This Week in Coverager (week ending 11/20/2020)

Discussed:

Zurich’s potential purchase of MetLife’s Auto & Home business for $4B
GM creates Onstar Insurance Agency to link their connected cars to auto insurance

 

Watch here:

 

 

Outro music  Gathering Crowds by John Scott
YouTube
Amazon
Transcript

Nick
Hello, everyone. This is, This Week in Coverager. My name is Nick Lamparelli. I am in podcasting headquarters in Naples, Florida. This is the podcast where we talk about some of the hot topics that have occurred in insurance, insurtech, fintech, things that we cover on Coverager. And what people have clicked on and what people have commented and engaged on. As usual, I have my co host/co hosts in podcasting headquarters in Queens and in Brooklyn. I have Avi and Shefi. Hey, there.

Shefi
Hello.

Avi
Hello, how are you?

Nick
Hi. Okay, so, um, interesting news week this week. So I'll kick it over to Shefi. And we'll run right into topic number one.

Shefi
Topic number one. So Zurich is looking to buy MetLife Auto and Home business for $4 billion, which rings very similar to what Allstate recently did with National General pretty much around the same price of 4 billion. Now, in terms of MetLife. They've had a challenging now, at least third quarter, you know, 68%, down, and in terms of auto and home in the US, not necessarily because of COVID more just catastrophe business. But again, they are they want to get out of a business that they're not performing well. So more consolidation as we expect, and just, you know, for the comparison sites of the world, that's one less brand to worry about. what we'll see is no inbox right? It's a near deal. You know, we'll see what happens next week.

Nick
Yeah, it the the branding of that, as I've always I was a I think MetLife was my first auto insurer. I'm not going to give you the date, because that's that's this TMI, but it was my first auto insurer. And I was always puzzled with, wait-a-minute isn't that a life insurance company? Why? Why is MetLife doing auto and home? I was always confused by that branding.

Shefi
So let me tell you a story. I when I came to the US, I used to work at 90 Park Avenue and right in front of the MetLife building. Yeah. And I found the the streets to be actually the streets and I really easy but you know, first time around, it's kind of confusing. Where do you go like, Where's first our versus west, east versus west, north versus south. And I thought that my sign would be if I see the MetLife logo on the building, then I know that I need the my back has to be to the to the logo if I want to go home because I was living downtown. But but I'm pretty sure that that MetLife sign is like across from the front and the end. And yeah, there was one really hot day where I just got lost, just around Grand Central trying to figure out my way home. This is probably like the first week of being in New York City. I'm not sure even if I had a cell phone and if I did have a cell phone I don't think I knew how to use it. But that's my that's my recollection of my life. Snoopy is gone, but I don't think that many people will miss MetLife Home & Auto...

Nick
did you end up in Harlem?

Shefi
No no, I ended up I ended up in circles. And how do I get like 22nd and 5th?

Nick
Well, at least we have those stories. But yeah, I it is confusing. It's amazing that it I mean 4 billion is big book. You know, for something where you would you quiz most people I don't think most people would realize that MetLife has does auto and homeowners. So that's that's not trivial. That's pretty good size. But, you know, I get to you know, what's your core business? What's your core business philosophy? And if they can't, if they can't put any effort or energy into it, then they should they should divest?

Shefi
Yeah, and they're definitely doing more on the benefits side and they're acquiring the part of digital will, company. So you know, focus on b2b. Yeah. Just get out where you're an underperformer and play to your strengths.

Nick
Anything to add on Avi?

Avi
you know, I i saw i get their Instagram ads, which I don't think they're, you know, very intriguing but MetLife auto in home two hours and you're back on the road. That's like after a claim. That's the promise and two hours you're as good as new and I think kind of like a weak messaging but it's interesting because you know, the whole group benefits and we talked about this. Having, you know, these platform providers, payroll providers offer you, users, business owners, employees, they couldn't crack that to get, you know, the auto in home pieces well to say a big company while you got Life Insurance from us, thousand employees, why not try and save for auto and home as well. So I wonder, I mean, obviously, there's the open enrollment and the benefits manager, and all of that. And employees, obviously, they choose their benefits and they move on. I wonder why there wasn't more of an effort to try to get auto in home because, you know, some some payroll providers are now integrating benefits beyond health and life insurance. But I guess they it wasn't a focus, or maybe it wasn't up to them, maybe not up, you know, ADP, and Paychecks, and Gusto and other companies. Were not big on P&C yet. But yeah, if that's not your strength, and you could grow in other areas, just go for it.

Nick
Insurance accounting's really messy. So if I were one of those companies that offered benefits, like, that's something where you know, someone does an endorsement and like, it gets messy, trying to figure out what the net change is, then figuring out how that's going to be allocated in your paycheck, over the course of the next policy period, when I worked at an agency where we did agency bill, Phillips Academy, Andover was one of our customers. So they they could they could buy auto insurance through us and actually have it delivered through their payroll. And it was, it was always messy, really messy, like it was, it was incredibly convenient, because now you're you're breaking up your auto payment into much smaller payments. So you you miss it less. And that's something you don't have to think about. But anytime there was a change, it would create this paperwork nightmare of trying to figure out, you know, the customer would complain, then you'd have to say, Okay, well, there's, you know, 13 paychecks until your renewal and so it was, you'd have to be like a mathematician to kind of figure all that stuff out. It was messy, you know. But one last thing before we go to the to the next topic, I remember now I had MetLife, auto and home why they were my first auto insurer. It shows you like how much things have changed, they were the only one that would take my annual premium and divide it up. If you did. The each was called the the payment from your checking account. If they did that, they would break it up into 12 monthly installments, they were the only company at that time that I could find that would do that. I was like 18 years old, I couldn't afford to put 20% down. So having it broken up was like something I could afford and budget for. And that's why I became a customer. It's like the insurance, like you get customers that are very economically sensitive, and they'll choose you if you make it very easy for them to buy. So anyways, we'll transition over to topic number two, which is the one I'm I'm really salivating over to talk about because I think there's a lot of different angles we're going to take on this. Let's get controversial. So who wants to bring that one up?

Shefi
Go for it, Svi.

Avi
So I, you know, General Motors announced that they're, you know, venturing into insurance once again. And Shefi wrote a piece about this, the history of General Motors. And apparently, I was actually in LinkedIn debate. And some people really took offense. And, you know, they presented as such a challenge for General Motors, as if insurance companies and insurtech companies are not challenged as if they figured that out as if they're performing so well. And everybody has challenges, you know, the insurance, pricing and filing and customer service and claims. And, you know, everybody is struggling with that. The benefit, the advantage of General Motors is in the distribution. And that is a big advantage. And what's interesting is that, you know, there's a big piece here of really when you look at many are talking about I mean, that was one of the topics of risk prevention's being proactive, that was one of the main topics of Insurtech. And in reality is a car company is an entity that can do that. And they've been doing that for years, with new technologies in the car. And of course, now comes the whole connected vehicles. And we talked about this several times, and you know, with General Motors, they have 22 million connected cars globally across the world. So obviously, when people are leasing or buying newer cars, that number goes up. And there is so much that they can do so much data that they have that insurance companies do not even know. And it's not just that, like, I think some don't understand the touch points, the offline touch points that a carmaker has as well. And in North America, General Motors has 4,743 independent authorized retail dealers. And guess what, you need to take your car once a year to get it service. Some people take it often because you know, they're paranoid, they want to get new tires, or they want to make sure everything is good with the oil and all that stuff. And that is an opportunity for a dealer to come and say, Hey, Nick, you're going to be here for 45 minutes at least, would you like to look at insurance. Now, we didn't even touch the topic of there is incentive here to have that insurance. And by the way, we're not saying that GM should be the insurer, they're obviously not the insurer in this case. But if they can offer benefits in terms of better pricing, because of the data, because they know who you are, they have you know, the the background check, they know your credit score. And by the end, they also know how well you you know, you treat a car. So if you come in for your yearly maintenance, and they see that you break like an idiot, or that you're in good get that bumper to put behind so you don't get scratches in your car that tells that they tell us it tells them something about you. And something again, the insurance company does not know, they don't know if I put the bumper they don't know if and there's so many elements. And that is very, you know, we see the future of connected vehicles, the date, everybody's talking about distracted driving of, you know, texting while driving it, that's something a smartphone based telematics can pick up. But there's other forms of distracted driving, like people eat in the car, and they're distracted. Or they look at a beautiful woman crossing the street and they're distracted. So there's other elements, and really the only company that is in a position to act on this data, not just for better pricing, but really for risk prevention is a car company. And for that reason, insurance companies should kind of say, well, they have all the capabilities, let's see how we can partner and obviously, again, you'd want to partner with them. They have the power and distribution aspect. And it all really depends on how serious they will be. And you know, Tesla, obviously, they they launched an insurance offering, and they're selling, they have a big team of insurance agents working they're selling, and whether or not it will reach its full potential yet to be seen. But you know, they have such a huge advantage over insurance companies and startups with to me when I saw that LinkedIn post, I said, What are you even talking about? You're not even in the game.

Shefi
And Rivian right, so this is so we always have this thing. When we do our research, we say what is an outlier? Two is a coincidence. coincidence, three is a trend right? So we know Rivian wants to enter insurance. So we know Tesla is doing something with insurance. We know General Motors is repeating history. And by the way back in the 1930s, when it started selling auto insurance, it was super successful, the only thing that got them to fail was really going into the mortgage business and into loans and or whatever it was with Willie with mortgage more than it is with auto insurance, auto insurance was a short deal. So if we break it down, insurers typically have five functions, right? They've got this regulatory know how that they need to know what to do, they've got, you know, underwriting that they need to take care of. They've got distribution, whether it's agency channel/direct, they may have, you know, a branding going for them, right, but the focus here really is distribution. And it's not necessarily General Motors versus an incumbent because General Motors is basically going to be offering products by Homesite. And, you know, phase one is going to be the same kind of underwriting as everybody else. And maybe in the future, they're talking about taking all this alternative data into the picture. But then once it bleeds into a different kind of underwriting, then you we may be able to see the full potential of what is happening here. But I think, you know, the first victim is going to be the Zebras of the world, because somebody is finding a way to bypass Google. And that's what this alternative distribution is all about. So when we say alternative distribution, and Avi and I were speaking with insurers and we always start you tell us what you what your definition of alternative distribution is, because that may mean something different to you know, depending on your primary channel, but When we're saying alternative distribution, what we mean is, there's an insurance entity and a non insurance entity, whether it's automotive, FinTech, legal, etc. Right? So they've got a captive audience. They got somebody that likes the car, let's get insurance.

Nick
I don't disagree. It's a distribution play with potential benefits for underwriting and loss control and risk management, could be a springboard to autonomous vehicles. It's, you know, just, again, it just emphasizes that if you're going to come into this area, like you need, if you can't get customers inexpensively, it's just I don't know how you end up making the economics work on this, and they, you know, if Homesite can get, you know, they pay a commission, right to GM for the privilege of being able to do this, and then every policy that gets sold. Like that seems like a very inexpensive way to get in front of potentially millions of customers. It's um, yeah, you know, it's not

Shefi
2.8 million. 2.8 M vehicles were sold last year. So it really is millions of customers. Yeah. So even if they lease a portion of that, what's the big deal of setting up of OnStar insurance agency? So? Yeah,

Nick
is OnStar available to any other manufacturer? Or is that like, very specific? You can only get OnStar if you're a GM car?

Avi
Yeah, yeah. GM cars. Yeah.

Nick
Okay,

Avi
Buick, Cadillac. And you know, you have the app, like I have a Volkswagen, I have the I get notifications, you know, so they have presence, you know, in my smartphone. So that's

Nick
Who's they?

Avi
Volkswagen, CarNet, they have their own connected car version. And, again, they have the data, they have it, it's a matter of do they want to take it seriously. And again, it will fall down to price. Like if the price is more expensive, then obviously a consumer is not an idiot is not going to buy if you know, it's going to be very expensive. But if you know they really do look at it from a perspective of we could give you better pricing, and we learn things and we could as Tesla is saying, redesign the car, if needed, reduce the cost of repair cars after a claim. If they go that route, then again, it's going to create a trend and then every other automaker is going to be in the game because you have to and and what you'll have his you know, they talk about the bundling also people that like the bundle, they won't do it, they can bundle home and auto as well. There is no Progressive doesn't have exclusivity and bundling all the Robinsons, they only go to Progressive. So everybody can play that game. And I think really, the benefits and and you know, to me that could be like in the future, there's going to be a trade off. And this is a trade off that insurance companies will never have, where you have this amazing car brand. You love the car. But that they tell you, you have to buy insurance from us like we're the insurer. And they have a really bad claims experience. But you really love the car, but you're taking a risk. On the other hand, you have a company that sells you a car that you don't want so much, but their claims experience is amazing. So what company do you choose? And I think that's, you know, could be eventually down the line, the benefit of car companies where they could really tailor the product to you. And of course not everybody's going to agree but many will. And by the way, the people that are buying the newer cars with the all the technology, that's the customer that you want. That's the preferred customer that an insurance company wants not someone that is going to replace an insurer every six months.

Nick
I think they're I think there's fear of missing out so Shefi You're right, it's it's like, soon we'll see another car manufacturer do the exact same thing like it's going to happen. And if that continues on, that's going to put a lot of pressure on anyone that's selling auto insurance. I think I think the whole risk management thing should be tabled because we don't know if the right the regulator's will even allow it like Avi, I don't know how much the regulators were allowed tailoring of insurance products, but I don't even think it matters. Well. GM will get a certain percentage, right like they'll they'll get built the the ones where they can actually make a cheaper product. They're going to get a percentage of those customers, the ones that is more expensive. They'll stay in the traditional market. But if Volkswagen and Ford and these other companies start coming in, they're also going to start chipping away at this. And the pool of available policyholders to get is just going to get smaller and contracting, the overall like aggregate industry dynamics for insurance, auto insurance, with autonomous vehicles kind of dangling out there as like the brick wall like it's going to end here. doesn't bode well.

Avi
Yeah, my, and Shefi today has the smart driver by GM. So it's a program where for 90 days you drive they measure how you drive. And they send that sample data to Progressive, Liberty Mutual, and Nationwide, of course, not in every state, I believe California, New York, and there's another state that is available. It is really, as I said, the product right now is not going to be differentiated. It could be differentiated from a messaging perspective, like you know, have your car Well, we know how you drive, just like Root and Root saw success with you know, pay how you drive. But really distribution, if they take it seriously, those insurtechs and insurance companies that are competing on Google for waiting for people to go search that is going to dry up, and the whole display and you know being on social media, if I have now my policy documents with my car net, or the smart drive of Chevy or OnStar, whatever that is, it's going to be hard to move me because again, they know things and they have all this preventative data by the way of you know, mechanical breakdown that's like Geico cells that David know before, Hey, bring your car, you know, it's going to be a problem if you don't bring your car. So that is something that they have. And again, people are saying, is it going to be worthwhile? How much money will they make? How much money are insurtechs are making from selling insurance? So if the Yea...

Shefi
it's just about having the one point of contact that you want to have? Or you need to have as opposed to having a few. Yeah, so you either deal with General Motors, or you rather deal with the show just we do in small business? Yeah. So something didn't work in the past? I mean, it's not gonna work in the future. Yeah, we get that argument a lot. So there's always somebody in insurance that's going to remember something bad. That's, you know, he surance did, or another company that's no longer with us.

Nick
Insurance today is a completely different beast than it was like five or 10 years ago. So it history matters. But I don't think it matters that much. Shall we wager? $1? Who's who's the next auto insure to follow suit?

Avi
Well, Mercedes does it in Germany. And, you know, I think every company I mean, many, many automakers today work with data providers, and they provide driving data to insurance companies. So they do that. And again, it's not even from a price perspective, like it's not about money. It's about doing it because you have to for the customer experience to say we do that as well. And by the way, many talk about, you know, many look at insurance before they buy a car, how much do I need to pay in insurance for this type of vehicle? That's a big factor when you buy a car. So if they can come in and ease your mind a little bit and say, Look, we'll be fine. Yeah, that is a major decision.

Nick
The whole, blending the insurance into the financing element of it and providing a discount on the financing.

Avi
As well, as well. Yeah.

Nick
Oooo. Whoo.

Avi
And eventually, as you said, you want to bundle let's make some more money off of bundling your home? Or if you have anything else. Yeah. No, that's really interesting. Distribution.

Nick
Yeah, that's a I mean, it's always been there. So it before, before we jumped on this, I was talking to someone in the pet insurance space. And, you know, the whole affinity group thing came up. And this is similar to that. It's, they have a captive audience. They have 2 million, you know, they sell, you know, millions of vehicles. They have these people, they have the technology to connect to them. These people are coming in for oil changes. And like, this is one additional element. And if I were in an auto insurer, I would continuously be worried because how do you match that you don't have the touch points that these other distribution channels have? We'll see. I'm betting on Ford.

Avi
Ford Ford is waiting for the right now with Metromile and State Farm I believe. They did a program of the you know, getting data so yeah, Ford is a big player and I think again, many are going to go and I wonder what the approach will be will they choose one insurer will they choose several but that is a significant distribution. Play

Nick
Yeah, absolutely. Well, it's thank you, Avi. Thank you Shefi next week is Thanksgiving. So unless there's like a huge announcement where we have to like cut into primetime broadcasting to tell you this urgent message, we'll see you in a couple weeks. So for everyone that's listening, be safe. Wear your mask, wash your hands, have a happy Thanksgiving. Don't get that $10,000 fine in New York. So please, be careful.

Avi, Shefi. Happy Thanksgiving.

Avi
Happy Thanksgiving.

Nick
And have a happy next week everybody. So for Avi, for Shefi. I'm Nick. Thank you, everyone.

Shefi
Bye

Transcribed by https://otter.ai