacting with Insurtech? Shefi, Avi, you want to put a little more color to that?

Shefi
Yeah. So it's very simple. We want to understand the mindset of insurance brokers, what you're doing right now, who your technology partner is, who your technology partners should be going forward, what kind of tools you're looking for from carriers. And obviously, if there is a shift in where you want to focus on your business, right, if you're if the mix of the book, right, so it's somewhat lengthy, but we really appreciate your time. And the 20 questions.

Avi
Yeah, it's not

Shefi
Yeah. You know, it's not five questions, but yeah, thank you.

Nick
I thought we were gonna say your commercial broker agent, we'd love to hear from you. So please let us know. I think it'll be very helpful for you and your stakeholders and partners, going forward as we sort of share some of that research. So, July 31. Happy August. We're here. Summer's almost over except I'm in Florida. I got three months left. I will I will. I'm going to be safe during the hurricane if it happens to affect any of you. Please be safe. And as per usual, wash your hands, wear a mask. It's not over, so be kind to one another. Avi...Shefi, Happy Friday. Have a great weekend.

Avi
Thank you, everybody. Bye,

Shefi
everybody. Bye bye.

Transcribed by https://otter.ai