This Week in Coverager (9/11/2020)

Patrick West from batomic joins us to bring his perspective on the two news stories we discussed:

– Chubb creates Chubb Studio
– Coterie advertises for agency partnership manager

We spent an hour discussing the challenges of having multiple distributions channels and what having multiple channels signals to the marketplace.

Watch here:

 

 

Transcript

Nick
And we're back! After a hiatus...This Week in Coverager. It is September 11th. It is the 19th anniversary of the September 11 attacks. Not a topic we're going to get into but it is that particular week so a little, a little bit of solemn vigil later probably. But we're back from hiatus. Shefi is on assignment and filling in Shefi shoes, we have a guest Patrick West from b-atomic and of course, my partner in crime, Avi. Good morning to you both.

Avi
Good morning,

Patrick W
Hey Nick.

Nick
So this is the Patrick you're new but I think you know all about us. This is the podcast where we break down some of the news coverages for the week, you know, what was hot on the Coverager your website or what was really noteworthy or newsworthy in Insurtech, Fintech, Ed Tech, Ag tech, Reg tech. wherever we're going with this tech. What was what was noteworthy about it? And I've got Insurtech and in so I'm going to kick it over to Avi. Avi for the week ending 9/11. What were the hot topics for the week?

Avi
So two big topics in terms of clicks, Chubb, launching Chubb Studio and Coterie looking to work with agents and I think we'll start with Chubb. We've seen them very active especially outside of the US in terms of partnership. Grab is a noteworthy partner and they will launch this studio basically making their products digitally available for partners to integrate with, all the way from, you know, buying the product to servicing the claims. So definitely kind of like you want this in the future to be a standard. But I wonder if you guys think this is enough to be chosen as a partner, just because you have that offering out there. And that's always comes down to the ultimate question. Is that enough?

Patrick W
I mean, I'm happy to jump in on this part of it. I mean, I think some of this is kind of along the lines of like the embedded insurance conversation, right. And I think you know, my personal view on a lot of this is, is really when you go this route, and you start to say, look, we're just going to put insurance anywhere, meet the client where they are. I mean, Ultimately I look at it and think, Okay, are you just blatantly admitting you have no ability to create relationships? To me, that's what this screams...is, we don't know what to do anymore. We think we need to get rid of agents or we think we need to add on to what we're doing with agents, I think it's the, you know, more than they want to get rid of them side of things, right. But it to me, it just screams that, look, we just were throwing our hands up, we're gonna put this everywhere because we don't know how to create relationships. And, you know, to think that this much money gets spent on things. And then I go and I talk to agents across the country, Main street, you know, keeping communities in check. And they're like, hey, they're screaming from the top of their lungs for a ($) grand in marketing. I mean, let's go like we have professional distribution models available. And this is cool. I mean, this is good on paper. This gets exciting, but at what point do we really need to say, are we investing in the right distribution channels, and I think this is reactionary, to maybe outside of the industry forces, while the entire industry, the people that have been in it for years, they bet their whole life on it are saying, where's my, you know, come to me, let's work together on our end, you know, instead of enabling bike insurance to go on the track website, you know, as an example, so that's where I go every time when I see stuff like this.

Nick
I almost think that there's there's a branding problem, like, as you're describing that I'm thinking, you know, could they have accomplished the same thing under a different branding name? And why mix the two? And let's, assume, Pat, let's assume that they don't, they don't, they don't have like they're struggling like they just want a shotgun approach it, they want to go out. I can, I can I can kind of understand that it's complicated times they're still trying to understand like how we're going to get our product out there. But why would you use your brand name to use it as the shotgun like if you're if you're going to go like if you're gonna go direct, create a new brand. If you're going to use agents use the brand that you've always used to go through agents. Why would you sully the brand and now there's going to be you know the whole part the whole point of branding is that you want to eliminate confusion. This kind of adds confusion...a little bit. Now I will I will tell you I'm a big fan of Chubb over the years have not followed them really massively since the since the merger. But with with Ace, right, yeah, I have not really followed them since then. But before that, I mean, I thought they had an immaculate reputation. They just were known as the company that paid claims and so yeah, it's a little it's a little confusing, great brand name, and I think they might be sullying it.

Avi
It's a, it's an interesting debate, because when you think about it, like if, you know, if you keep your eyes toward the future, and everybody's talking about the future ecosystem embedded, and not just, you know, we're talking about insurance, we're talking about financial products, other services, you know, of consumers that they're looking for. You can't ignore the fact that someone like, I don't know, maybe Grab in Southeast Asia comes in and says, look, we have, you know, 50 million users. They can use insurance, like, well, let's meet them at the point of sale and Chubb is like, of course, I mean, I can't say no to this opportunity. Sure. And, you know, again, This is this is the future. And we talked about this. And we talked about agents and they think agents have a problem. And I think carriers think that agents have a problem. And they're saying, we're not saying this is a bad channel, but we have to be in other places. Because at the end of the day, you know, everybody talks about carriers for the agent, they want the agent to succeed, whatever. That's their business, they care about their business. They don't care if an agent sells it or someone like Grab sells it. So you have to be there but you're right in a way you kind of like you're, you're hurting yourself. Because if you are saying, I can't create the relationship, I can go direct to consumer, I don't have a brand to be able to win that customer. Even if Grab offers something else, then you're in a bad situation because tomorrow other insurance will come to launch their own studio. It's going to be competitive again and now. Grab has to choose. Maybe they choose one but maybe the customers are happy that they Just chose one for him. So you get into this point. So I don't think there's going to be a home run here. The fact that Chubb has a Chubb studio, it's not going to be a home run, it's still going to be very slow. But for them, it's another area where they can play in. And if they can prove the ROI and saying, look, because we've built this, we were able to attract more partners. And I can tell you a lot of times I know of a mortgage player, a digital mortgage player, that partnered with a specific Insurtech just because they were the only one that had an API offering. No one else offered that. And, you know, they got business from it. So so there's that game of kind of like, let's be faster than anyone else. But you're right. It's a very challenging proposition, because where does it take you as a business?

Patrick W
Yeah, you know, the two things I think about one, you know, when I worked for the largest auto insurer in the country, and you know, they would come out with a bank product as an example. It would stink as an agent because you're like, yeah, you know, this is more pressure to push something out now, but they didn't care because they knew there's 18,000 agents in the country. So day one, they probably sold 10,000 of that product just to those people. The second piece that I look at is when you go direct and you use agents. It reminds me of a buddy in college and our freshman year, he literally chased a girl for the whole year. She had a boyfriend was respectful about it. I mean, maybe we don't need to go there with it. But he chased her he just he liked her. You wanted to you wanted to take her out and like right at the end of our freshman year, she's like, fine, and they started dating for like the last couple months. But then literally the second she went home, she stopped calling he didn't hear from her. We were we stayed in the summer and played baseball. He didn't hear from her it was over like she went home. her new boyfriend, her old boyfriend came to the party and that was it. When I look at it, I said okay, if you're going direct, and you're going Through agents, what's going to happen is I'm going to buy online at 2am. Because I'm frustrated, I need something done. And then I'm going to church, I'm going to go to the bar, I'm gonna go wherever. And I'm going to run into the insurance agent that's in every every, you know, every city in America. And they're just going to come in and they're going to take that relationship. And so now has Chubb paid for that relationship twice, once through their digital stream, just to have the agent turn around, essentially put them in the same spot as a consumer. But to me, there's there's a lot of complication that comes with the direct and the agent route that isn't just the Hey, you know, you're kind of playing both sides of the fence. There's some other stuff that goes there and I see that relationship. poaching agents are going to clean up I mean, they got to be patient, they got to let that digital stuff go, but that's where I see the ability to just clean up it's you're gonna see him at church, you're gonna see him at Little League and how does digital compete in that environment? That's a question not a statement.

Nick
I think I've said that before. Avi, I think I've said like, it's, you know, part of the advantage of the agency system for 100 plus years has always been that local community, the the ability to form very long lasting, bonding relationships. You know, hey, you know, I'm an insurance agent, I can sell everyone I went to high school with people I went to college with, like, people I'm now seeing at church or at the, you know, the Lions Club or whatever. That's tough. Avi it gets to that point that you made several times now, which is when, you know, in that sort of face to face relationship, it's hard to say no, right? It it's one it's hard to say no when someone's just like, hey, just have a meeting with me. You know, if you know that person It's gonna be hard to say no. If you become a client, as you said, it's gonna be hard to say goodbye, you know, it's gonna be really hard to do. So I have no problem with carriers going direct. None, it's fine. I think it's going to be harder than they expect it to be. But who can go direct? Only the big players, it's just too expensive to acquire a customer. So I think there's a very high line like in terms of maybe, you know, level of surplus. And above that I think you have the financial capability of going direct...below that I don't think you really have the capability of going direct. And the agency system has proven itself. And I wish to Patrick's point I wish there was that I wish carriers spent more time trying to form long lasting relationships with their agents and treat them like this like their own internal sales force versus, you know, it feels like a conflicting relationship. And there's always this threat that, well, we're just gonna go direct anyways and compete with you. I wish there was I wish that relationship was a little bit better. But to go back to where I started, I don't mind if you know carriers go direct, that's their choice. They can do it. It's when they do both. And they do both under the same brand name. I don't understand that. It's, it's too muddled. It's you're, you're sullying the brand on that part. So I have a feeling we're, we're we're kind of all in agreement on this.

Avi
You know, you you mentioned that only the big players can you know, forge these digital partnerships because it costs money. They also have another advantage where they can come in, Grab and say, Look, we'll give you a higher commission. Our competitor can't, we'll give you a higher commission chooses And you better believe that Grab was going to say I need to make money like, I don't care what this other player, it's insurance. It's the same let's go with the highest bidder. But, you know, it's we talked about agents like I tell you, for example, when you look at the life insurance space, I don't see how you could work with new agents today because new agents today are young, their friends are young, they're not getting married. yet. They're not having kids. So you can't work with them. It's a it's going to be difficult for insurance companies, life insurance companies to keep on recruiting like they recruited in previous years. So you need to find a partnership that is able to target 35 year olds, I just read Brooke Shields....when did she discovered that she needs life insurance when she was pregnant? That's the moment Yeah. When she was pregnant, and you know, I speak with so many others. And we've been we've been doing some research around the age of when they were actually like PolicyGenius, Bestow, Health IQ, what is the age group and these are not millennials like You're very kind of they're barely millennials because again 35 to 45 a lot of people delay this purchase so I don't think you can now go to a college student graduate say hey, you want to be financially dependent, come sell life insurance. You can't sell to your friends. I mean unless you get married and then make the main kids

Nick
Pat I don't know, I don't know what your experiences on the life side but life insurance being a life agent seems like a Herculean task. I don't understand it. P&C has relevancy like you have to buy auto insurance like there's, there's a gun to your head, figuratively, to do that. I think of Brett Williams from Benekiva, who has sold a lot of life insurance but he was financial planner. Right. And I think he, you know, I think that's a nice marriage because the life insurance becomes part of the financial planning process. The risk management. Also, you know, the deferment of taxes. There's a whole bunch of uses for life insurance. I think financial planners kind of nail that down. I just don't see, like life agents like that. I don't see what what value do they bring other than making the transaction? Have you done life Pat,

Patrick W
What's that?

Nick
Have you done life?

Patrick W
That's where I started. Yeah. So I was I started at Northwestern Mutual at 20 years old as a college junior. So and I went full time like a year into it. So it was just different at that point, but I think it's reckless. I mean, I think there's two sides of it. It's reckless to bring somebody young into a captive or even just a life insurance only environment unless it's Hey, you're a specialist inside of our P&C. out. And the second piece of it is like, hey, and I this is a challenge that I make to every agent I talked to is, you know, the idea of life only agent. The only reason that exists is is one we need to support some old industry structure that every a lot of people still depend on. But the other part is that P&C agents just leave it on the table. And so the Insurtech side of it where, you know, I don't pretend to be on either side of the debate, but I think Insurtech and Mainstreet if you want to call it, agencies, independent agencies, that the life insurance opportunity that Insurtech sees could be swallowed up with the pretty just consistent couple of years honestly of P&C focused agencies just writing life insurance. You know, the captives have their, you know, twice a year events that you win, prizes and trips and all that stuff. If the IA channel started to have twice a year, where they just pump through their book to find life insurance. I think the Insurtech side of it unless it's something unique, I've seen some really cool products like, you know, products that change as your life changes, they're AI driven. That's a product thing again, but that still could fit into the agency side. So I think it's an opportunity that exists because agencies are so tied into P&C, which is understandable. It's the way the revenue model is created. But yeah, I always challenge people to sell more life insurance, if they're in that agency environment.

Nick
It's it's a natural fit. I mean, it's got the word insurance in it. So I think for the majority of people that do business with an agent on the P&C side, if like, they get a Brooke Shields moment where all sudden they're pregnant and like, shoot, I need to buy some life insurance. Who do I call? What about the guy that sold me my auto, right? Natural like that, that would happen.

Patrick W
People still call me like, Dude, are you still in life insurance and like, you haven't talked to me since I was 37 now like, No, I don't but yeah, your call this person too because I kind of, you know, like, I could build you up. So I get calls for people constantly when I, because I try to hit up everybody. I mean, I was talking to 22 year old people about

Avi
it's a very longer sales cycle. Yeah, the thing is like you're literally you could talk to someone and maybe years later, they will give you a call because they need it now and they remember you and that's the thing they remember you. But it's very difficult for a human to do it because as humans, you know, we lose patience and we get frustrated and we're like, this is not working. So, you know, at the end of the day, the way I look at it, and yesterday Century 21 was in the news, they're going bankrupt. Some brands, some, you know, clothing brands, shoe brands, they don't want to be in department stores. They don't want to have that 50% off stick around their shoe and even then some that do believe and say you know what, let's go into Nordstrom. Let's go into century 21. They still have the confidence that a consumer will remember their brand will see a friend Yeah, that's your clothing. Yeah, with insurance like, no one's like, Well, my friend has job you know, it's

Nick
When you are when you're introducing the Chubb story I was thinking of with like Chubb studio in situations like this. Could this be a similar situation where you know the internet comes and retails just like, what do we do with this thing? And they kind of created a wall. So that Think of it like, you know, we're going direct, but we're going also going to use the agency system, it seems very similar to how retail had the, the, the walled stores and then like, Oh, well, we need an online presence. And then the two were different. And they kept them different and they didn't do the they didn't roll up their sleeves and do the necessary work to integrate those. And then along comes Apple, whose was a digital player and said, oh, we're gonna open some retail stores and everyone's just like, Are you nuts like retails dead? and Apple's like, no, we're going to merge these two and they're going to work nicely together. Now you see Walmart doing it. And I know Nordstrom is still kind of experimenting with this model, but they're they're doing those sort of things I almost see as the same way. It's just like, you can do it. But if you're just like trying to make a buck, the way like Patrick was sort of describing it like, you just want to like make money. You're admitting you can't form relationships. It's almost doomed. Right? Right from the start. It's like you got to roll up your sleeves and like figure out how to integrate those two pieces. And I think it could work. But I my my opinion is that I think they should...I think they should separate the brands because I don't I know they're not going to roll up their sleeves. They're not going to do that necessary work so they can't get it the way Apple got retail, and digital

Patrick W
I'll give him a reason to do it. If you google search Chubb Studio, and I'm not going to get any deeper than that, I think we both know what I'm going out here, right? Like, if you google search something like Chubb Studio, what's gonna pop up below what they have? I mean, did anybody not think of those types of things too? And I'm not again, I'm not trying to be gross or anything like that. But at what point did you sit back as a product person and say, Look, do these Google searches are going to come back and they're gonna be gross?

Avi
No, you know, I think, yeah, listen, you know what, with Walmart and there's beauty to offline because when you get into a Walmart, and just like when you go eat at a restaurant, you may be tempted to order an appetizer or dessert. And when you go into Walmart, you go into this aisle and say, You know what, I didn't see this barbecue sauce before. Let me take it. When you're online, you're very kind of goal oriented. You don't have any distractions. You know, with insurance. Look, Nick, if they could fire on all cylinders and be here and be there. That's great for them. Like, I think if they'll have that headstart, they will win business because at the end of the day, a lot of consumers are indifferent than they say if Grab is saying that job is good. If this watch a brand saying that job is good, I'm going with it. I don't want to compare like, I'm fine with the price. Let me do it. And that's a great way for Chubb to win business. At the end of the day, if the you know, the playing field is leveled, then you say, Well, is there any brand element and we know that there are no brands or insurance in my opinion, at least so then it's up to the partner to kind of push the specific insurer and to me, like if I'm Chubb I'm big and powerful Chubb. I'm like, Wait a second. I mean, can I do something else to control my destiny because right now you're kind of offering your product and you hope people will implement them in their digital stores or wherever. I don't think that 20/30 years from now, that is going to be a wise strategy. Because at the end of the day, you know to replace a partner is simply a matter of Can I get a better commission? Can they be more flexible? And whoever owns that customer? whoever owns that interaction is going to be on the winning side for sure.

Nick
Alignment of interest...Avi, I think topic number two is similar to topic number one, why don't you go...

Avi
You know, it's Let me tell you I topic number two, and we talked about Coterie in the past and I'll tell you one thing that kind of bothers me right now at least so on their website, Coterie, they have the job ad, they're looking for a VP of agency distribution, you know, kind of be responsible for developing that channel. But if I go one second, and I look at there on the right, they have a text box right next to the ad and it reads Coterie is a well funded Insurtech startup that does distributes commercial insurance via API and partnerships, rather than insurance agents. So if you're looking for an agent, I mean, wouldn't you kind of at least remove that text box, change it? The ad is for the agent and someone is reading that and they're saying so they sell without agents, but they're looking for agents. Come on. That's like number one. Number two and like you Pat because this is a question we hear from many insurtechs. What can Insurtech do to successfully recruit agents, like what what is the sell? Like? What do you need to offer agents? And I'll tell you Next Insurance is working with thousands of agents. Attune which considers itself an Insurtech works with thousands of agents. Coverwallet they have a different take on how they work with agents. Everybody is now going after agents. So in a way I feel like Insurtechs will become kind of like you know, your traditional carrier because I mean, what's The difference like when one Insurtech comes to you and says, oh, and you're the agents like, Oh, I work with an insurtech like I have an Insurtech in my mix. That's great. But now you have all of these coming after you. So what can coterie do to successfully recruit agents?

Patrick W
Yeah, I, you talked about it in the last topic too. And I've told you, they know who they are. I've told them over and over, you know, if you want to, if you want to get in front of agents, and you want agents to pay attention to you, and you want to be the 14th relationship of, you know, in the group, you have to you have to provide something unique and I think there's three ways that you can approach that the most obvious and to be perfectly upfront, if you have hundreds of millions in funding, pay agents more there's nothing about that, that that even is hard to they you have funding and you're gonna give me a lower commission and you want me to sell your product over relationships I've had for a decade. It's to me that's so obvious. They fight it, because again, they started with I don't want to work with agents. Now they're like, yeah, that was stupid. Now I need to and they know what's the

Nick
what's the what's the cheapest way we can do it?

Patrick W
Yeah, like, again, it's it's it to me I feel like it's a question of are you trying to add agencies onto your story so you can say we have this much potential in the future so that you can just get closer to that exit that a lot of founders probably in my opinion have right now. You know, it's just, they don't see that you're not building a 30 year company and most of these environments. The second thing is either given you have to give them something unique. Agents pay for MVRs, agents pay for VOIP, agents pay for a lot of things that technology driven carriers can educate them on and they don't do it. They think they want more articles about what to do when your car breaks down. I live in Illinois if my car breaks down the toll road guys pull up behind me 30 seconds later, I could care less guys stop about it. What's unique? How can if you have for behavioral economists are you have five engineers? Why not have them talk to me about something totally not?

Nick
My god, yes.

Patrick W
Why do I need to hear about all the same basic stuff? And they've been told these things, guys, and you know, because you've been telling them to they don't care because they're telling a story towards an exit strategy. But again, that's number two. The third thing and actually why I think the numbers you're talking about, we should look deeper into them is I think, if you the one advantage and Insurtech carrier has is with scratch agents, scratch agents in the United States get treated like the poop emoji, right?

Nick
Can you can you can you define scratch agent?

Patrick W
Scratch agents, somebody that is literally they didn't buy their book, they're starting at zero policies, day one, they have 00 carrier agreements. It's a true zero start, right? Not you didn't buy a book or anything like that. So you might have experience it's not an experience thing, which makes it even worse. You have some, you know, a stud in Alabama, you guys know who I'm talking about it, he gets invited to conferences to talk about how to run agencies by carriers that won't appoint him. Come on. So Insurtech has a huge advantage in their ability to identify scratch agencies, first year, second year agents that just want to have some options for the relationships they have. And I'll tell you right now, if you think you're a big carrier, and people are going to sell Insurtech for a couple years, and then when they're big enough for your standards, they're going to come to you, you're crazy, you're going to miss the boat. And I warn incumbents every day about that if you ignore those scratch agents, if you're no matter what you are, if you're a vendor, if you're a carrier, any of those people that ignore relationships with scratch agencies are going to pay for it and it's not even be that long. It's going to be five years from now. They're going to be paying for that. So yeah, those are the three things I would talk about.

Nick
Go ahead Avi

Avi
You know, that's that's a good point. And you know, There's actually a company that specifically what you just said of ignoring, you know, kind of like the tier two agents those that don't bring a lot in premiums every year, they went after them. And they grew to over 100 million in premiums and a few years. And that was their strategy. But now everybody is going after agents. Everyone I feel like yeah, in the commercial space, so like your point, give them something valuable give them you know, technology, talk to them, maybe help them with marketing be more, I mean,

Nick
Maybe they're incapable, but honestly, like, I don't know why it's sort of like dawned on me. They they don't know how to sell either or else they would have done direct so they don't know how to market either. So it's maybe it's like a self fulfilling prophecy where it's just like, you know, they've they've done it in the past they've given marketing dollars and nothing worked. And it's just like, but they can't provide any guidance because they don't know how to do it.

Avi
So here's the thing, and people need to understand this. And to me, it was a surprise because the founder of Coterie came from Clearcover. And you know, the whole API approach, it's not new. They know that it didn't work there. And you know, Clearcover is after agents. Everybody knows that. And, like, I want to ask, like, why, why did you think you could make it work because there is no scale in this model. You can say, let me wake up one day. And I'm going to go to all the digital partners out there and I'm going to have them you know, implement my piece of code and then their users are magically going to buy insurance you have to understand also like the fact that you are integrated with a kind of like a small business software or something. That doesn't mean that the user is going to see the insurance and buy it. They may not need it. They may already have insurance. Now. You have to also look at the line of business. Commercial insurance unlike personal lines, auto or home, people don't compare commercial insurance often. You buy it, you kind of stick with it, because to begin with your options are not very, you know, they're not endless. You don't have Geico and Nationwide and Allstate and State Farm and Travelers, you know, you have like very limited companies, and maybe CNA is gonna be $2,000 more than what the Hartford is. And, you know, what are you comparing? So, there's that element. But But again, it's a surprise. So you're right. You can't first you cannot sell online. I always say that to people you cannot sell you can offer, you can offer a product and maybe if the user comes in, they'll decide to buy. That's all you can do. But to me not to go after the agent. And, you know, Pat talked about an exit strategy and I was speaking to someone from an Insurtech startup. And that person told me, you know, if you want an exit you need kind of have a strategy of what sets you apart. And when someone buys you, what are they getting? So if someone is buying coterie What are they getting? It's exactly the same thing as anyone else. Now, it's you started with the API, which was unique. Sure you were committed to that. Of course, that doesn't work. Now you're after agents. So is that the future? Is that modern insurance? I don't think so. So I think even for an exit strategy, it's going to be very difficult for them to convince someone to say, we're better. You should buy us.

Patrick W
I think what you you know, you see different kinds of founders, you see founders with backgrounds, you know, obviously not speaking specifically to Coterie when I say this, but, you know, I think what we're seeing with a lot of Insurtech is that they end up coming from, you know, investment front firms that are funds that are, you know, used to being an insurance or they come from investment funds literally created by insurance, right. And the idea is that, I think in a lot of ways, they're in r&d kind of a offshore if you want to call it that a third party r&d environment, that I think there's some good technology there, I think there's some really interesting innovation happening at the product level. So my expectation is that a lot of these people that have relationships, and came from kind of around the industry or in the industry, I think they're gonna be able to take those back to the carriers, but the idea that you know, Insurtech is going to, like, somehow become the new norm is is crazy. I mean, the economy or the uncertainty in the world right now. You know, people aren't trying to just risk it all and I think any kind of offer from a carrier, you know, if they wanted if they need it is probably about the only realistic thing like, Hey, I have friends that know what I built, they know how they can use it. And, you know, maybe it's not the sweetest deal ever, but it gets us out of this environment that we're in now. It wouldn't say surprised me to see that. But you know, again, we're one of the hashtags you guys forgot at the beginning was was the Inditech part of it. And with my new role at neon and b-atomic and developing neon, as a product manager, I can tell you guys, you know, and Seth, they'll tell you this point blank, we need to know where the groups that we introduce to our network, we need to know where they come from, as far as, you know, experience in the industry, it doesn't matter. You don't have to have 30 years of agency experience. But did you start off saying agents are on their way out? And we're that first wave that takes them out? Or, you know, are you saying, hey, look, I understand how distribution works. I'm freaking awesome at building software. I'm awesome at branding and messaging. But hey, can you guys create relationships with me? I mean, we always are looking at that and and you know, I mean, we do what's best for our business period, but at the end of the day, the indietech environment is absolutely a rebuttal to Insurtech that thought they had the solutions that Facebook ads, you know, somehow totally negated a century long sales process like, oh, I'll just, they'll see different Google ads and different Facebook ads and they'll buy eventually. No, the agent they've known for 20 years is going to make sure that he takes care of them. And he's patient. And I just don't think that traditional sales cycle was disrupted at any level. And certainly social media is a great medium for connecting with clients. I don't think it's a great nudge to get people to buy at any kind of consistent club.

Nick
Yeah, the same leverage, the same value that social media gives direct companies gives the same amplification to agents. They can forge the same and they have an advantage because their actual human being, they can actually forge stronger relationships. So I start to, I mean, you guys are bringing up great points, I can't help. This isn't, I know, Coterie is more of a mgu. So I'm really thinking of the carrier space. And I'm thinking in an insurance world where the product is highly commoditized, who has the advantage? And to me the advantage comes with the big players that can spend a ton of money we see it GEICOs, you know, they can just spend billions of dollars on advertisement just constantly being your face to get your attention. And I think the, you're gonna see and it's the agency system, where there's a professional level of sales and marketing within those agencies, huge advantage in a commodified world. So from a carrier's perspective, I think they can do one of two things. They can if they can't go Direct, then they have no choice. They can't just go to the agency system and just try to shotgun it. They're really because most likely they have a commodified product most likely. Therefore it is in their best interest to really lock in with select agents that they can form long term relationships with, and basically be a conduit between the two to make sure that that agency system that they've partnered with has that professional level sales and marketing so they can sell their commodity product or part two, decommodify. Your product, distinguish it, make it make it something special that is in a very small market and then people have to come to you to buy it. And I don't see carriers doing that. I think they would much rather spend as much money on the marketing stuff. But if you're, you know, a mutual or Farm Bureau or regional, you're not, you're not going to have that budget. So you have two choices, I think that you can't really go direct, you either have to form a strong relationship with your agency system, better relationship with the agency system. And, or, and/or really take take your product and decommoditize. it

Avi
You know, in the commercial space, you know, it's not as easy to go buy car insurance online like you could do with Geico and Nationwide and Progressive. So most of the policies still go through agents. So obviously for Coterie and Next and Coverwallet and you know, anyone else Pie Insurance?

Nick
Oh, you know what, you know Avi, there's, there's a reason why. it's much more it's much more complex, of course, very complicated. I mean, like you like you said, it can't be sold (online). Like you can't you can't go online and buy like Yo, if you had one car Yeah, I think you could Commercial auto, you have more than one car, you have three, you have a fleet. Absolutely no way you want...you need a commercial agent that understands fleets, understands commercial auto, again, basically say no, you don't want to do that. It this. I mean, there are codes in commercial auto where if you get those codes wrong, you will not have coverage. Yeah, you can't expect a layperson to go in and start understanding Oh, do you know, do I need non own and hired auto? Do I? It's impossible. So it gets to your point like that can't be sold. And that's why they have to go through agents. It's

Patrick W
Yeah, everybody has no like, Hey, what do we do? Right? We know but what do we do? And it's doable. You know, I wrote an article about it last year, and it was, you know, whether the idea was whether or not hardware stores were a cautionary tale for the main street local insurance agent. And the answer is, absolutely there's no doubt about it, but when you look at models like Ace Hardware, or you look at the hardware stores that did survive the family owned ones, right, they had niche data, they had a local presence and a local understanding. They had niche, they had a niche product. You know, if you live in a different environment than I do, Avi the same way our hardware store needs are different. Those local stores did it. So there is a way to do it. It's very difficult, but it's absolutely necessary because the consumer is going to lose on the other end of things in the environment Nick's coming across and are talking about if agents aren't there, back to my earlier comment to steal that relationship back. Cleaning up is a look like, I know, I know. It felt good to be out. I feel like I'm the one that's gonna treat you the right way. And it's not BS. I can list it I'm a professional I know how to do this.

Avi
You know, it's really like I think one of the problems when you're a founder and especially if you've come with a you know, from my like a tech background and you look at all these other startups that you know, I've seen wide adoption Like, you know, even Warby Parker, I'll say or don't, they're not a tech company. They say they are a tech company but, you know, Chime and Acorns and millions and millions of users and Robin Hood, there are no home runs in insurance. That is the the biggest problem you have to deal with first. The second is like, look at your line of business, look at the consumer. And you know what I can tell you like, if you target with a product that's very, like, low end, very cheap, you're going to target, you know, attract a very specific audience that when the rate goes up, they're gonna go shopping elsewhere. That's what it is. I mean, there are no secrets. I mean, that's what you offer. That's what they bought. You know, I think you asked the question, like, who has the advantage? I and I, when we were at a webinar with Seth, I said, you know, because to me like agents, my opinion is that agents need to be different. I don't believe in I say this all the time. I don't believe insurance companies or agents have the right to be consumer facing brands. You don't offer a product, especially like if you're in the specialty lines, something very specific, like commercial, you know, you could say yes, but but in others, I would say no. But I like the fact that you can work with agents. And I'll tell you why. Because if I, let's say, with a carrier, and you would tell me, okay, you have to choose, are you going full in on Coterie? Or you're going full in on 5000 agents. And it's the same amount of money. I would go with 5000 agents. And I'll tell you why. It's much easier to break the spirit of one company than it is to break the spirit to 5000 agents, because that agent may be lazy, or he may lose confidence. But that (other) one, oh boy, that one is very creative. And he's able to get clients I can't even believe that he was able to get these clients. And that's where you kind of insurance was always that way. You want to take the fight to the street and you want to have different tactics and you let people loose. I still believe that you know, if you look in time and you know, 20/30 years and we're already seeing this, like people that grow up in digit environment. They don't know what an insurance agent is. They go on Google and they search for car insurance or car insurance companies. Very few search for an agent. Why I mean different reasons. So either carriers help agents be more popular, you know, just like they did with the Got Milk? and get people to drink more milk. Either you do that. And if you don't do that, then you have to make sure that your brand is more popular. And I always say like, and this goes back to Chubb studio, you could offer your product so others will choose it, or you could be that platform and integrate your product with it. And you know what, it's fine even if you don't sell because you're not going to sell 100% of the time, but I want to see an insurance carrier or a commercial insurance carrier. I want to see them offering something else that's relevant for businesses. It doesn't have to be insurance, it could be legal, it could be recruiting, it could be so many other things and you have to like understand Be for you going forward, insurance is not going to be the main business. Because if it is the main business and you're going to lose, most will lose. Because it is a commodity. And it is driven by consumers. It is driven by price. And it's very difficult to get it across.

Patrick W
Yeah, yeah, I would just say I, you know, I'm gonna throw this in here, but we call him neons at b-atomic and there's agents that are out there that are that are thinking the way that we do that are thinking like Insurtech that own relationships. And so that's my, you know, again, I'll take that little is that my book pitch moment kind of thing. But

Avi
no, no, no, yes.

Patrick W
That was my big surprise when I switched into my current role. If you think insurance is dusty, you think insurance is you know, doesn't care. Keep thinking that way. Please. I don't I don't need any more people. I don't need anybody else to follow what we're doing because it Mainstreet is a lot more innovative. And not just in insurance. I mean people are leaving Silicon Valley they're moving to the Midwest they're moving to places that that you wouldn't think innovation necessarily is going to be a hub at. Des Moines, Columbus, places like that are starting to be Insurtech hubs. But the reality of it is is just, you know, a man this is we're underscoring innovation at mainstream level, whether it's insurance or whether it's any other I think high tech areas, it's coming. It's coming into a different reality with the stay at home and the less travel and, you know, remote workers and dispersed workforces.

Nick
I think sports provide the good metaphor/analogy or comparable here. It feels like we're in the era, Pat of, you know, the first few innings of Moneyball for baseball you know, really old industry. Did scouting in a particular way for generations. And here's this, you know, new way of thinking and it was like completely rejected for a while now everybody's doing it and they're doing it in other sports. And I just can't help but think as you were sort of describing both of you are sort of describing some, some of your points that I think the sales is hard. Selling insurance is really difficult. And to me, it's like a baseball prospect. Most of them are going to fail. So most of the salespeople are not going to make it. But there are very few like Mike Trouts, like they're very few players that sort of stand out at the beginning level and sort of keep standing out like the whole way through. More often than not what ends up happening is you find like the diamonds in the rough. There's so many of them, they end up like you know, they weren't highly recruited, they weren't drafted high, but they worked hard and you had to you had to give you had to invest resources into them to mature that. And I think that, to me is the big thing that's missing with the carrier/agency relationship and I think carriers don't know how to do it, but they should start thinking themselves as like major league baseball teams, and providing investment to to their distribution channel because it's that investment that's going to plant seeds and allow those diamonds this kind of, or the fruits, probably better the fruits to kind of emerge from that because you don't know which ones. What are the odds that you're going to shock on, you know, 50 college students that graduate for some sort of sales position. You're gonna you're you know, you don't know which one is going to nail it. It takes time, it takes investment sometimes the ones that like the the ones that star early are the ones that peter out later on like it. That to me is I think the big dynamic is in in that particular relationship and if the risk bearing entity, carrier, MGA, reinsurer whatever, is not going to make the investment, then they're just going to always have problems selling their product and I just...do want to sell more product or not?

Patrick W
invest in the people that get on base if you're going to bring out Moneyball. You know, Pete, why do we like him? Because he gets on base. Guys, I'm gonna keep pointing to Pete. That's me, right? I'm going to need insurance agents get on base. Why this continues to be a debate or a fight that we have with Insurtech is ego driven or they just literally don't have any other part of their story. that's compelling. If I'm going to take the 6% or 8%, I need for agents out of the equation. The rest of your story kind of sucks. And I'm sorry to say that go home, try again, or invest in agents and do it the right way. Pay him more, give them resources that aren't bullshit blog posts, and treat them like the special humans...

Nick
Have a strategy. Just have a strategy! That doesn't mean you have to treat all agents the same. It just means like, Who do you want representing your product in the marketplace? If you're if, if you're going to shotgun it and just say, well, whoever can sell you're gonna have to bear the consequences of that. Unfortunately. No, that works really.

Avi
Pat is b-atomic/neon, the platform. Are you guys going to work with insurtechs? Is that going to be part of the solution or

Patrick W
absolutely 100% I mean, anything that positions agents to find margin, to create better data. And again, people that want to keep money inside of the insurance ecosystem. I mean, that's what we're about at this point, because so much of that money gets sold as data out the back door. It is used for other private equity purchases, if agents are the ones that are getting compensated for that data for those sales, and that money stays inside of the ecosystem, that's where you're gonna see some really kick ass Insurtech because it's going to be agent backed. It's going to be agent bill. Neon is, in my opinion, one of the first platforms that's that's utilizing that model. But I actually think there's a lot of direct stuff that comes up but the reality is agent built a middle America built, there's some rust belt stuff that's coming out, that's going to be cool. And so I think, I think Insurtech what it's been for the last three or four years was fun, but it was probably just that it probably wasn't a whole lot that is going to just totally change the game, it still comes back to agents creating relationships. So yeah, we want to work with Insurtech. Absolutely. But like I said, if, if you came in at the idea that agents didn't need to be a part of it, I handle that part of the business, I need to have a deeper discussion with you. And it can't just be Hey, I was wrong, it needs to be deeper than that. And and that's, that's part of the game. And I think our agents in the indie tech environment respects us for doing it that way.

Avi
You know, I think I mean, to your point, but and, you know, why are we even here? Like, really? What is this all about? And I feel like, it must be driven, but a lot of young people that came into the insurance workforce, and obviously everybody's talking about insurance as a big guy, you know, talent problem, and a lot of people are retiring and all that. But a lot of young people came in that want to do things differently, and you know what, they don't have the patience to recruit 500 people, so maybe 20 will make it. That's that's think so me like to have that process. I mean, who wants to do that? It's not automated. It's, it takes time. And that's the thing, the grind. And I feel like that's why a lot of part of it is why companies came in with the say like, let's replace agents. And again, well,

Nick
yeah, I think they're comparing it to other industries, though. Yeah. So I think a lot of folks are coming in and just saying, excuse me, it is the cost of acquisition is15%? It's in other industries. It's 1%. We should be driving it down to that. What are these people doing?

Avi
Yeah, no, don't don't forget this. That really the battle and I mean, that's, I've been saying that all the time. The battle is not insurance agents versus Insurtech. The battle is other companies and insurance. They don't care if you're a Agent, they don't care if you're an Insurtech. And the it's a really like a challenge that again, different lines of business mean different things and you need that person in the mix, of course. But I think, right now if again, if I had to make a personal bet, I'll bet on agents, especially in the commercial space, but moving forward like I'm if I'm an insurance carrier, I'm you know, preparing my strategy to a world where agents are not all the time in the mix, because you will simplify even in commercial you will be able to simplify some coverages and give consumers that peace of mind. We looked at your data, we have your payroll data, we know exactly what you're doing. We compared it to others in your space. This is the policy and we stand behind it. This is what you need to get. So there's that element. But I think, I think Yeah, you mentioned you know, Insurtech so far, aside from the companies that send out and we see more companies stand out in the personal space because easier to get the message across. And see results in the personal space. Commercial is a different animal. And you're you're battling not just again, like, let's find good b2b partners to put our products there. It's also a lot of times lack of awareness, a business owner, something doesn't even know what coverage they need, or if they need coverage, or if they are covered, they're not covered. So a very challenging space.

Patrick W
We talked about a baked idea, and you know, if an idea is truly baked, and I think that's where the insurance agencies just continue to stand out that it's not, and I got some, you know, I talked about fin tech and how, oh, I sell Lemonade through my, you know, credit scoring app. So I have a Insurtech element, like it's a mono line referral that you make, I mean, insurance agencies. Excuse me, I mean, they're baked, they've got the, they've got the systems, they've got the infrastructure. I just don't see the point in spending 10/20/$30 million trying to create an alternative distribution. model that puts you next to you know custom sneakers, that puts you next to jerseys, that put you next to Cologne, like the sexiest stuff in the world. And now you're going to go on that platform you're telling me you're going to compete? No, like you have to I always say like you have to you have to Zig when everybody else is zagging and insurance, I don't know if that could be any more drag our industry man if you you do what everybody else is doing. It is so expensive that I just I don't get it. I I don't know.

Avi
It's it's expensive for the insurtechs. Like for an Insurtech for Bestow to pay their commission for acquisition, that doesn't make sense, for life insurance company like Northwestern Mutual, not a big deal. I'll pay it. I have no problem. That's what I pay the agent anyway. But I'll tell you what's a positive and from the company from Clearcover that the founder of Coterie came with the API approach There is another former employee that came with a very different approach, that he doesn't believe in API's. And he doesn't believe that you can scale that model. And it's a completely different model. And at the end of the day, that's what it's about, like we're in business. We talk about technology and all that the person driving the strategy is someone with different thoughts and different opinions on how they can do things. So we'd always see the different solutions out there. And I think time will tell what's going to happen But to your point, Nick, like sit down and have a strategy. We understand you're not here to build a carrier for 100 years but if your strategy is an exit, think very hard what you need to do to differentiate yourself for a few years at least.

Patrick W
Do more, do more. Do more. There's no way that you're I hate to say it, but like online popularity does not transfer down to agency level decisions. Yeah, they like your brand. Yeah, they might like your edge. Maybe agree with your message, but they need you, you have to be so much more on top of that you have to outwork your competition to get inside of that agency network, in my opinion. And I think that's fair. I do think these agents make a lot of money, they run very successful businesses. And you know, from my perspective, have some help bring some humility to it. When you talk to these people that owe you understand one part of the technology ecosystem. This person spent the last 13 years building a $25 million book of insurance business, highly competitive, very expensive. This person's a major league business manager in a lot of circumstances, they might be some of the smartest business people in their community. Sometimes, if you're trying to partner with them, I think you need to, you need to approach it with some humility and understand that before you say, Oh, these are guys that are just, you know, whatever, they just golf and they go to their office for two hours. hours? No, they don't keep thinking that if you compete with me keep thinking that but it's it's so far off a reality.

Nick
Yeah, I think we're just gonna have to keep having this conversation. But I just think it boils, you know, probably the biggest misunderstood aspect of insurance is distribution. And so for those listening this is we're not favoring agents over direct or anything like that. It's just this is a complicated...it's, it's a very complicated product. You know, it's just like Patrick just said, You can't make it sexy. It just, it just can't like it's just not possible. So that's why we focus so much on the distribution angle of it, because it's such a competitive advantage. And I think it's just, it's an afterthought. Let's build the product and then we'll figure out how to sell it. And I think companies get into all sorts of problems when they do that, so...Awesome conversation guys.Patrick West from be atomic and neon. Thank you for guest guest hosting guests appearing?? What, however you say

Patrick W
I'm doing my best Shefi impression. By the way, Shefi I love you, you're my idol.

Nick
Your best Shefi impression would have been to yell at Avi.

Patrick W
I spent a day with Avi in New York and the two of them on the phone. Is there some special about that!

Nick
Absolutely.

And Avi, as usual, thank you. This was a again, spirited discussion, I hope I hope the listeners got something out of it. We're gonna have more of these, you know, I think going forward just because distribution is just so important. So any sort of nugget we can provide on, you know, insight that might help people kind of square this stuff away. I think it's very helpful. So, Patrick West, Avi, everyone that's listening. Happy Friday. happy weekend. This is This Week in Coverager for the week ending 9/11. Very solemn day. So I hope everyone remembers, you know that particular moment in time and have your own, you know, personal reflections on what that means for all of us. So, for Avi for Patrick, everyone, happy weekend.

Avi
Happy weekend.

Transcribed by https://otter.ai