Powered by KASKO

Nikolaus Sühr, CEO and cofounder of KASKO, asked his friend Matt Wardle to put the pen down as he was about to sign for his first mortgage, and instead take a chance of building something together. I had the chance to ask Nick some questions about KASKO’s early days, insurtech, digital partners, and customer engagement.

Avi: Describe KASKO.

Nick: KASKO is an InsurTech that specializes in working with insurers and MGAs to design, distribute and run digital insurance products for any distribution channel without having to re-prioritize their legacy IT. KASKO to date has worked with insurance brands such as Allianz, AXA, Baloise, Co-Op, FRI:DAY, Swiss Re and Zurich.

Whereas it used to take 18 months to go from the boardroom to launching an insurance product, KASKO’s platform means incumbents and startups alike can now design, build, launch, test, tweak and manage insurance products within their own or third party channels, in around 4-6 weeks, at a tenth of the costs of old. These new offerings can be run side-by-side or integrated into the insurer’s legacy system.

In essence, what took 18 months and around €500,000 now takes five weeks at less than €50,000.

Avi: What led you to start KASKO and what are your goals for the company?

Nick: I think I will be the first in this Coverager interview series to say that it all started when helping my sister build what at the time was going to be a dating app. That is what put some form of target on my always inherently existing desire to “build” something.

It helps of course that I come from an insurance family, my dad founded, scaled and exited the leading classic car MGA and brand in Germany, Austria and Switzerland, but, although we touched on cars in KASKO’s early stages, I am not a car fanatic.

The startup seed had been sewn though and I knew exactly who I wanted as a co-founder.

I met Matt by chance at university, well, if me signing up to the wrong halls of residence is the same as chance, then… that. Anyway, we spoke about it, and agreed that we could do something together, so we decided on something that is instrumental to how we operate now too – we ran a test. We wanted to test ourselves having never worked together, we were mates, but working is different.

So, we set out making “Quotes of Glory,” a celebrity quotes content app – at the end, we were still standing, still friends and still wanted to work together, whilst Quotes of Glory was not, the test, very much was a success. In January 2015, I then took a sabbatical to ponder our next step. With my insurance background and Matt’s technical knowhow, we started the journey of making KASKO Drive, something along the lines of Cuvva in the UK. Without really much of a product, we started entering startup competitions as a proof of concept test, the aim was to give ourselves three months to work out whether we quit our jobs and crack on, or go back to “working for the man” ☺..

We ended up winning at the WHU Otto Beisheim School of Management 3-Day Startup Pitch. Matt was in London, I was only two weeks into my sabbatical, but we had won the startup competition of Germany’s number one business school for entrepreneurs (have a look at Germany’s leading founders and see where they went to school). That evening, I rang Matt to chat, the next day he was signing for his first mortgage – having asked him to re-think and put the pen down, he packed his bags and flew to Hamburg to join me, leaving those mortgage papers dry.

In March of the same year, we won a space at Deutsche Telekom’s accelerator, Hubraum, and by April, we had pivoted to a B2B2C model. We realized that customer acquisition costs on an on-demand insurance model was simply not going to work, but the tech was very much on point.

There was more to be made and better opportunities for networking too, by offering tailored insurance products at the point of need for digital retailer and marketplaces – this reduced our customer acquisition costs massively. But more change was on the way as Seedcamp had accepted us into their ecosystem.

Initially we were quite skeptical of the lure of the equity-based accelerator program, as we simply didn’t think that an accelerator will get you your customers (which some claimed at the time). However, Seedcamp was very frank and promised two things: 1) To get us a meeting with every VC in town and 2) access to a network of >100 founders who have found an answer to pretty much any question not directly related to your product and your market. They also convinced us to move from Berlin to London, which was somewhat fortunate for Matt ☺

For the third time in three months, we moved cities to where we now call home. Thanks to Seedcamp’s advice, we are headquartered here, but we also have a team in Riga, a team in Hamburg and a satellite at this stage in Singapore.

Even in August 2016 we were still working on the B2B2C intermediation model, but with limited fiscal success. Sales cycles were painfully slow, and the growth we were targeting still wasn’t there. In all honesty, enabling incumbent insurers was not something we had aimed for. But, never ones to look a gift horse in the mouth, we had a meeting with Baloise in Switzerland, who it turns out, liked our tech and has quite the distribution network.

Baloise wanted to white-label our platform to design products and integrate them into its multiple distribution channels. Being paid a license per product, a small success fee and most of the setup costs covered, the KASKO you see today, offering “InsurTech As A Service” was born.

So too was the phrase “InsurTech As A Service,” I wish we had copyrighted that…

As for the goals, I had basically always wanted to “build” something. I also wanted that to be an environment to combine meaningful work, meaningful relationships and fair compensation for everyone involved, and thus far, we are managing to do that here at KASKO (at least most of the time).

Avi: If you weren’t working in insurance, what would you do?

Nick: I’d probably be working as a lawyer, either with my own practice or some large outfit – this has nothing to do with the TV show Suits, but I could see myself as somewhere between Mike and Harvey as characters go. Seriously though, I had also enjoyed time prior to KASKO as a strategic consultant, so maybe that too. It is hard to answer, as I can’t see myself not where I am now.

It was never much about the title though, I guess I would have been happy anywhere where I could have a decent level of autonomy and responsibility, a series of complex problems to solve to keep me engaged, and people to work with that I can learn from whilst getting stuff done.

Avi: Kasko has built different solutions – some more successful than others. From your experience, what are the main reasons a solution you provided didn’t work out as planned? Was it a lack of commitment from the insurer? Wrong product? Wrong distribution partner?

Nick: It often comes down to lack of commitment on the part of the product owner. Your first iteration might not have product-market-fit but if you have grit (passion and perseverance) you usually figure it out along the way in the early stages.

In the short-term, we see too much emphasis on “product.” There is often a lot of focus on trying to re-educate the customer when really, in our insurance circles, the focus needs to be on educating the distributor on the new ways. Doing this without coming across as condescending or arrogant is a fine balancing act. We always recommend focusing on distribution and configuring the product or service to the specific contextual cues and levers within a distribution channel.

This means whilst still being on the drawing board, get buy-in from your marketing colleagues, bancassurance partner, lead agents, brokers you name it and make sure that whatever you think works also works for them… We highly discourage “build it and they will come” (unless you fancy another innovation prize of course ☺)

Avi: One of the things KASKO does is help digital businesses offer insurance and in the past few years we’ve seen more and more digital players do exactly that. Do you think there’s enough partners out there for every insurer? And what’s the answer to those that aren’t able to find partners?

Nick: You are right, we originally started as a B2B2C intermediary targeting digital businesses to inject insurance into their service offering to improve customer experience (e.g. trust) or simply to monetize more efficiently.

These days we turned this around and partner with insurers who might offer their product in traditional or emerging channels. As a completely digital operation, we have found we can cater to the old-guard by digitizing their process or massively enhancing their current setups, or working with the plethora of new business that work like us, quickly, flexibly and digitally.

Generally speaking there are not enough partners for every insurer, as ecosystems and platforms have strong network effects – benefitting scale. Thus, it’s key for insurers to sharpen their teeth as partnering with ecosystems and digital players requires a re-definition of what their product is, whilst great underwriting, pricing and claims regulation is still core to the insurer. A quick point for the insurer, NEVER outsource this, the product becomes wider-reaching, it’s about connectivity to different touch points and value-adding services, it’s about ease of integration, flexibility and willingness as well as ability to change. Now, whilst many insurers try to in-source these functions, I have not seen this to be a very cost-effective way to allocate resources. When you do decide to partner, make sure your partner is aligned. Be wary of ballooning service and customization contracts and pick players who go for platform and connectivity.

If you really want to understand where your money as an insurance company goes when partnering with tech players have a look at their reported revenue margins (most publicly listed players require 70%) or recent valuation and fundraising if they are still private, these come with expected returns by investors that need to be paid by someone after-all… guess who that might be…

We call it ‘learning to partner well.’ Especially where opportunities might not be that obvious at first, everyone gets that you can make volume if you partner with a large bank, travel agent, car manufacturer or retailer but this makes it really difficult to earn sufficient margins, therefore, try thinking more like an orchestrator of services, both internal and external, that will become a new USP to get these partnerships to work.

Finally, I’d say that Asia with its tendency towards using ‘SUPER-apps’ is a great sign of the ecosystems to come. In China for instance, WeChat is your everything, from paying a market-trader to massaging your mum and so much more – it is an OS within an OS over there, over here, the ‘dominance’ of Google Or Facebook for instance, doesn’t come close. I think that the US and Europe will follow rather quickly on this front.

Avi: ING launched Yolt. Goldman Sachs acquired Clarity Money. BGL Group (comparethemarket.com) acquired Bean. Moneysupermarket.com integrated with Yolt. Starling Bank built a marketplace, and Monzo allows users to compare and switch energy providers. Are money management apps and digital banks positioned to be the most powerful insurance distributors in the future considering the data they have and timely access to users?

Nick: Yes and no;

These money management apps will be strong and significant lead generators for insurers and their prowess will be different by target segment. Currently they cater best to younger, well educated customers, which is a critical part of the pie but it is not the whole pie.

I’d say that they are probably strongest in life insurance circles for instance, both pension/annuity and term life, because of the proximity to financial planning and insight into key life events like leaving home, being a student, starting a job, getting married, starting a family and so on.

However, regarding insurance for high-value properties like homes, cars or your business, as well as health insurance, require so much individual insights and other players like car manufacturers and health apps etc. might have more relevant data to better price and offer insurance to customers. Moreover, as insurance products become more complex, people might still want to listen to an expert to guide them through the alternatives. Whether this expert is a commission-based agent in a local branch, a customer care expert or a pay by the hour expert that you can email, chat and video conference with remains to be seen.

At any rate, the distribution landscape and opportunities will become more heterogeneous and insurers should ignore this at their own peril.

Avi: The US and UK markets are different in terms of how consumers purchase home & auto insurance. In the UK it’s mostly done through comparison sites while in the US consumers don’t have that full end-to-end option. What are the challenges and opportunities you see in each market?

Nick: The UK has traditionally been a broker market and auto-expire policies have created a “placement” market where each year there was a forcing function to renew. With this comes the drive to compare insurance offerings, and this was happening long before the advent of price comparison sites and their horrible adverts. Don’t forget they really are just brokers on tech steroids.

The US, as well as most continental European markets, had more of an agent based model where insurance policies auto renew and it was always structured around a relationship.

The interesting thing about the UK is that it already has quite well digitized insurers because of the need to deal with so many brokers. Thanks to this, the rise of price comparison sites, we are now seeing the rise of the neo banks more strongly. So I believe, digital bancassurance will be a key development.

For the US, because of regulation and largely agent-based distribution success in the past, digital transformation that is geared towards distribution connectivity, flexible product configuration to account for state regulation, rather than the internal Guidewire et al upgrades will see the sharpest benefit in terms of wasted IT budgets and thus fundamentally lower premiums.

Basically, the US will see the fiscal benefits more than the UK has from these new developments, simply because there is far bigger changes to make. The UK has been on the digitization journey in its own way for a while, the US is switching from the pony express to a Tesla – and we (KASKO and the wider InsurTech ecosystem) want to be the ones powering it.

Avi: In the age of insurtech, agents have been a trending topic. Do you believe agents have a chance to compete as more and more consumers start their insurance quest online? Specifically independent insurance agents that have to worry about customer acquisition themselves.

Nick: Well, Yes, digitally augmented ‘human’ advice will be key to insurance distribution for years to come due to the inherent complexity of the product and client disinterest with the topic – being able to just asking Steve or Sarah to sort out your insurance is a very good way to reduce complexity! That won’t change.

And no.

Offline distribution with the agent knocking on your door and filing a paper-based home insurance form will eventually die, it has to right?

Moreover, remuneration structures that are purely commission-based might also come under scrutiny. From a customer point of view, I do hope so… It always baffled me why I am paying other professional services by the hour or service delivered and the insurance agent gets paid by the product provider.

I can’t be the only one thinking this right?

The fact that customers start online and then want advice from the agent is totally fine. Even in a commission based system, it’s not like online is “free” you still have to pay in branding and ads, whilst the same might hold true for the agent, you could simply get massively higher conversion when listening to a customer and advising them on the right coverage than your chatbot might do. Again, not for things like home insurance but I believe this to be the case for more complex products.

Even if that wasn’t true, insurers at least will have to consider bridge scenarios where the type of distribution is linked with the customers age. If you are used to engaging with an agent for the past 30 years, you probably won’t change but if you never even seen a banking branch for anything other than a cash machine (ATM), then you would probably never even consider that.

To summarize, insurers will have to keep listening to their customers and engaging with them on how they are used to until they … erm… die. Any strategy needs to keep the cash coming in on the old model without too much investment whilst taking that to invest in the new upcoming systems.

Avi: There are many in the industry that believe in customer engagement. From your experience, do you believe consumers want to interact with the insurance product/company?

Nick: No, users want flexible products and ease of purchase, don’t want to overpay and definitely don’t want to actually engage with the insurance company… heck, I don’t even want to engage with Amazon, I just nip in and out and get it delivered to my door… Why should insurance be any different?

Avi: Unlike fintechs that enjoy massive adoption from users, insurtechs weren’t able to generate such interest. Why do you think that is? And do you believe insurtech founders underestimated the challenges of acquiring users?

Nick: It starts with the core difference between a payment or lending product, AKA FinTech vs a risk transfer product AKA InsurTech.

The frequency of engagement around payments is much higher, so any friction becomes much more obvious. Say it takes me 5 mins to do a transfer that I have to do 3-5 times a week. That’s annoying isn’t it? If I can swipe that problem away via slick UX and the costs are the same or even lower than my current provider, I’m in. Sign me up!

Now say the last time I checked my car insurance quote was 3 years ago, the process on check24, the largest price comparison portal in Germany, wasn’t great but heck we are talking 300-800 EUR a year in total premium – I am more than happy to spend that extra 20 mins to save a wedge of money. Added to that, it needs to consider that I might actually drive a lot, or very little, own several cars, have a classic car, have two named drivers of different ages or a multitude of other variables – all of which impact price and all of a sudden the UX becomes less relevant and the product and savings potential far more important.

Lending is another interesting one, getting money now to fuel my consumption or investment is great, it’s a positive association and it can be embedded into any purchase journey. Especially since the assets in question (other than the value of course) are largely irrelevant and it’s all about me and my credit score.

Now shift this to insurance, it is somewhat different. Insuring something is not interesting.

Whilst whatever I just spent my money on (car, holiday, laptop or even a nose job), hugely impacts the insurance, these are questions which make it much harder to streamline efficiently.

This is why so many InsurTech founders coming from other finance or retail industries have somewhat underestimated the massive differentiative power of a good brand and deep understanding of risk pricing.

Avi: What insurtech companies do you find interesting and why?

Nick: Any B2C or B2B2C MGA or full stack like Lemonade, Next, One, Coya, Fri:Day, Getsafe, Metromile, Qover, Ladder, Element, Mailo etc. as they are paving the way for change in the insurance industry, bringing new products and services to market with customers in mind rather than risk of cannibalization.

It’s simply less risky these days to suggest something that might challenge the status quo in an existing insurance company than it was five years ago. Moreover, if you truly “follow fast” (and not just don’t do anything waiting for the ideal moment to align on your powerpoint deck) you can get inspired, adapt and improve without having to invest too much of your own money, unless you are the limited partner of a VC of course, then it’s expensive :-)) – If you are a VC, and keen to invest the smart money, get in touch. 😉

From a more operational note, we are very interested in anything regarding distribution, we believe truly that good networks and ecosystems are the future, be it neobanks, mobility, e-commerce, travel or price comparison sites. These are natural partners to connect to, enabling insurers to offer their service there.

Again in no particular order these include WeFox, Curve, Monzo, Simply Business, Starling Bank, Cler, MOVU, Penta, HomeToGo etc. We also LOVE “value-adding” services to inject USPs into the insurance offering. Here we have not partnered with as many companies as we would like since we have to convince the insurer first, but some companies I personally would love to work with are Ozon, Skendata, FRISS, fegder.io, Digital Fineprint, Cytora, Leakbot to name a few.

Avi: What does the insurance industry look like 5 years from now?

Nick: A lot is being said about the customer being able to get the right insurance at the right place, right time, right price. This is via the convergence of customer access and data, through ecosystems and platforms, insurance as a utility and prevention and replacement over indemnification.

And I believe in all of the above but the million dollar question is “when?”

Which is why we hedge our bets and build technology geared for the emergence above but solve today’s problems with it.

But, people talk about focus on the customer. And our customer is the insurer or MGA, not the consumer. The consumer is really part of the product. Don’t get me wrong, it’s the same way we are the product not the customers of Google and we need to create great customer service but within such a low interest product such as insurance, you need to figure out how to get it to the right place. So if I take a typical customer like an underwriter within an insurance company, in 5 years time her job will look much more like that of a hedge-fund manager or direct marketer today. She will open her dashboard, see relevant news around risks and customer demand, and be able to allocate risk capital across various channels simply by stating the max exposure and max. CAC.

She is willing to bid on a given subsegment of customers. These will then be published across the connected distributors – be they banks, price comparison sites, broker portals, agent portals, or mobility apps, in real-time very much like Google Ads…

Of course, if we play our cards right, the glue keeping all of this together will be “powered by KASKO” 🙂