This Week in Coverager (week ending 11/13/2020)

This week, Avi and Nick welcome Shefi back from assignment.

Discussed:

  • Brown & Brown’s acquisition of Coverhound
  • Lemonade forming a life insurance agency
  • And a Wait-For-It moment near the end where we discuss Turkey Insurance with Avi.

Watch here:

 

 

Outro music Gathering Crowds by John Scott
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Transcript

Nick
And we're back. And we're live. This is the, This Week in Coverager podcast. This is the podcast where we go over some of the news, heavy news articles that have occurred in fintech, Insurtech, any other kind of tech, insurance that we found in Coverager? I am Nick Lamparelli. I'm in podcasting headquarters in Naples, Florida. My co host, as usual is Avi, who's in Coverager headquarters in New York City. And who is this person? This she's she's back from assignments, back from assignment. Shefi is back also in the other Coverager headquarters in New York City. So Shefi welcome back.

Shefi
Thank you. Good to be here.

Nick
Avi good Happy Friday.

Avi
Hello, everyone

Shefi
Happy Friday.

Nick
Again. So this is the podcast where we discuss news articles and this was the juicy week. Some really some really good stuff. I think we're gonna have some good conversation. So I'll kick it over to Shefi for our news item number one, what is it?

Shefi
Brown & Brown acquiring Coverhound. So Coverhound has been in business for 20 years. And I think similar, Avi did a really nice piece on The Zebra, which was not promotional. By the way, in case anybody's wondering if we do promote something, it's under the sponsored newsletter. It was just a good story. Anyway, so Brown & Brown, acquired Coverhound and I think with Coverhound, everybody probably knows, right, this is an insurance aggregator of personal lines, business lines, they do have an an another sub brand called Cyberpolicy, which they initially launched for cyber insurance. But it also includes commercial and business insurance, and Coverhound like Compare.com, and The Zebra in a sense on the personal line front is an insurance aggregator. And what do I think about it? So obviously, we don't know the acquisition costs. It was undisclosed. What we do know about Brown and Brown is it it's, you know, the sixth largest independent broker in the US and I, when I think about Brown and Brown, obviously, they know acquisitions very well. But the thing with acquisitions is they, they will acquire companies and let them be or acquire companies and kind of swallow them. This can't work with Coverhound. So you kind of you got a fuel Coverhound because this isn't necessarily a company that has has been successful competing with the changing landscape, right? So we've got in the insurance aggregator space, we've got exact competition from like, you know, like companies. And then you've got different kinds of companies that are emerging, like Gabby and Jerry. And these two are becoming competitors on the personal line front, right, commercial is a different story. So do I, I'm not entirely convinced that Brown and Brown will know what to do with Coverhound. Obviously, I think that Brown & Brown is looking at Lockton. Lockton in has Milo so for them cover hound is going to be the, you know, the Milo equivalent of Lockton. And Lockton, by the way, or my life should say just file the form D for $11 million. They've previously, two to two years ago, they wait they raised 28 million. So I you know, obviously with insurance is a very much a mee-too industry, you see something there and you kind of want it and you're copying a strategy. Ah, I don't know. I'm not a believer.

Avi
It's, it's it's so you know, again, it's a company that you know, kind of was standing still, you look at their traffic numbers, decline in employees. You know, I'm unlike The Zebra and PolicyGenius and Gabby and Jerry. They weren't growing and I you know what, I don't know if they were putting much of an effort. You look at their organic presence on Google you look at their traffic numbers. So if you know if you're not able to compete organically like Everquote for example, then you compete on this play and you put your ads everywhere but you know, you know we covered The Zebra we did the story. It is such a broken process. The whole model. Yes, it is better for consumers to go through The Zebra to go through cover hound and not have to go to GEICO go to State Farm, Allstate, Progressive put their information all over again and again. But it is not a great experience. And at the end of the day, the most important thing to remember is that if the price is not good, if there are no savings, you're not going to sell now, this is a point that we should talk about. Because in The UK where the model works perfectly for comparison sites, what are they complaining about? They are complaining about consumers forgetting to compare. They always tell consumers don't forget to compare, because if you forget to compare, you will not save. So they're trying to encourage people to compare more often now the people that have it in them to compare every six months, they'll find the provider and they're probably not going to find Coverhound because the Coverhound is not advertising, they don't have that organic presence. So again, Everquote, all these media alpha and quinstreet, and all these other companies. So I don't know, they weren't really competing. And I can understand, you know, the acquisition from a digital perspective. And you know, as Shefi said, sometimes you buy a company just for the capabilities. And, you know, a lot of times these acquisition is basically, okay, let us get our hands on a digital company that has software engineers, has product people, and they'll do the work for us. And in a lot of sense, Coverwallet was kind of I would think, what what it was for, for Aon, it was more of a technology company that can build things fast and experiment, and not necessarily because of the policies that it sold in their book of business. But you know, it's a really, it's a interesting

Shefi
It's a challenging time. Look at compare.com again, it's another company that was, that was doing better than it is today. That's how that's how I'm going to put it the advantage of Coverhound is that it is personal and commercial line. So Brown, and Brown has a lot to work with, again, this Brown and Brown have the capabilities to go ahead and take and give Coverhound what it needs to compete against PolicyGenius Nerdwallet, everybody that is eyeing the insurance space, do they have the right partners, or they have the right carrier partners that will go ahead and offer a price that makes sense. I mean, so we'll see. And,

Avi
you know, an important, you know, thing to consider. And this is a when we were talking to The Zebra, in their view, they're not competing with insurance companies, they're competing with Google, they're telling the carrier, listen, you want to qualify a specific user, you want to reach a specific user, do it through us, we'll tell you, if they have a claim, we'll tell you, the car, we'll tell you where they live. So instead of just putting your ads on Google and not knowing who is going to click, and they're not converting because there wasn't a fit, they're telling companies go through us, we have organic presence. We're working with Google as well, we'll do it. Of course, it's a trap. Because once you know, the secret becomes big and the same for PolicyGenius. They're going to have a lot of power. And then, you know, it's kind of going to be a challenge for other insurance companies. Geico, of course, Progressive, State Farm, Allstate, I don't think they're going to let that happen. And you know, they're playing on both sides. They're working here, but they're also full steam ahead with their own efforts. Because they want to create confusion, they want to create chaos, we've talked about this, at the end of the day, when you don't get a good experience with Coverhound, Jerry or Gabby, you're gonna go to the top four. And that is what these companies want. They want, you know, one and a four chance to get you. And they will get you eventually, because the average consumer is probably not going to go to State Auto to do a quote on State Auto Probably not. That's not the top choice. You know, so this is really the battle. But you know, again, just I it is a broken process, but it's broken by design, it is a better process for consumers. But it's not a great model for Coverhound that it's a very challenging model. And we'll see if they push more effort and try to get it to work again.

Nick
Well, it's an easily covered model, a copied model, sorry, that's Yeah, that's right. Like it's, it's an aggregator right, they're essentially acting as a broker they have, they can sell I saw QBE and a handful of other companies. Like, I don't want to, I don't want to make it sound easy. And just say anyone can do that. But it can be copied, and it is being copied in, in other forms. And so, they're there. I don't think there are any, any business dynamics where there's like a network effect where you can lock that in, right, like, and it some you can go to an aggregator and get a quote, and there's no loyalty there. Right. And so a different aggregator can get you at some other time. And so an aggregator is essentially a type of insurance agency, and they're going to have to spend money on marketing to get people to come through the funnel. It's, it's not like a disruptive technology. So I think from my perspective from Brown and Brown, I see there could be synergies there. Like you said, maybe maybe, maybe this is their copying their competitors who are looking to bring technology in. And Brown and Brown can think of it as like, we're going to use cover hound, and expand that so that our entire workforce, our entire the carriers that we represent, we're going to be able to deliver some sort of digital experience with, with our customers and potentially our new customers. So I could see that as as synergistic to do both plus to, it's better deal, I think for Coverhound immediately, because immediately, they could have brown and brown agents funneling business through through that channel like that, that business is already there. So they could just tell their agents, hey, go get a quote from Coverhound, because there could be a policy form or a carrier, we're not doing business with that we might be able to get a better deal. So I don't know what the we don't know what the price is on it. So I don't know about valuation.

Shefi
If they do that, I think Coverhound has no chance. If they don't take Coverhound and look at Coverhound strategy, by product by line of business and judge the competitors, only around a single product, then they're going to continue with the same state of of this, this Coverhound/cyber policy all in one, let's have agents use it. And that's not the goal. The goal is for if you want to be digital, then you need to focus on the customer, the customer that's going through the internet, not finding you through the agent, the agent knows how to close a deal. You need to compete against those that are, you know, picking up customers through Google. That's the only way they're going to learn something new. That's my that's my take. And I do think that Coverhound has lost a considerable amount of time going after cyber insurance for instance.

Avi
Yeah, and they haven't changed their quote/flow from my, if remember correctly, at least four years, last time I checked exactly the same. And again, you wonder have

Shefi
a nice quote, flow, though, a really

Avi
little, it seems to me a little outdated, like kind of like the 2000, or maybe like the 1990s. With the gray, I get the Coverhound understand. But again, it doesn't seem that you know, they've put a lot of effort. And to be successful with this model, you need to put a lot of effort because, you know, as I said, you need to have a good SEO, that's where people can go to compare. Now you're up against Progressive, Geico, they also compete MediaAlpha/QuinStreet. So

Nick
it gets back to Avi, it's really, it's just even if they win, they lose, because it's going to be so expensive for them to get the to get leads through the funnel that even if they bind this business, they'll they'll they'll never be able to justify the customer acquisition costs over the long term.

Avi
And you know, The Zebra is a good story of, you know, becoming profitable. And personally, I'm not a big fan of what The Zebra does, because I don't I mean, it's not that it's fair, not fair, I believe that if you can close the business, close the business, then get your commission, I'm not a big fan of clicks, even if it's the customer clicking and knowing that it's going to GEICO or Progressive. So they profit from both models, they can bind the business, put it on their book of business, and they make money from the referral. I'm not a big fan of that. But they've done it. And one of the reasons they've become successful and profitable is the quality mix of the customer. All of a sudden, the standard customers, the preferred customers were watching TV, and we're saying why not compare car insurance, like why not and instead of the non standard, those that are hard to close, because of who knows what credit score and violations and so many other things. So just because of that, so the model was there, but it was attracting a different type of customer. And for that you're gonna have to find these customers and make sure they come because they may not be searching for you on Google. So that's where the starts to be expensive. The Zebra benefited with a pandemic and TV rates going down and you know, but obviously they've been working hard and changing the product and putting some more effort but it's less than that. It really is up to the client makes the customer base and you really need to be able to get that customer and judging by past years cover hound was not successful at doing that.

Nick
Yeah, I'm you guys have convinced me over time now to me. I any of these companies that I look at anyone that shows up on Coverager or gets any sort of publicity, the first thing I'm looking at is how much is it costing them? How are they getting in front of customers, and how much is it costing them to to get a customer on the books and it is so problematic? That I think that that is the single biggest issue I think now, in Insurtech, is these companies come in and it's, you know, we're gonna we're gonna spend a ton to get this book...great. But there's, there's, you know a lot of these VCs and like they want like a Google or an Uber. And there's there's nothing enduring about that model. Right? You, you, as soon as you start raising prices on them, you're running the risk of you're going to lose them. And like, Avi said, they're going to watch the TV and say, wait a second, how much am I paying? You know, like, it is so difficult to have loyalty ininsurance, maybe maybe insurance companies don't deserve to be a consumer facing brand.

They do not. They do not. And but again, it's really the battle, as I see it is between the big guys the GEICOs, the Progressives and companies now shaping to be The Zebra and PolicyGenius. Of course, Jerry and Gary, they're doing well. And, you know, that is where the battle is, and all the rest that cannot like if I'm a cover hound partner, and I'm like in American Family where I can barely make it Google's first page. I'm telling cover hound. What the hell are you doing? You start promoting like we need you and and support the business because, you know, guess who's on The Zebra...Geico and Progressive? So they're going to be everywhere. If you're struggling, and you have a struggling partner, struggled together to be better, you know, you need that. Yeah, it's

Shefi
I'll build on that right. Because the other side of this is that you have a strong partner and rising tide lifts all boats, right. So if if Brown and Brown takes Coverhound and breaks it down into products and forget starting with the customer, because the customer isn't loyal and not loyal to you in any any way, then start with the product, then you're going to see what kind of partnerships or alternative distribution channels are out there. Right? And then you know, what you need to do to make Coverhound successful. So we're not, we're not just telling you what not to do. We're also telling you what you should do. And this goes back to this was earlier this week, when we talked about the 200 million ways by better.com. Right? This is a mortgage originator, digital mortgage originator type of company, where it's partnering with insurance companies to offer home insurance, they do good, these carriers do good, right? That should be the the mindset, the mindset mindset shouldn't be. We have an agency base, who, you know, we bought something, Let's feed the agency base, what we just bought, we've seen that done in like, early 2000. Let's do the hard work. The hard work is actually getting the digital customer. The one that's not loyal. Right, but I mean, that's just a reality we live in.

Nick
Yeah. Okay. Well, well, we'll be following that. For sure. It'll be interesting once the price tag comes out if we can find out what that is. Did we ever find out what Aon paid for Coverwallet?

Shefi
Well, I wouldn't say the kind of the low three digit something right? I don't know. 200 million ish.

Avi
That's the those are the rumors. 250/230/200 but not a billion. You know, I wonder now.

Nick
This makes our conversation last week even more relevant. It wasn't 2.4 billion for Assurance IQ like it like every week that just looks worse and worse

Avi
They they just sold Primerica to I believe TCS and the rumor is the rumor that I heard was that ever since the Assurance IQ deal, Prudential is kind of putting all their digital transformation aspirations you know, with Assurance IQ, they're hoping that they will take them to the promised land and they're cutting in other areas. Big mistake, you know, don't let pride kill you, I bet you you can still get a refund. Like if they really wanted they will get a refund. But, but that's a different topic. And

Nick
I don't I don't think it works that way.

Avi
You can return in America, you can return almost anything and take advantage. That's what you need to do. And you know, we we from Prudential/Assurance, IQ I think the the next topic, of course, Lemonade, discussing their term life insurance, a new product, again, fits our description of the company when we wrote about this several times, still, you know, want to stay pretty and not get dirty and someone said that they're going to launch auto insurance, and that's what they said, but I read the transcript and it seems that that really wasn't what they said someone else asked a question. So you will also launch auto insurance and then they said well, we first launch term life insurance. So from that they figured that they will go with auto insurance. You know, still, as I said, like really going with those lines of business that don't require money. So what do you think about this? Are they going to solve the life insurance problem in the United States?

Nick
No. No, I mean, that's good. It's a good move. Like, if you have a customer that's paying money for something, why not? They're buying renter's insurance...Hey, do you have a dog? You do? Would you like pet insurance? Okay, great. Um, by the way, what do you want to buy a million dollars of term life insurance? Sure. Okay, great. Put your credit card in. Let's go. They have them there. It's an easy, not an easy cross sell. It's easy to make the cross sell pitch. They'll get some of that business. It's low hanging fruit. Will they do anything to change life insurance? No. Shefi disagree with me. Let's let's make this controversial.

Shefi
Okay, let's make this controversial. Well, I don't know. I mean, there's obviously room to do something fun and Lemonade life. And it makes sense. It makes sense to me again, because of the of how they want to continue and process claims as much as automated as possible. Obviously, Pie Insurance are a little bit of hiccups over there, because there are a lot more claims than there are in renter's insurance, right? Yeah, yeah.

Nick
Well, they, you know, they could do their they're a broker.

Shefi
They are a broker.

Nick
Yeah. Okay. So this is not their product, this is going to be someone else's product. That's another aspect to this Avi, is, it's someone else's product, like, will will there be no medical exam, probably not...probably going to have the same things. So that's that's kind of where I'm coming from. It's someone else's product.

Avi
Well, the the so Ethos, for example, and Bestow they have, actually, Ethos just launched two new products that take even the numerical exam even a little further, and bestow did the same. Still, these companies are struggling to acquire customers at a cost effective way. Now, from my understanding of what Lemonade is going to do, they will represent a company. But it seems like way, the way they talk about it, that they're not really going to make this their flagship product, they're going to try to promote it within their customer base. But I don't see them going now. And, you know, having billboards of life insurance, because again, this is not a stupid company. They've stuck with renters, made everybody go crazy, just because they knew of you know, the cost of acquisition because they had no competition there, and they still barely have any competition. And you're seeing what pet they launched with pet, obviously, there's a lot of a lot more competition in pet. And by the way, 40%, if I read correctly, 40% of the people that bought pet insurance were new customers. So you would think with all the millennials, they have almost a million policyholders by now, you would see a bigger number of people buying from their customer base. But keep in mind, there's a company called Google and they have a Gmail. And when you send that email, they usually hide it in the promotions. And when it's in the promotions, I don't get a notification about it. And people are not engaged with Lemonade. And it's actually funny and we we rank the on Google's first page when you search cancer, eliminate insurance. And you know what happens when Lemonade sends emails? There's a spike in cancellations because you know why people are saying, Oh boy, I still have this renter's insurance, I'm still paying for it. But thing they reminded me, let's cancel. That is that is what happens, you know, if they take the approach of leading with life insurance, I think that would be a mistake. Because again, this this is not a product where you're going to tell me Well, you know, because it's cool. You know, haven't This is a purchase. It's a long sales cycle. It could take weeks, months, years. And really who is the customer the profile, if this is going to be someone 45 with some health issues, asking for over a million dollars, he's probably going to need a medical exam. So I get what they're doing. They're trying to please you know, investors, they're trying to squeeze as much as possible and get it. I know, a lot of people from the industry are like putting their hopes up thinking Lemonade is going to solve the life insurance problem. They're not. But you know, I bet for other companies that are struggling trying to compete, this is not great news. I think this is not great news for Gusto for Ethos, you know, they're they're going to have more competition. And well, it's,

Nick
I think, to me, Avi, this is this reminds me of our conversation with Petplan Right? It's um, through that sales cycle, Lemonade is not going to be able to say hey, you know, here's five different variations of renter's insurance. Oh, you want pet insurance. Here's five different variations of that. You want life insurance? Here's five different very, they're not going to be able to do though. Like their thing is streamline, right? So it's going to be a bare bones basic product, very simple to sell. So from a, Petplan doesn't worry about that, because pet plan already knows we're a premier product. So we're we're, we're marketing towards what they call pet pet parents are that right?

Avi
But But parents yeah

Nick
parents and they're saying everyone else's pet owners right. So like when I like Bestow and Ethos, Reddit like, I think that traditional life companies can get more creative because they that's what they're going to focus on. So they can do different types of term, different bells and whistles, their other outside, get out of term and go into whole life or variable, whatever, with medical exam, without medical exam, like they can get really creative if they wanted to. They just, they just have to go through a different distribution market to be able to execute on that, like, so whose you can't you can't go mass market with that it's too complex. So to me, the like, the Lemonade thing makes a lot of sense. But if I were a life, if I run the life insurance, I would I wouldn't worry. It's just we got to execute in a different way, not their way.

Avi
I think, you know, for Ethos, and Gusto, and they've discovered this later than Ladder, they're now going after agents. Ethos is actually being very creative with agents, and they're promising them free leads if they sell certain amount of policies, which they're kind of utilizing these agents as their independent call center where they don't really have to pay. So I think it's a smart move. But they're struggling for distribution. It's a it's a product that lacks awareness, not because oh, people don't know that life insurance is important. Because guess what, people are getting married later. They're not having as many kids as they used to wake up face reality, you're not going to change that. And no one is going to buy life insurance for student debt. Unless he's a really good person, you know, most people will not do that.

Shefi
I just had, I think for Ethos, right? So let's talk about your conventional life insurance ad with, you know, a mom and a dad and a kid, right? But this was for, you know, I'm Erica, I'm a homeowner and I buy life insurance for my mom.

Nick
So, yeah, that's

Avi
the thing, they don't do that. Well, you know, you know, here's

Nick
a play here, here's a play here, Ethos or Bestow, that kind of focus on life insurance, they can go to all of Lemonade competitors, and say, plug us in. Lemonade is offering life insurance, plug our product in, and we will pay you right? Now that is when you have someone that's buying homeowners or somewhat something else, and there's a chance to, you know, take take a mutual, right? Someone is actually trying to sell through a mutual or some online digital application. And there's an opportunity, Hey, would you like to buy life insurance, million dollars of coverage, 400 bucks a year, making something up, and they can plug their product in? Like, that's probably the approach I would take, is Lemonade can only service them. But theoretically, another life insurer can go to all of Lemonade competitors and say you want to do what they're doing. Plug us in.

Avi
You know, we talked about this and we say life insurance companies, wherever you can stick your product. Yeah, go for it. Agents, online. Whatever it is, you have to because really,

Shefi
I have an idea. Well, it's your idea. Can I share it? Yeah, I

Nick
Mine or his?

Shefi
His...

Avi
I have a lot of ideas.

Shefi
You know, most of them I like I like. Avi came up with this idea that you should you should create a life insurance product that bundles in pet insurance. Now, let that sink in. And yeah, that's a great way to compete with it. I mean, we don't know how big Lemonade life thinking is going to be but it's

Nick
well think about the relevancy if you're if you're attracted to pet insurance, right? And you have this you dangle this bundled piece. They're already thinking about mortality, just something else. I don't know I could warm the spirits and just say well, if I'm taking care of them, I should take care of the rest of my family. Or vice versa. Like I I'm with you guys like

Avi
something Yeah, I think even I think the because in my opinion, life insurance is a, even term life like you know, you do it usually most people the the peasants, the poor people like me, will do this probably once in a lifetime and we don't mind comparing taking the time to make sure we got the right product. Now. I see this even as where you, you know, you have a, have an accident and your car is bust, and they give you a rental car, maybe there's a way to give some kind of, you know, supplemental coverage for now just take it, it's not going to save you for your life. But while you compare at least have this like very basic coverage, very simple, maybe 250,000/500,000, like try to sell that and say just have that for now it's going to cost you $10 a month, go for it, while we maybe help you compare while you take your time to compare other products. And then if you want to make it you know, a bigger amount, go for it. It's such a, it really is a challenging product. And, you know, we talked about this, you have to look at really the changing landscape. And also the financial advisors, where you're now you know, graduating from college, and you're bringing them to call their family and friends to sell life insurance. Most of their friends are not married, they're out of college, they're looking for a job. So the whole process is broken. Of course, you know, these life insurance companies, Massmutual, Northwestern Mutual, they don't care. They'll keep on recruiting, and they have many recruiters, they think Northwestern Mutual has more recruiters, then PolicyGenius employees, or something very close to that number. That's their recruiting company. That's really what they are. They're not selling life insurance, their recruiting company, forget, Jacobson on line, forget all these companies just go to Northwestern Mutual, they'll get you whatever talents you want quickly. That's what they do. They're very good at that. And, you know, it is a very challenging product. But again, maybe Lemonade will come up with some creative way. I doubt it, but it was just I don't believe Yeah, well, yeah,

Shefi
That's our job, to analyze them and predict the next one.

Avi
We'll keep an eye and then did you get turkey from Whole Foods? The turkey Thanksgiving insurance? Did you get that? What you're buying from? It was my idea. It was

Nick
I laughed at it, I didn't know if that was real or not that real?

Avi
For sure. Oh, yeah, it's real. Yeah. I'm going to buy from Whole Foods just because of that like to know and I'm going to have a claim I'm going to celebrate now because I come from...my wife, she's like maybe second/third generation of overcookers. They want to make sure it's it's properly cooked. They want to kill it again. I don't know what it is. But this is my this is what I live with. And I'm going to get a free Turkey.

Nick
Oh, wow.

Shefi
Okay.

Nick
I don't even know what to do with that. I think we should have your wife on as a guest as some point to meet her.

Avi
She weren't like that. But I know like me saying that. She's an overcomer. She's trying to be better. But I know it's not easy...

Nick
You called her mother overcooker too. You said second/third generation.

Avi
Yeah. Well, it starts with her dad, her dad. He's an overcooker. You know. I can understand why I get it. It's not easy. Yeah.

Nick
I'm not buying turkey insurance. I'm a good cooker. So well, I'll I'll get it right somehow. But we'll be following Lemonade. I mean, I think it's a no brainer move. In Shefi to your point, if anyone does this, I will get very upset. They should be selling life insurance but in auto comeon! Like wherever you can put it in...autos now a lot of

Shefi
people do

Avi
it we're trying to get a lot of they're saying the opportunity is to get P&C agencies to try to want to sell more life insurance. But, you know, they look at it as kind of like a one time commission because usually there are no like meaningful residuals. So they're saying, well forget it, you know, I don't want to get into it. It's really a long sales cycle. And you need the medical exam, in most cases, if you need the proper coverage. But agencies, they do have the power, digital agencies as well. And I mean, it's a it's a good it's a good move for life insurance. I bet you they're going to look at it and really, I think many will hope that Lemonade will fix life insurance buttons. Not going to be fixed. No,

Nick
but it's good move. You know, yeah, um, before we move to the to the next topic, they announced that move with their earnings report. They're still pouring gasoline on cash and lighting it on fire. So yeah, I don't even we only we don't have to talk about that. But it's like still losing a lot of money. You know, so yeah. And, and I it's stuff like that or just, um, you guys got me sold. customer acquisition costs. I just don't see how they're going to get it under control. You know, competing against Progressive and State Farm and all like at the end of the day, you can't compete with what how much money they can throw at advertising. in marketing, so it's a big problem across the industry, but I'm sure we're gonna keep talking about that. So, um, what's the what's the third and final topic? was their third and final topic?

Avi
I think that's it, right? I mean,

Shefi
yeah, they weren't that important.

Nick
Well, I think that's what we learned here. customer acquisition. It's, it's becoming the end all and be all with between Coverhound, and Lemonade, I think we're just gonna keep keep coming back to that. That's what I think about all day long, you guys have you guys have like completely brainwashed me,

Avi
I think you know, a good product, if you really build a good product, you can solve a big part of your distribution. Like, if you have a good product, people will come really if you could stand out.

Nick
Well, can I add to that? Can I because I agree with that. I think it has to be a good product. And that very much differentiated product is then because then I think you have you have the capacity to market it. Right? Like you can explain differences and stuff like that. Right? Um, a good product by itself. Well, if you're competing against other good products, I think there's still a struggle and how do you get through the noise? Somehow you got to get through that noise and get people's attention to to be able to do that. That's

Avi
Yeah, and you know, insurance Still, we say this all the time. You're never ever going to change the product. Like Don't talk to me about the quote, process as the product. That's, that's not the product, you make it simple. But again, if you're more expensive than I'm going to send faxes if I need to, to save fine savings, I'm even thinking of taking the defensive driving course to save $62. That's what I'm thinking about. Do you know that Geico has a welcome team, I switch to GEICO and the next day, they call me the Geico welcome team. And the representative was so nice, you know, I went for the quote online, I get one price. I called him on the phone because I couldn't understand one thing. And he's like, oh, let me find you some credits, he found some credits, another hundred and $50 off. People will do things to find savings when they don't understand why they need to pay more. And unless you can build a very special product, then forget about it focus on the distribution, and

Shefi
or a very special service. And that's really the point is because go differentiate online, online, it's really hard to differentiate product. But if you leave somebody with a good experience, and of course, you know, the digital carriers of the world are doing this, as the incumbents, right? There are tons of good stories about Geico reps and progressive reps. And there's, you know that the opposite is also true. So a mixture of a lot of things, right? Yeah, I'm for that. Obviously, distribution all starts with distribution.

Nick
Yeah, well, these, these products don't have a lot of margin to begin with. So you start to kind of run through some of the economics of it. It's like even even if they can get the customer acquisition costs under control. Right. What else you bringing to the table? For them

Avi
let's first get to the place where they do I mean, I want to see I mean, even if you think like Lemonade will, do you think about the amount of money that they've raised? How much money they used to get to a point where they're breaking even, or they may have some profit? And what what competitive advantage Do you have at the end of the day, what is the difference? What is the difference? And that's something that you cannot understand. And again, Lemonade was we're in the space that they really didn't have competition. Not many competed with them. They didn't go after that. target market. Lemonade has this like, oh, graduation, it's a bullshit. They're lying. It's not true. That's what they're selling. But when you look at really car insurance, then you know, this is where the game starts. And you look at Root how much money they spent and you know, Geico and Progressive of course, they can afford it. So why not? But because they have that loyal customer base, like we saw this week, an article from a b2c. And one of the guys there he was, he was he's with his insurance company for since he got his license. That's royalty. I doubt that they make people like that. They don't make people like that anymore. The modern, you know, the millennials, the Gen Z. We didn't grow up with brands. We don't have enough money to justify to just stick with a company and not switch. You know, and that's, that's one of the struggles. Yeah,

Shefi
I'll you know, ap intego right. So I interviewed Steve Wright. He's one of the co founders over there. And there are other companies that you're going to have to be loyal to before you think of Insurtech. And I spoke with a different friend this week, and he was talking about an accelerator. And he said that this accelerator is FinTech first. And I said, you know, this is exactly the issue with Insurtech Insurtech is I was going to come last, you know, first we're going to look at better.com, maybe we're gonna look at Acorns, maybe we're going to look at our you know, what the work side benefits are going to offer us. And after all of this, there's going to be a brand and insurance brands. And it's really hard to call it a brand. But let's, let's say that it is because there's a promise over there to pay a claim. Right? So that's the fundamental issue. No one shirt that has sold it, no Insurtech will solve it. If you accept that, and then your life becomes a lot easier.

Nick
And with you, yeah, I've in this has been very recent. And all of a sudden, I'm just like, I just don't see how they solve this problem. I don't see anything they're bringing to the table that actually solves this problem. And, and I want to say I

Shefi
brought to the table personality. And you know, they really

Avi
did, they did lemonade and Root personality, but I saw your Twitter.

Shefi
Insurtech's bringing personality. I know it's Insurtech versus in comments and comments. Oh, yeah. It's Come on, look at Brown and Brown go to their website, what do you get? We acquired 23 or 26 companies. And last year, what else are you giving me? They're not, they're not giving you much to feel what the company stands for. So not everyone's talking about, about, you know, charity we've all been doing charity for for Yeah, the entire life of this industry. We lack storytelling. That's what we have

Nick
100% Yeah, no, there's no doubt

Avi
And I want to tell you one last thing, I saw your Twitter exchange with the Branch. And they were talking about API's and Cover and Gabby's suffering, because they don't have good connections and API's. A person coming from Everquote. And they know Everquote sends traffic to Branch. They're not here, for instance, they're here to compare. So they want to see different options, or they're going to take their time to find different options. So don't believe that it's about API-instant, because if it was instant, then Clearcover would be a succeeding company. And Root will do just like that. When Allstate tells you go talk to an agent, it's not about instant, there is only I think I said this in the past only one brand that does instant Well, that's instant coffee. That's the only success you have with instant, nothing else. Insurance is not instant. And it really is about the price, unless you can bring something else to the equation, but that's not technology.

Nick
Yeah. But I don't think I can say it better than that, I think price is such a driving factor, you have to bring something else to the table. I just don't see any way around it. It's gonna be you know, and and I'll add this, um, the, the stuff that these insurtechs are going after the stuff that already exists, I will I will salute Lemonade a little bit because they did get there they are getting new renters, new pet owners to come in...great. The industry needs new premium, right? Like, anything you build, that takes business away from someone that's already got the business, they're gonna try to figure out a way to get that business back. And then it's the last 50 years, we just swapping business, trading it back and forth, you take it for three years, I take it back for three years. you lower your price, you take it for three years. Like that's the that's the thing that is just like you the margins are already so thin. So if you can't get your customer acquisition costs under control, it's not going to work. Like you, you have to bring so much more to the table in the Allstates and the GEICOs. Like when I when Avi when I heard that Allstate, like the lifetime value is six times the customer acquisition cost. I was talking to an insurance professional last night and he's just like, you can't compete with that. How do you compete with that? Like that? Like, they'll have so much resources to throw at this problem. The other companies will, will just struggle with it. And so we're gonna keep talking about that. Shefi was awesome to have you back.

Shefi
Good to be back

Nick
your hair looks awesome, looks great. You're the Lady Gaga of insurance.

Shefi
Oh, my God. Yeah, I get that often.

Nick
So awesome time, guys. I as usual, I appreciate it. For Shefi, for Avi, I'm Nick. This is, This Week in Coverager. happy weekend. Happy next week, everyone. So until next time, thank you.

Shefi
Bye bye.

Nick
Bye, everyone.

Transcribed by https://otter.ai