Trent Cooksley, COO of Cowbell Cyber Joins The Discussion | This Week In Coverager (week ending 12/11/20)

Trent Cooksley, COO, and co-founder of Cowbell Cyber joined us this week.

Discussed:

  • Hippo’s investment in French insurer Luko
  • The failed acquisition of Metromile via USAA
  • Bitcoin, cryptocurrencies, blockchain, and the bloodthirsty desire of IPO’s from the investment class
  • Cyber insurance and how cyber capacity and pricing has been affected by the pandemic

Watch here:

 

 

Outro music –  Gathering Crowds by John Scott
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Transcript

Nick
Hello, everyone. Welcome back. This is This Week in Coverager. This is the podcast where we talk about topics during the week that occurred that were interesting and insurance, finance, FinTech, Insurtech. Whatever else is just interesting. I am Nick Lamparelli. I'm in podcasting headquarters in Naples, Florida. In Coverager headquarters in Queens and Brooklyn. I have Avi, my co hosts...Avi and Shefi. Hello,

Shefi
Hello.

Nick
And we have a guest another guest this week, a man that many of you will already know he his reputation precedes him. Trent Cooksley from Cowbell Cyber. Welcome to This Week in Coverager.

Trent
Thank you, everyone. I'm really excited to be here.

Nick
I call you the Bill Burr of insurance.

Trent
It's not very creative.

Nick
I but I think it's it's quite a compliment though. You're

Shefi
It's spot on!

Nick
Yes. You're handsome guy. So just accept it. And so we're gonna expect some chuckles a little bit, a lot of pressure on you. So before I go over to Avi for the first topic of the week, Trent, why don't you Why don't you introduce yourself for those that were that were your reputation hasn't proceeded you?

Trent
Yeah. All right. Well, thanks, you guys. I'm really excited to get the chance to come talk to you. I'll give a little background. So I started my career as actually as a bond trader in Chicago Board of Trade. And I quickly realized that that's as much of an athletic competition as it is like a quantitative one. So I went and did some desk trading oil and gas. During that time, I got my graduate degree and started and failed a few different a few different businesses. And then I found this young company that was focused on workers compensation. And I didn't know what workers compensation was at the at the time, but the company definitely had something going on. It was very early stage, taking advantage of the internet, really focusing on data and analytics. And I started with them. And that's really where I kind of cut my teeth on the crossroads of insurance, innovation and technology. And we were an MGA. We were also an insurance company, depending on the jurisdiction, so there was a lot there's a lot going on there. We grew that company pretty fast. And we sold it in 2010 to Markel, and then I spent nine years with Markel in a variety different roles with really the last half of that helping startup the strategic partners group, Markel Digital Markel, Insurtech underwriters, Markel Digital investments, so a lot of exciting things with it with a great organization there and, and then the summer 2019 it was time for some different and I have helped co found cowbell and so been focused on Cowbell Cyber and a couple of different advisory roles for the last 18 months.

Nick
started off as a bond trader. I didn't know that.

Avi
Is that when you lost your hair,

Trent
yeah, it took me Yeah, it was about two weeks. So I mean, I started off sneaking McDonald's hamburgers onto the floor for the other traders, but I gotta have a lot of conversations with Rick Santelli. I was not cut out for that line of work.

Nick
That must have been something that's very interesting. So you learn something new every day. So that explains a lot. So why don't thank you for that. Why don't we kick it over to Avi for the first topic and no holds barred Trent? Just wherever whatever goes. All right.

Avi
So there was actually a lot of kind of interesting stories this week. One, Assaf Wand/ Hippo investing in Luko. alongside other investors, Luko is kind of the French Lemonade. The copied Lemonade they launched in France. Now Lemonade is live in France just this week. So I thought that was interesting. And I, you know, they have like a smart home play. But you've got to wonder what the, the incentive behind that was. In terms of investment. There was of course, and we'll go over these very quickly, USAA and Metromile. That's a story. It's a true story. So, you know, believe it. We'll move on from that as well. And you know,

Shefi
you have to explain that one. In case somebody didn't read it.

Avi
So read it. It's a Coverager exclusive USAA and Metromile. were engaged in acquisition talks earlier this year. And well, it's interesting first, because, you know, to me, the big part of the story is Metromile valuation at the time of the acquisition talks, which was significantly lower than their valuation now with the aspect deal. And, you know, it's, I mean, I think it's like you look at USAA, you know, their telematics unit, you know, not something amazing, but they really they looked at Metromile, from my understanding more about technology play, which begs the question, did you do your due diligence? USAA? Did you do your due diligence when you look at Metromile as a technology company, I'm not sure about that. It didn't go through for different reasons. But you know, Metromile is on their way, going public. So we'll see how that plays out. We're seeing Lemonade stock go up high Root stock not doing so well. So you never know what these things so so that that was the story. And I want to talk to you, Nick, two interesting things happened. One, which to me is interesting from for the action itself. massmutual buying Bitcoins. And the second thing is and Insurtech acquiring a technology company, which I always say like insurance, they take pride in their technology, they have engineers they can build everything by themselves. Why did next by Juniper labs

Nick
Yeah, so the Bitcoin thing I'm I'm gonna have to pass on that. I don't I don't understand bitcoins it but I would probably try to get Trent's feeling on that. But it was $100 million, wasn't it? Like this wasn't just a little investment.

Trent
Well for them. I mean, maybe like 240 billion, so maybe it was just really little, but we've seen this happen in the last three months for some some other corporates not insurance. I was I was shocked that an insurance company did it. And I think it was very telling because SCOR Square about $50 million with a Bitcoin maybe two months ago, there's a company called MicroStrategy that actually put out a convertible note to raise $650 million at point seven 5% interest that they're going to actually use to buy bitcoin on top of the 500 million they've already they've already purchased. But to see an insurance company, I think is, is a little surprising. But I anticipate this is a wave that is going to be going to be occurring because 0% negative interest rates, people are looking for a safe haven for sitting on cash or sitting on a piece of ice that's melting so it doesn't work.

Nick
does this give legitimacy to Bitcoin? More legitimacy, I mean,

you as a conservative insurance company would dedicate this much to Bitcoin to me, is kind of like the final piece of like, Okay, this, this is a real asset.

Trent
It's it's been going on for 12 years. I think somebody sent a research paper last week that, is 12 years...do fads last 12 years.

Nick
I don't have Bitcoin. I don't I don't understand it. Like I I don't even know how to buy it.

Avi
You go to Coinbase you can buy it on Coinbase.

Nick
But then I hear horror stories about people losing stuff, and then it's gone. And

Avi
I read about this, like Dutch family like the most one of the most amazing, handsome man I've ever seen. And he travels the world because of Bitcoin, like he bought Bitcoin years ago. He sold all of it, he sold all his assets. He's, you know, now he's traveling the world telling everybody about Bitcoin. But you know, I heard another story about an insurance company in Israel, that is now under a cyber attack. It's a kind of like a big company called shield bait. And, you know, cyber criminals, they stole documents, credit cards, IDs, all that stuff of policyholders. They told them pay I think like there was 100 bitcoins or something like that, or maybe more. And from my understanding, when I read the article that said it was untraceable. So if you pay with Bitcoin, you don't know where it is like you can't, you can freeze the account, you can do things like that. So and the insurance company refused to pay, because they said you know, we don't negotiate with terrorists or whatever. And they've exposed a lot of the policyholders personal information. So that was that was another Bitcoin story of an insurance company this week.

Shefi
So is that an underwriting question when you apply for cyber insurance.

Trent
A lot of buyers of cyber insurance are interested if their carrier has the ability to pay those ransomware claims in crypto, cryptocurrency for sure. Because those are usually What the, what the hackers are demanding. So I mean, that's ransomware has obviously exploded over the last over the last year. And so there's a lot of interesting questions around around aperture.

Nick
Can we can we get them Mossad to find out who these people are? There's got to be a way.

Avi
You know, it's interesting, really the choice, you know, bigger than you mentioned, you know, the increase in cyberattacks and, you know, we're seeing work from home, there's more, what's going on? Like, what are the people doing that? You know, there's, there's more risk? Is it because Internet Explorer? Is that the problem? Is it is it older people that this is happening to,

Trent
I mean, there's a surprisingly high number of people still using Internet Explorer,

Avi
I want to see the age demographic of like cyber attacks, I'm really interested in that, like, I want to, I want to know if like, the, the, the people that it's happening to them are a certain like age group, or maybe they're using a certain technology. I wonder, you know.

Trent
there's so definitely using certain technologies, end of life technologies are just really nice targets for cybercriminals. Because they're not being supported anymore. So they're not being patched, they're not being updated. It's surprisingly high number of, of organizations are using technology that's at the end of its life, and they handle well. That's it. It's also a really expensive proposition to move over, right? I mean, you don't just go decide you want to do it, and, you know, go by, go by a download and plug it in. So they're, they're very challenging discussions that are happening in the in the boardroom. I haven't seen a specific demographic get attacked yet, but maybe I'll keep an eye out for

Shefi
Well, you said end of life, and that got me thinking of the companies like Everquote that target older demographics and get a hold of their financials. And I was thinking, Okay, it makes sense to target seniors. But then ABI always joke, so everybody in my family makes fun of me, because I still answer calls that I don't recognize,

Avi
it's embarrassing, it really is embarrassing.

Shefi
It's some of them are really convincing. I mean, once I did almost give my, my information, but I did it. I did it, but

Trent
it's surprisingly high number of people do and of all of all demographics, right.

Nick
I, I don't even answer the phone If I recognize the name. It's like Trent Cooksley...not right. Now. Let's see what he has to say. or

Trent
change it to say spam risk, then you'll be like, Yeah,maybe.

Nick
I think the whole Bitcoin thing is interesting, because because there, there's like aetherium. Like, there's is what what would prevent, prevent someone from just creating a new token? Like, it almost seems like you can build this stuff from scratch that I just don't understand it.

Trent
So there's a lot of rabbit holes there. But maybe this from an from an insurance standpoint, begs the question of, so if it's not a fad, blockchain as private blockchains kind of really, you know, kind of crapped out whatever, in 2018, maybe 2017 when people really talking about him around insurance, but you bring up a theorem, which is really interesting, because a theorem is just launched aetherium 2.0. And you can build a lot on top of that. So maybe public blockchains are where people will find really big opportunities. So I don't know if you guys familiar with like Nexus mutual, but that's, that's an insurance organization built built on. aetherium really very interesting. What you carp is doing over there. And you know, it's there's a lot of open source around it. And I think you'll start to see stuff getting built on top of aetherium that will have insurance implications that will bring blockchain back around. And I think it won't be private blockchains it'll be these public the public ones built on built on protocols.

Nick
I do believe in the blockchain. Like I do believe in that technology. It's the it's the money element that's associated with it that's just a head scratcher.

Avi
Yeah, I don't understand any of it. I don't I really I tried to understand like, I tried to learn but I don't get it and not that I'm was ever into like stocks or finance or, or things like that. Ask me anything about homos Sharma. Not a problem, things like that. And I know many others struggle to understand and that's why they're not investing. But, but it's really, really interesting because you have so many people really devoted, like they they swear by it and they do I yeah, it's crazy. It's just a nicer

Nick
At first, it was like the preppers. You know, so you know, the end of world types, you know, the government's coming after me, and it's a good place to hide and hide the money. And, you know, and there's a lot of that like, because you can't trace it. And then you have a company like massmutual. It's like, oh, we're gonna buy 100 million worth, it's like, well, aren't people gonna like line up in front of you? Or how do you how does that get reported? What's the, you know, what's the NAIC implications of? I don't know.

Shefi
But it's, I mean, if we're talking about this for 12 years, are we going to talk about this for another 12 years and still be in the same position because you visit Nexus mutual, and the first thing you see is still a white paper. And I remember, I was like, once making a joke around 2016, every blockchain based insurance startup, that's what it was, it was okay, go read my white paper to understand what I'm trying to do. So obviously,

Trent
Nexus mutual is providing cover on smart contracts today. So there's a there there, that that's not a pilot anymore. It's, it's in progress. So I think it's very interesting what's happening there. So it's basically providing cover on multi SIG smart contracts. So if there was a hack, you could you could actually get it, whatever you had lost in that hack back. And then the the token itself is, you know, as a kind of a governance protocol to it. So you can, you know, be an owner of it and be part of that governance protocol. And it's really getting rid of a middleman, which is, you know, fairly interesting. And it's putting things onto a smart contract. And so, these are, these are moving really, really quickly, I was talking to somebody who is, you know, deep in old finance, old insurance, and they're now deep into, into into bitcoin. But the specific reason was, was they met people who are working on it, and they're like, these people are really, really sharp, right? And they're really, they're really able to move really quickly. So it's pretty interesting that insurance company bought Bitcoin.

Nick
I, I believe that I think that a lot of the mathematics behind it are fairly complex. So they are very sharp. I believe in the technology, I think, for transactions and audits, and things like that, that's something that my company's doing is to put the entire underwriting process. So the MGA guidelines into a blockchain, because then that can get shared with our stakeholders, whether it's arranger or carrier, and they can see that like, we literally follow the guidelines, you know, like it's embedded in our code, and it was placed into the blockchain. So they don't have to come and do an audit,

you know, either on site or virtually, to check our files. It's all right there in the blockchain.

Shefi
Most interesting case was the one with kind of the the death database where you monitor people that have passed away in order to initiate the life insurance process, which is the family members. That's really Yeah, yeah. That was one of the US. There's one in Asia. Yeah.

Obviously, relevant.

Nick
The only But speaking of 2016 Shefi, the only term that Lemonade didn't use when they came live was blockchain on chain, I think, I think they use everything else AI, behavioral economics.

Shefi
it was a block chain editor to Lemonade, that use blockchain. And in the fine print, it was very much very much along the lines because guys peer to peer was always associated with blockchain. Remember, back in the days when people started to use a blockchain technology, and it was all about, you know, sharing information. That company which is again, it was a white paper and ended up as a white paper. How to find a friend that said, by the way, we're not Lemonade.

Nick
Interesting. So with that,

Shefi
yeah. 2016 that was a good year,

Nick
Lemonade closed at 91.59. Today, it was down 8%. It was it was it did break $100 a share for an all time high, making the company worth $5 billion. So I wanted I was I don't I don't know if this would be excitable to the audience. But I was going to, I was thinking of writing an article for Coverager and doing like a tale of two companies. And like basically give you the finances of two companies, growth rates and all of that give you the name of two companies and have have like the audience figure out which company belongs to which, but I'm looking at a company like Unum un M which is an employee benefits life insurance and things like that. Their market cap is the same as lemonades. Right, and they have billions of dollars of revenue a four oh, nearly 5% dividend. And their, their book value. So there are $23.27. And their, their book value is where is it? It's like 100 billion, or they have 2 billion in cash. And their book value is $53 per share, and they're selling at 23. And then there's Lemonade, and they're worth exactly the same. It's it's Trent, you, you were on the Chicago Board of Trade, talk about the animal spirits that go along with something like that.

Trent
Well, I was there a long time ago, but I mean, this, this mantra is across a lot of industries right now. It's, it's, money's going to grow. Right? If you're an electric car company, you can trade it 1000 times earnings. If you're an old school car company, you trade at 15 times earnings. So I don't think it's actually insurance specific, I think it's, you know, kind of a macro trend. And maybe along the same lines with massmutual going well, we better buy bitcoin because I, I don't want I don't want all this cash we are we're printing money, like it's going out of style, we're gonna continue to do that no matter who's in office. that's a that's a given. And you know, the dollars are going to growth. So anything that has digital or technology on it in any industry is getting is getting valuations right now. Right?

Nick
Well, that's that segues back to Avi store and USA and Metromile. Right. So I wonder if that was more of a cultural thing? Well, I'm thinking that too, but also what you just said, Metro miles valuation is a lot higher in the SPAC than it was what us where USA was thinking of, and maybe that was the deal breaker for that.

But it's just like, there's almost like a disincentive. Like, if I were in Insurtech, I would do absolutely right now anything possible to try to accelerate towards an IPO? Because it's See, I think you're right, I don't think it's an insurance thing. I think people are just hungry for growth, fast growing, tech ish companies that are going to IPO.

Avi
You know, the difference is that, you know, this happened with Amazon and Sears A long time ago, where people were saying how is a bookstore online bookstore worth so much more than the revenue, and people said, this is the future. That's that was the thing, this is the future. That's why it's worth more Tesla, you could say is the future they've built something that's, you know, different. Lemonade, Metromile Root, it's the same exact same insurance, having a chatbot. Using a third party to build a chatbot is not the future everybody could have that it's the exact same thing. And yes, you'll go for an IPO and some you know, people will buy in and you'll make your money. But, you know, this is not Amazon that leveraged the whole concept of, you know, the convenience economy. People don't want to leave their house or everything. They were very aggressive. What could Lemonade do? What could they do? Unless they go beyond?

Shefi
Look at what they're doing? Even with life insurance, it's not going to be their paper, it's going to be in partnership with someone else.

Nick
Look at what's your

Shefi
question? What's going to come after life insurance, or insurance? Hippo? We hit

Nick
the ground go. Right. And I don't know Trent, it just seems like just grow, like just grow, make investments move quick.

Trent
It was a lot of money right now. I know. From 2020 was a was a pad the pockets year for them. So I don't know if that's the same type of investment of next and Juniper. You know, similar, maybe not at the same scale, but similar type capability. capability. I don't know anything about Hippo, about Luko been visited a capability. I mean, you're not buying revenue, right?

Avi
No, it's a smart home insurance, you know, sending water detectors and stuff like that they again, they have to give back model did the exact same like Lemonade. Just we're friends MGA. They're not an insurer. You know, it's, they were no no, when Lemonade goes to France, people are going to say well, do we stick with the French? Or do we go with the Americans or Israelis or whatever you call them? You know, so I bet that most people will stick with the French just because and we saw that in Germany as well. Lemonade, you know the can get people excited here

Shefi
these days. markets are really different. I was in the news this week, right raising 30 million. And I think they were mostly in the news because it was an investment, buy it to queue. And I think last year, they didn't make any investment. So big deal on behalf of Swiss Re showing support on getsafe, which is basically currently applying to be a P&C insurer. So there's definitely this trend where we started in MGA, and we want to be a full stack insurance company. But then on the other side, they're partnering with an insurance aggregator and insurance is paid, are you growing? And if you know something about the audience, the audience cares about the price. And so there's always as you know, we're going back to the basics, that there's the lemma, who's the customer? Because with, you know, with Amazon, what kind of customer that they have, if we're comparing it to Amazon or the Tesla, again, with Lemonade? What are we comparing it to? What's the benefit? Yeah, who's who's paying a premium for insurance? It's always going to be that kind of a question. With Hippo. It's interesting, because with homeowners less, maybe less sensitivity to price are moving into teleconsultation. So moving into services, leuco is doing the same thing in France. So trying to assist or, you know, going into the service area, which is another kind of trend that insurance companies are picking up on.

Avi
If you aren't me, you want your my opinion, always about the whole smart home. It's a it's it's a way to scam insurance companies. That's what it is.

Shefi
I would say the same thing about wellness, right? Because whoever, whoever Yeah, smart home, we care about smart home life. We care about comedy.

Avi
It's a story. Yeah, it's a story.

Shefi
Yeah, company paper.

Avi
Yeah. Yeah, that's my opinion in most cases, because you know, it still can't get your roof to say when there's a hurricane. And really the the flood everybody saying, Oh, well, how much people you know, they have flood in their house, they forget whatever. I think you know, for Hippo, it's a story. And we're seeing this, by the way with Root. One of the reasons like their stock is performing so bad is it really is a story. And their story stinks. Compared to Lemonade.

Nick
I agree. I like the smart home. Oh, yeah.

Avi
No, no, I, you know, it's different different opinions and perspectives. I think that because it's not proven like with, with telematics, you can at least say that people who drive fast or heartbreak, you can show it, you could show, you know, telematics, you have a lot of data with smart home, you know, what is that detector is going to is it really going to prevent anything? Maybe well,

Nick
not necessarily a detector, I'll say like a smart, smart device for water. Water shut off. Right? Is is one thing where in homeowners insurance, water is a much bigger loss cost driver than fire. So I see an opportunity there where it could reduce the loss costs. And so that's always a good thing. How the insurance figures that out in the business model, I've no idea yet. I like the way Hippo is doing it, because they're not counting on it. And it's a story. So it's a marketing, it's a

Avi
as they say, that's the thing, point. To me. It's a weaker story. Like if if I had to like, write the stories, it's the weak story because Hippo still sold through agents. No one is coming to Hippo because of the smart home insurance. Sure. That's not coming for us. That's the thing. Yeah. Listen, you

Nick
brought up Tesla on Amazon trend, if clear, those are like two World Class companies who have dramatically changed the landscape in their respective industries. Lemonade has not done that. Hippo, Hippo. I think Hippo has an opportunity, but they have not done that yet. You know, it's hard to do.

Trent
I think the best insurance is invisible insurance.

Avi
Exactly. Amen.

Trent
You never have to really think about or know about. And so I'm surprised when people say they're excited. You know, and there are different generational ideas.

Nick
I'm delighted. I'm delighted.

Trent
I'm surprised when people say they're excited, like I've had good experiences with with insurance, here's my good experience is the last time I bought a car, I took a picture of the whatever the slip with the VIN number, and I emailed it to my agent, and I said, Hey, I got a new car. And then, you know, like, three days later, I got a bill in the mail. And I actually like was gonna, you know, because it'd been insurance on my why I try this company and try that company. But I'm like, yeah, you know, that bundled with this big company over here, and I never had any problems with them. And, you know, I'm not, I'm not a shopper. So I'm not looking at it every you know, every year and by the way, if you look at retention rates, most people meaning auto is a little different, but in about everything else. And I spent most of my time in commercial insurance. commercial insurance is fairly Sticky, right? Like, I mean you to get business you got to take it from, from from someone else. And there's one thing that, you know, before we got on Shefi and I were talking about when we first met in like 2015. And Brett kind of bred the birth of Insurtech. Right? At the birth of Insurtech. If that was 2016, or whenever it was, have we really had a hard market in insurance? We're awash in capital. So not No, no Insurtech has really had to face like really difficult scenarios, where reinsurers are like, nope. Right? Because now when reinsures are like, nope, guess what someone else is kind of willing to step up and you're kind of willing to find it, the people aren't leaving the primary side, that may be changing, right. And that's, that's a risk that's that. A lot of if you've only been in insurance for the last four or five years you haven't lived in, if I go back to like work comp, work comp it up from like, 1980 to 2015 basically combined ratios, the whole market, it's we're comps a huge market, right? It's like $70 billion, whatever, it would go up to 120% combined ratio, and then five years later would come down, it would touch 99, right? 1985, it would touch 99. And then it would go back up, right? And it would go back up to 120. And then in 1995, we would come back down to a touch 99. Again, right? And I'm not kidding. It's like clockwork, right? 2005 it touched 99 2015 and touch nine nine again. Well guess what it kept coming down in 2015 is the first time and is on its way down where you have you have 0% interest rates that maybe changes within work, right. And the risk characteristics of Workers Comp has changed. And you know, there's probably less risky work and there was 30 years ago, whatever. But that dynamic has continued to come down, right? Like we're now you got combines in the 80s. And by the way, if you hadn't been able to make money and were competent last five years, you have no idea what you're doing, right. But what happens when we're running, you know, you have a really big Katrina type disaster, right? Maybe this pandemic, is it right? Because we're still in the middle of it, right? We're in six months from now, if we're looking at, okay, now you're on a year of double digit, double digit rate increases on property or, you know, whatever. I think that's a big risk that we haven't really seen. And most

Nick
I have, I was I happen to think of that as I was going for a walk this afternoon thinking about this particular conversation. And you know, thinking about these insure Tech's right especially, especially the ones that are like a really adamant that, like, we got to get market share. So we're gonna try to grow faster than our losses in your right, capacity has always been there for them, where, you know, the lemonades of the world just passing their losses on to their reinsurers. If that stops, they don't have the balance sheet to be able to do the things that they want to do. They are completely dependent on having reinsurance there to keep them afloat. The reinsurance market gets hard for for them. That's kind of disastrous, and I don't think a lot of investors, the ones that fund these IPOs with the lemonades the routes, you know, these companies they're coming out. I don't think that they've put that into their calculus at all. And I've brought it up several times. And I always always feel like it gets brushed aside and almost scratch my head like am I missing something here? Like Lemonade is completely dependent upon reinsurance more so now than when they first started, you know, they had to transition over to a quota share. I don't see that ending because of this give back like they show no signs that they want to grow their surplus and kind of take more control over that. Yeah, what if what if there was a hard market this thing would end like that? So if I were these Insurtech comes I would try to IPO as quickly as possible.

Shefi
So what Okay, so what products are we seeing the hard market and because I would think like alternative to rent that there's tons of like, the no Jetty is of the world Lease Lock companies like that they seem to be actually surviving this pandemic, and hearing some negativity around cyber insurance, reinsurance market, afraid and jump in because of what is happening with the pandemic. What do you what do you say about that?

Trent
I cybers, hardening for targeting. Yeah, cybers hardening for sure. You know, as as you know, Nick, always I think, Nick, you've said like, it's impossible to underwrite cyber insurance, or maybe it's impossible to price it. It's actually one of the reasons why we're in the business is to solve that solve that particular issue, because the risk is expanding at an exponential base, right. And you have to be able to underwrite a technology risk with technology. But if you look at historical historical loss ratios. There's a lot of our companies I've done fairly well in cyber. And we've had a we've had a rough year, and especially in terms of ransomware. And it was exceedingly worse because of the, because of the pandemic. And there were companies that were like, didn't know what to do when they went to work from home, right where you had to where they were like, well, I literally had to go out and buy my whole company laptops, right. And we didn't have a structure of you know, how we were were able to handle that. So cybers hardening. And but I think across the board, there's hardening happening. So that's kind of what I would be more concerned about for the Insurtech space is a mass hardening, where you're throwing, you're not just throwing the baby out with the bathwater and specific lines of business, you're doing it across the board, because you're actually seeing your capacity start to dry up where that really hasn't happened.

Nick
It's happening though, like the thing is like, you're right, you're right. It's bit by bit. So we're seeing you've seen it in California. So property markets has like seized, you know, as caused by the wildfire. But this did not the pandemic did not help the general hardening of the property market did not help. And I'm hearing you know, how difficult it is I I keep getting asked for coverage in like southern Florida, which is all of a sudden, we didn't even have a hurricane here. But the hurricanes that hit elsewhere have affected that that's, that's hardening as well. If you're correct with the cyber market, like there's, that becomes an issue. If you start seeing it in like aviation and Workers Comp and other areas, it will, it will be a problem. It's like a bear market, there's nowhere to run nowhere to hide. And if you don't have a book already, it's going to be impossible for you to get a book. But I don't think writings, underwriting cyber is impossible trend. I think there are companies like yours that can do it. I just said it's, it's hard. It's really hard. And I have always thought it was harder than to do with flood. But that was selfish, because it's like I want capacity to Why is everyone running, giving it to cyber and they could give it to me.

Avi
Let me ask you, I mean, uh, underwriting, no underwriting? How the heck do you sell cyber insurance?

Trent
Well, I mean, we, we sell through brokers, through brokers and agents, so you think

Avi
you can do it direct to consumer,

Trent
I think you can do it on the micro level direct to consumer. So my opinion has been on direct, for commercial. And I don't think I've ever moved off of this is that absolutely can be done. There's absolutely a market there. But once you start getting of any size, it's easier to have an agent, if you're a business owner, they always said like, there's this puzzle of risk that an organization has, right. And if you let's break it down to you know, a restaurant you've got, you've got your property risk, you've got a liability risk. Now you've got a cyber risk, you've got a worker's compensation risk, you know, me as an insurance company, I don't want all that, you know, I'm a property expert, I want the property right. Or I'm a comp expert, I want the comp but I don't want the liability on it. I'm not I don't understand it, whatever the reasons are. So kind of putting that puzzle together is that that's a real fixing a problem for for somebody, it just so the other thing is, if you're a carrier that's going direct, you better have a pretty broad appetite, or you're telling people No, right? Like, if you're an aggregator you can place it somewhere else. You've got other folks, that's it, that's a little bit of a different, a little bit of a different story. You can have success going direct, but I would say like everybody who has come out of the gates, commercially minded, that has skin in the game, from from some sort of risk standpoint as some sort of skin in the game. Pretty much at about the two year mark start moving in ages. I mean, I think that's all you really need to you really need to know and, and I, I support that I support both models. I think they can both, they can both work. But if you have, I don't know, it just seems to me if you have 10 employees, like you're sitting around, are they googling how much insurance you need? Or you're just calling somebody and being like, Hey, can you can you can you take care of my insurance leads, and they get taken care of? I mean, I think that's a that's a huge value proposition. And, you know, if you people used to compare it to travel agents, sometimes planning a vacation is fun, right? Like people like to do that. Right? They're they're excited about it. Like I don't know who gets excited about evaluating different insurance options, not to

Nick
Definitely not. I think

Shefi
we should stop comparing insurance to anything. It's kind of it really is even when that you know, I was writing this article about the Uber of insurance and the Netflix of insurance. Then there is no Netflix of insurance. The Uber of insurance is Uber because they have a capacity or about a really big balance sheet. Same thing I would say with Lyft. And

Trent
I think you're right, the puzzle of risk, I think is always going to be a challenge, capacity will become more of a challenge. And it makes it so it's hard to have a monopoly, right like to say that Netflix and Netflix doesn't even have a monopoly anymore, because people have caught up, right? And now it's now it's basically you're gonna have to re bundle because you're spending 10 bucks on every single service there is and that's not I'm spending $200 a month on cable again, basically. But with insurance, it's hard to have a monopoly because, again, if you wrote the whole, the whole risk in you know, work comp today, yeah, you'd be making money. If you're doing 10 years ago, you begin your ask it, right.

Shefi
And there is this element. And so first of all, there's always there seems to be always a conversation about what do we do? And then there is very few conversations around what we don't do. And I think, you know, that's the thing for me, Coverhound and, you know, building cyber policy calm. That was such a waste of time, because if they would have focused.

Avi
That's not true. That's not true. They they sponsored the Golden State Warriors. That was nice. You would see that on TV, and it's golden state. They got tickets to the game, the employees, I think were invited. So that was nice.

Shefi
Okay, point taken

have you ever been to a Warriors game, when they were good?

Avi
I haven't. I live in New York. So no, but yeah, I mean, I wish I could go.

Shefi
got we got one wasn't okay. My point is, you go off this track. And he tried to make it work. I mean, we've seen I think it was two weeks ago, where we said in Coverager. And that's life and AXA, are no longer selling a standalone cyber policy. After we covered it. 24 hours later, they went and changed your messaging on their website saying we're working on a new kind of cyber insurance. And I bet you that new kind of cyber insurance is maybe going to be something like what cowbell has to offer or what corvis? It's, it's going to be the traditional product being sold, or intermediated, or yada, yada, yada. You're still trying to figure out how to underwrite it better, right? But why? Why figure out how to communicate it and market it to a consumer that doesn't know what to do with it.

Trent
sales and distribution is a contact sport. And so can you build some embedded products? Absolutely. And I think that's really exciting. And people who have done that, if you go back to Shefi, when you talked about AP and ago, that's kind of an embedded product. Right page, you go work comp is Kevin bedded. And we I was actually lucky enough to build some of the first page go software in like 2009. And that just exploded, right. It's a match made in heaven for those two types of types of products. Probably the perfect example. There's other cases where I think that that is absolutely a possibility, and those things will take off and explode. But even if you're if you're directly trying to sell through the internet, it's a it's one, it's just competitive as all get out. Right. And it's expensive, and it's it's a lot of crap in crap out. Can it be done? I mean, yeah, yeah, it can be done.

Avi
If you want to lose money. Yeah, you can do it. If you have a lot of money to lose not a problem. And you know, Allstate today, it's in the email. I think it's a big story, a very big story, they have launched a part time insurance agent program. And not all state employees. So I assume 1099. sell insurance whenever you want. And this is an idea. I don't know if you remember if you pay attention to Coverager. But this was a concept that we talked about a while we've actually improved the concept significantly. But, you know, you said contact sport, right? That sales. Well, if you're ugly, no one wants to be next to you. No one wants to play with you. If you're ugly, okay. No one will choose you. And that, to me the idea of like part time, and if you and this was the idea of insurance for decades, bring the former athletes, the respected people in the community, the ones that go to the soccer, the church, the church, all of that. Now, Allstate will try to do something that primerica has done very aggressively, but really, you know, expand their distribution channel, they so they went from the captive, they bought National General, which is independent, and now they're going part time. So a huge transformation in

Trent
a short period of time work, just like selling insurances, again,

Avi
and and they mentioned the gig economy. And I could tell you, you know, here's what I tell, I think, if you're a new agent coming to the workforce, and you're just starting out and you have nothing, it's going to be very difficult for you to, to sell anything like you need networking to find people, it's going to be very difficult and that's why

Shefi
we talk about massmutual and Then that buying Bitcoin and just the other, we spend an awful lot of time on Glassdoor. It's it's part of the tracking that we do on companies. And till this day, every, you know, every 10, Glassdoor reviews, or so you're going to find a financial advisor that says, We are brought in to spam our friends and family, you're and if you have a rich family, that's great. You might be able to sell them some products. And if you don't, you don't. And that's the thing. Now I answer the phone. A lot of people don't answer the phone. So it's a it's a matter of a lot of

Avi
people not getting married. We talked about it, the young people that come and go to college, a 21 year old 22 year old, you probably never had a girlfriend, this Gen Z, right. I mean, it's all virtual nowadays, all tokens and bitcoins and no face to face. I saw I saw actually Yeah, no, but but that's but that's the thing like you really, it's a it's a process that worked for them for many years. And they keep on doing it because why not? It doesn't cost them anything.

Trent
No, I it maybe, like schlepping just a car insurance and auto or auto and home for Allstate as a part time gig agent. I guess I can see. I can see that.

Nick
People do it on real estate. trend. Yeah, I mean, I don't even believe how many times I have a robot commercial do real estate now. Right? So you see

Shefi
it happening? Maybe commercial on the mic, micro micro side, but even then, then you're gonna go to Hiscox and get their GL and but you know what, Trent? There is this illusion that with commercial insurance, there's actually comparison and apples and apples and product. Meanwhile, like Coverager, this is just one example. But we come in and Okay, Coverager, here are two options for you. To the other five. Yeah. So it's it's not, you know, there is a reason why there is no monopoly to your back to the point. Everybody wants a certain kind of risk. appetite is very different. You get into eligibility, the devil is in the details, a lot of folks coming in and saying, we're going to build a, you know, an aggregator for small business insurance. And I said, Okay, the clock, what's that going to look like? And then you need the agent and you need, you know, to be relying on

Trent
your side, like, so we I wanted to get product through. Specifically, I wanted to get product, I was going through one channel on one to get it on another channel. And I had built a technical capabilities to do it. But I didn't have the marketing capabilities, I was going to try and build that, right. So it's all about finding partners that I can, that I can that I can do it with. And the one thing that always like after 50 meetings or whatever they always walked away going was like, if someone tells me Oh, yeah, our technology is like going to be able to like, fit the right insurance price. Because every carrier comes in, they're like, well, don't spreadsheet me I don't want to just be like the chat. I want to just be spreadsheet, it'd be the cheapest price. They're like, Yeah, well guess what people would want to look at price. But like, so we hear like these engines are going to are going to put the right carrier with the right product. It was almost always Bs, right? It never actually happened. Because when you got into the real world, it was actually about I need to sell and I need to sell now. So like that idea of like matchmaking, you know, match.com for carriers and and customers became, I'm not sure. And I'm not saying that it doesn't exist or that someone hasn't solved it. I just didn't see it a lot in, in in reality.

Nick
Yeah. I also I kind of want to end on the story, the M broker story that I was reading in Coverager. Because I thought that was interesting. So here's the digital broker, yet, you don't hear a lot about m broker and now they're opening up their entire platform. And I saw someone many agents to agents,

Avi
right? It's I think what it was like a when did Coverwallet do Coverwallet for agents? How long ago was that? Two years, maybe two years? A bit. And you know what the problem is, Nick with, you know, selling commercial insurance online. Aside from, you know, generating awareness, because not everybody knows that you need, you know, we went for like, I think, what, three years without media coverage, Shefi bought some general liability, thought it would solve all the problems. And I said, Wait a second, we've been getting all these like hate emails from people. And what if someone's going to sue us? Are we covered? And then we learned that we needed media coverage, and it took us a while to get it and Coverwallet helped us. Thank you very much. We're coming up for renewal and I hope we don't see a big rate increase. But you know, it the awareness aspect is very big. Let me do

Shefi
the whole lot. It's the thought and I fully accurate story, because I went through Hiscox, and when I realized that it wasn't fully covered enough is after having a conversation with somebody that just didn't really have attention, didn't want to pay attention to my my kind of risk and I started, like networking around the folks that I knew within the Coverager community. So it is a challenge to actually understand what kind of coverage you need. It wasn't obvious that, you know, because Coverager we do a lot of things. So and then you have to you have to find the class code. I had the wrong classification, for instance, but under Coverager, all these things happened. And so really with an easy

Trent
that, quote, was that a conversation with someone at Hiscox, or was it a conversation

Shefi
customer? their customer? Rep. Yeah.

Trent
So you call them? Right, I

Shefi
call them? Yeah, I wanted to make sure that I have coverage.

Nick
That's one problem with commercial insurance.

Trent
The phone calls are driven by the customers, they're not driven by someone going, I want to set up a

Avi
IT, can you use it, just imagine that you're paying, it's crazy, like you're paying for something and this is not like I pay $7 a month, I forgot to cancel something, you're paying a lot of money for something that you don't know. It's just amazing. I know. And again, and we're a small company. Coverager is a small company, we're not talking about huge enterprises or things like that. It should be simpler, should be more transparent. And this is the problem of em broker and also cover why you know what education I went

Shefi
through next, next, and I want my coverage either, right? So I just want to say so yes, two thumbs up to Coverwallet. There was a lot of interaction with Coverwallet. It was all done off Klein, I would say, was there any

Avi
cake with a sent to K? No,

Shefi
we did that, that we did that? Because we were happy.

Avi
But yeah, well, I mean, I think that when it hits it, that

Nick
that's where I think. So I had the same experience when I was at insurance nerds where we got our media coverage. And we had three people that were in insurance. And we were combing over that policy. And we're just like, I can't tell the difference, like what is the difference between this one in this one. And because the price was very different. It's like, there's definitely a difference in here. We ended up finding it but we had three insurance people who are just scratching their heads, the average commercial person does not want to spend that much amount of time. And so there's an opportunity here for someone to niche specialize and say, I focus on media, I will get the

Shefi
opportunity is to create an a code. I don't know if it exists, but I was like a we were a newsletter for the digital age. Like we're not we don't print kept on telling people we don't deal with paper.

Avi
But But you know, e newsletter, let me tell you something, I'll tell you what the problem is with M broker and you know, m broker, they have a nice brand, they have a nice name. They've been doing very well in terms of SEO, they've really invested in that they they appear organically. And we all know that. That helps when you appear organically for the consumer. You're going after agents that Coverwallet is going after Next Insurance is going after Hiscox is going after everybody's going after them. Now the problem is you give this to the agent and the agents like great, what am I going to do? Who am I going to call today it's not as easy they should have what they should have done they should have went to substack if they wanted to go after media coverage, it should have formed an exclusive partnership with substack and said look, we have the commercial agents give us all the information that's what we need. We need a distribution Avi you

Nick
should have been the head of business development because it's what Trent said you want to appear invisible. Right? Like we Shefi we talked about this last week affinity marketing, like it's not going to go away if you can embed your product where someone else can do some of the heavy lifting for you. Like it's just such abundance because nobody wants to actually buy insurance like you can't be delighted in it but

Shefi
I will give em broker credit for you know, I think what they do is they're trying to fix the terminology they're trying to make it more approachable to speak the language that we speak in again they are working with legacy carriers and just like AP to go you're not you can only go as fast as the company that's giving you the product to sell. So by the way trends which carriers Do you work with on cyber

Trent
for our product, okay, so we're we're the underwriter and we write on state national paper and we also write on a benchmark insurance company and Okay, so right on obsidian insurance

Avi
never heard of ever heard of God. Sounds futuristic, the name. That's what it sounds like. The second one not. Cyber is futuristic. Yeah. obsidian does I mean it sounds like from like a galaxy far far away. look at trends background

Nick
that's very futuristic like the water is green.

Avi
That's Norway, right? What is it Iceland.

Trent
I don't know. I paid 99.

Nick
I want I want to, I'd like to finish on the broker thing, right and just say we're gonna keep Keep hitting this distribution is hard sales is hard. I did see someone who did say, an agent who said, you know, with the with the options that are available, he could theoretically just focus on a couple of appointments, ditch the rest, and just use companies like em broker and others to kind of fill in the gaps everywhere else to give them a broad market ability. I was like, that's not a bad idea.

Avi
Yep, they have they have access to many carriers. Yeah, that's true.

Trent
Is the move to give an Asian access? And I read the I read the blurb this week, or is it to offer him a SaaS platform? No,

Avi
I think it's both. Both.

Nick
Yeah, both? Yeah.

Avi
It just,

Nick
I think really smart, because there's a potential play for them to kind of continue to dig in. I just don't see any way around it. I think you have to use the agent and broker force that's out there as a as a legit sales force, because they already have the relationships. Like they're, it's a less expensive way for you to sell your product and you try to do it on your own. my two cents,

Shefi
I think it's worth it. So try. So Trump remembers me from from a conference. And I remember him because I gave him I called him for advice. So way back when I was working for CNA trying to apply for a job where I was the responsibility. what not, I don't care about the titles, but the responsibility was, how do we realign agents to work better or sell more CNA products. And one of the I think one of the options was we had a lot of relationship with, with cluster agencies where you don't actually talk with the, you know, the one that's actually selling, but the level above it. And we had this whole conversation and I was kind of taking notes. But you know, with the agency base selling through agents, it's not the same for each one there there is there is kind of a you have to you have to differentiate between who's a good seller and who's not. And there's so many factors between that. So just because next is going after agents or brokers going after agents, there's more to that strategy that they're going to learn because they actually, you know, build a relationship with these agents. And the idea is how do we move forward? And how we, you know, we grow that relationship. So it's, there is stickiness to it, it's you know, obviously everybody's in relationship business, it's actually a good thing to be in a relationship business during this pandemic. So yeah, and yeah,

Nick
it's got you got to nurture it.

Avi
What is happening really is agents are trending again, all of a sudden, like Insurtech came in to like replace agents, the you know, to say no more agents. Now you're seeing everybody going after agents, Coverwallet m broker, Allstate ones, part time agents, everybody wants agents.

Nick
It's an inexpensive distribution force, you pay them when they actually succeed, versus when, versus an expense that's continuously coming out of your pocket, where you may not be able to get the ROI, or at least the at least your interests are aligned. Then they get when when you get paid, they get paid. It wasn't worth

Trent
it. I'll say it again, they especially on commercial on bigger commercial stuff, right? Like, hey, you know, you car insurance, you could call Geico, you know, you want to be a renter, you can, I'm sure, you know, you're a young millennial, you're really following Lemonade, because that's a really exciting stuff for you. So you can even call those up. It's a little different. But if you have, if you have a risk that has any complexity to it, whatsoever, a good broker is an ally, a good agent is an ally to get you the right type of coverage you have. And I think I think Avi You said it before you actually talk to an agent at Geico. Right? He probably tried to sell you homeowners or renters because he didn't Geico insurance agency is actually the biggest agent in country, right? Because they get every auto in the phone and try to sell them the Travelers homeowner's policy or whatever. You know, so like those big complexity though, those are good agents really serve a really valuable purpose. If you take like cyber specifically, forms can be very different. in cyber, I'd say it is the like, it's one of the most complex and can be the most variable type of form. work comp is like the opposite and everybody's form is exactly the same. Right? And so they're it's a different sell. But I just think there's a big value proposition for that agents have to deliver to the customer.

Avi
I think you just now need to help agents and it's not with technology. Don't come to agents and say, oh, here's better technology. All of a sudden you're selling 100 policies a day now help them help them sell that's what you need. More marketing dollars. Instead, outing marketing dollars in some, give agents, a budget help them you know, do something Because people don't understand that Google is not your friend. Google is your enemy. YouTube is your enemy. Facebook is your enemy. All these companies, all these, you know, embedded, we talked about fintechs fintechs. They have so much information they're going to if they want to be a broker tomorrow, they have all the data, the reach, they have everything. You need to pull money away from those companies and start giving. I don't care if you go back to flyers, if you need to print out flyers, if you need to postcards, whatever. People that want postcards, you have to take money away from Google, from Facebook. All these like affinity partnerships with chime. Do you want to sell to a customer with a average income, medium income of $50,000 a year is that the customer you want that's going to change every six months? Think about your customer and help agents know with these you know dumb prizes. If you saw this, you'll get something no commit for change. That doesn't always have to be Win Win where you always win. It could be Win Win and you could lose a little bit and still be a win win eventually.

Nick
priceless. That's what you get here This Week in Coverager. So hard to end on a better note than that, Trent. Thanks so much.

Trent
Thank you guys. Win Win scenario.

Nick
Win Win win. Everybody's gonna.

Avi
Yeah, and so we're going

Nick
to lose a little bit, but that's a win too. So thank you

Shefi
for joining us.

Trent
Really appreciate it.

Nick
Thanks, Trent. out in Omaha.

Trent
in Omaha. Yep.

Nick
Okay, so, for Trent in Omaha for Shefi and Avi in New York City. I am Nick. Thanks again. So have a great weekend, everyone and have a great happy next week. Bye everyone.

Avi
See ya.