Podcast 22: The MGA insurtechs (Part One): Coverly, Tarian, Digital Asset Services with Artificial & Insurtech Gateway

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In this episode we bring you the first three discussions we had on stage at our evening event "MGA: The new frontier for Insurtech"

First up is Bryan Phillips from small business insurance provider Coverly describing why they decided to offer a new type of insurance and who they are working with. 

Jason Coombe from Tarian and David King, Founder of Artificial explain how they worked together to launch Tarian's cyber MGA. (5:40)

David Janczewski co-founder of Digital Assets Services talks about his new crypto assets insurance business and Richard Chattock CEO of Insurtech Gateway describes why they chose to support Digital Assets Services. (13:30)

Look out for more speakers in future podcasts. Further details and pictures from the event at https://www.instech.london/events

Listen here to Instech London podcast 22. It is also available on iTunes, Spotify, and Podbean.

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Transcript for this podcast

00:04 Matthew Grant: Hello and welcome back to the InsTech London Podcast. This is Matthew Grant, a partner at InsTech London and in this episode, we brought to you the first extract from our event at The Steelyard talking about MGAs and what they're doing in innovation. And again a very lively crowd and we had three very interesting discussions. First of all, we have Coverly talking about what they're doing around SME insurance, and then Tarian and their partners Artificial about their suburb product, and then finally, Digital Asset Services, talking with Insurtech Gateway about what they're doing in the area of protecting crypto assets.

00:44 Robin Merttens: The question's very easy Bryan. Firstly, what does Coverly do?

00:48 Bryan Phillips: So, thank you for having me on stage. Coverly is a digital, on-demand, small business insurance in a nutshell.

00:58 Robin Merttens: So you've come on brand, appreciate that. [chuckle] So, and why is it...

01:01 Bryan Phillips: I was threatened if I didn't, so yes.

01:04 RM: So why is it different? There's no shortage of people doing sort of SME stuff. Why is yours special?

01:11 Bryan: No. So that's a tricky question because there's so many reasons why we've tried to be a bit more different. When we started the journey, we had extensive research behind the scenes to try and understand what the customers wanted. And what was coming through loud and clear time and time again, we looked at the market as it was, what customers were demanding and where we're trying to pinpoint our difference is really to give small businesses, micro SMEs, that sort of instant on-demand pay as you go cover which is what we were being told was required in the market. And so that's where we placed our bets in the product we've launched.

02:03 RM: Sounds like it's customer-focused? [chuckle] Not all these things are. So tell us what the genesis was, who came up with the idea, where did it come from?

02:15 Bryan: It will be no surprise in the room, people don't like insurance, they feel that it's a grudge purchase, begrudgingly taxed to protect something that they don't feel... They don't know what they're buying, in essence, when you speak to them. And so that comes on to the next point of, "Okay, so how can we start stripping that back and making it a bit more jargon-free into layman's terms?" And I go on, there were so many opportunities for us to enter the market and we thought, "Well, we can't do it all, but at the same time, we can go a little way into each of it, and start to build a brand that changes the face of insurance for this community." So the key focus for us is really how can we change it to a purchase that you do once a year and you don't think about it, you don't want to think about it, to more of that ongoing relationship. How can we build trust? So back to the Bibby values, it's about supporting businesses, believing in businesses, being there as a trusted voice.

03:20 RM: So there's a lot of preparatory work in that. How long did it take you from the moment that they went “go” to getting something live?

03:28 Bryan: So the actual decision to invest in building the MVP was in beginning of August last year, 2018. So we spent, we already had identified a lot of our build partners at that point, so we had a bit of a head start, but then we spent five months building our MVP before going live.

03:54 RM: So how long have you been live?

03:57 Bryan: So well, we soft-launched end of January this year, so we've been live eight weeks.

04:01 RM: Given that you are live, what have you learned, what was different from what you thought?

04:07 Bryan: What was different from what I thought?

04:09 RM: So, how did live trading and the way in which your customers have behaved changed in any way from what you were expecting?

04:19 Bryan: I think one of the bigger revelations to us is, everyone always talks about mobile over laptop, or office hours versus out of hours, how we call it. The biggest revelation is actually people don't necessarily want to talk to you. We always try... And this mental picture of contact centres being pushed to their phones and majority of our traffic is through web chat, and you go to sort of... Geek myself out here, contact centre conferences and things. And that is the future, they're all seeing in terms of those customer trends that these small business owners they think that if they get on the phone, there's a half hour conversation there, they don't have time for that so they don't engage. Whereas, actually, they might be on web chat for half an our with us, but they're only in and out, they're not giving it that full dedication, they can do other things. And that's really been quite a revelation in terms of man up your web chat channels.

05:22 RM: Done. Last question, which is the best Insurtech community in the world, do you think?

05:28 Bryan: That's a loaded question. Robin, what can I say?

05:31 RM: Thank you very much.

05:32 Bryan: Eternally yours.

05:33 RM: On you go. Thank you very much Bryan.

05:34 Bryan: Thank you.

05:38 RM: So next up, we've got Jason Coombe from Tarian and David King from Artificial. We're going to put you guys through the same process. So Jason, can I start with you?

05:54 Jason Coombe: Yep.

05:54 RM: Tell me what Tarian do?

05:56 JC: The cyber market in it's current existence has a lot of talented people, but it's very centric to the London industry. And it's felt sometimes that the barriers to business perhaps around the UK are felt by an education piece or getting the message out and we felt with the right partnerships distribution model we could help businesses no matter where their geography is in the UK, access the cyber market and access the right products.

06:24 RM: Fantastic... And then what's your distribution model? Are you broker orientated?

06:29 JC: We are broker-orientated, yes. In our first two years of trading, we've been predominantly Lloyd's broker-focused, that's been our, I guess, building platform. The viewpoint in the next 12 to 24 months is to grow a distribution network outside of that model and push through the regions.

06:46 RM: Given there are no brokers in the room, or there normally aren't, do you have plans to... Oh, there are a couple. Would you change that model? What do you think your plans are long term? Be broker centric or go direct to consumer at some point? Or customer at some point?

07:03 JC: Yes, very good question. I think in the initial phase where we're at now, we'll always be broker-focused. I think to push direct to client, we'd been moving right into the micro SME. It brings challenges with it. At this stage, from a resource perspective, and the rest of it would perhaps be a future roll out.

07:22 RM: And how did you get your capacity? Who is it, can we say?

07:25 JC: We Lloyds backed, 100% Lloyds backed from a capacity standpoint. I think and I was just talking to people earlier, that being in the cyber market brings with it, perhaps an easier access to capacity than in more traditional lines. What with it being a business that people are keen to invest in, and in a lot of cases, syndicates perhaps struggle to obtain the expertise at market rate or market value. So there are those who are willing to back expertise from elsewhere.

07:58 RM: And if you were to differentiate yourself from the competition, how would you do that?

08:04 JC: A couple of things, really. I think firstly, my colleagues that I work with, their expertise, their knowledge. As I alluded to earlier, whilst there are a lot of talented people in the cyber market, it's predominantly London-focused, and in terms of years of experience in the market, it's few and far between those that would be considered grey-haired. We have leading experts in the claims area, in the underwriting area and it helps us, I guess, get confidence from the market space. Beyond that, technology partners and the ability to bespoke and be lean.

08:39 RM: See how we set that up? Mr Technology Partner, come and tell us. How did you get involved with Tarian? And how did that start?

08:49 David King: First of all, good evening, Robin.

08:51 RM: Good evening. Sorry.

08:54 DK: How did we get involved with you guys? I think we knew the investor. There's a VC backed entity that started up Tarian, and coming from a VC backed firm ourselves, we operate in their circles and one of the VCs said that they were looking at technology for the MGAs. So I think that we were then introduced to the CEO of Tarian.

09:15 RM: Nice. And what does the technology involve? How do you build it? What are you most proud of?

09:22 DK: I think the really big challenge here, especially with Tarian, is you've got the... As I said the few people that have greyer hair, in cyber. And they've got their expertise and they've got their very complicated algorithms that do the pricing and translating that into a really simple user experience. In terms of what we did for them, I think it was taking all those coverages, breaking them up into modules, digitizing the pricing algorithms for those modules. So you get to a point where the user can very simply and straightforwardly select what coverages they would like. You then use third-party datasets and an internal rules engine to decide whether they are applicable for those coverages, provide them with a price, and then very quickly allow them to straight-through digital process that. I think that where they are now is at around 85% of digital risks are targeted to go straight through. And that means the underwriters are only focusing on high value tasks, that underwriters should focus on. And 85% of the risks, whether it's the basics in terms of documentation or whether it's more advanced stuff in terms of presenting the data in a way it can be manipulated by machine learning algorithms, you've got all of that. Admittedly, it's not 100% straight-through processing, but targeting 85% seems to hopefully put them in a position where they can do what is most important for their business.

10:48 RM: This is a trick question. What does user experience mean when you're dealing with brokers?

10:56 DK: Brokers do things a certain way and if you ask them to do some things differently, they'd probably tell you where to go. Is this correct?

11:03 Audience response: There are conversations..!

11:06 DK: Yes. So what we try and do is we say, "This is a great user experience in that, it's really simple, you ask them the fewest questions possible," but I think the next steps that we're working towards is that if you try and integrate in the way that they work at the moment. If you say to them, "Okay then, you don't want to fill out a form. Can you be bothered to just write that information in an email and send it to us?" If they can do that, then we can take it out of the email. And because of the way that you've built all of the platform with APIs that can receive the information once you've digitized it, then those same pricing algorithms can take the information from an email, as well as a form. So you can say to the broker, "Apologies for picking on you, but just send me an email and I'll get you a price really fast as well."

11:50 RM: Sounds to me like you're encouraging bad behaviour in brokers.

11:54 RM: But it also sounds like a really cool piece of technology. Okay, so having worked together through this, what single piece of advice would you have to anybody who was about to start out off on the same journey?

12:06 JC: You know what? I'll take this one. I think a major part of investing any time or process in developing a new distribution platform really requires an understanding of the different types of projects you might engage in. If you're going down on that dull route, go down an alternative route, as the project owner you need to understand that scoping it and investing time at the start reaps rewards at the back end. There is a rush to get to market, a desire to be there before the others, because there's this viewpoint or conception that first out takes market share. The thing that we've learned from it, is a little bit of patience goes a long way to when you actually get to the stage, which we're almost that now, of launching your product in the market space. The thing I would say is, perhaps take a bit more...less haste and a bit more patience in the process.

13:07 RM: Doesn't sound very Insurtech-ey to me.

13:12 RM: Thank you very much, David, Jason. Very kind, thank you. Well done.

13:20 RM: So next up, we've got Digital Asset Services. This is David Janczewski, I got that right?

13:28 David Janczewski: Close enough.

13:30 RM: Thank you and Richard Chattock, he's the CEO of Insurance Gateway. Welcome to my living room. So let's start. What does Digital Asset Services do?

13:41 DJ: In a nutshell, we offer insurance for cryptocurrencies. The difference that we have versus, I guess, other providers is that we insure cryptocurrencies in a hot or online environment.

14:00 RM: So, I've heard this discussed for a while now. So how did the idea come around and how did you set about getting it to market?

14:10 DJ: Well, like all good ideas, it started in a pub. Started in a pub in Slovenia of all places as well, where I was talking to somebody who'd made a heck of a lot of money in running a cryptocurrency exchange. And there's a 27-year-old with hundreds of millions of euros in the bank. You kind of start to worry about how much cash, and this chap was worried about how much cash he was leaving on his balance sheet as a mechanism for self-insurance, because he couldn't buy a policy anywhere. And kind of in line with that, I'd been spending some time working with an organization called the Royal Mint, who I guess is, I would say, the most conservative, secure, concerned organization you could ever wish to work with. And so we'd come up with some pretty interesting ways to secure hot environments and something that we thought was very good. So here was this thing that we had developed as a proprietary piece of technology, here was a marketplace that seemed to be crying out for it, and it's as simple as putting the two bits together.

15:19 RM: I'm sorry, this is out of left field, but without sharing special sauce, how do you price the insurance of digital assets?

15:29 DJ: Very simply, because price volatility in crypto assets is all over the shop, right? It was up 20% today, Bitcoin. So, we reverse price it. So what we say is, "How much cover do you want to buy? What's the dollar value of cover that you want to hold for your, against your crypto assets?" So it's much easier for us to say, "Buy 5000 pounds, 10,000 pounds, a 100,000 pounds worth of cover." And then you take volatility, add to that question.

15:57 RM: Yes, that's a new theme, I like that. So, what role did Insurtech Gateway play? When did they come on the scene?

16:04 DJ: I met them in a pub as well. [chuckle] So genuinely, I bumped into a chap called Stephen Brittain, who's the founder of the Gateway, in a bar and he after about half an hour of in-cohesive chat on my part, and not relating to drink by the way, just in-cohesive chat, he said, "Come and have a chat." And I think, for me, I spent nine months rolling around this idea, not really sure how to take it to market, and I bumped into Stephen and all of a sudden I found this really enabling capability from my perspective in terms of this can make it real.

16:44 RM: Richard, one for you. I know you see endless propositions dance before you. What was special about this one?

16:53 Richard Chattock: So, we invest, obviously, our time, and energy, and our sweat, and our cash in the businesses that we back in return for equity. So any business that we invest in, we invest in because we think it's going to be a valuable business one day. We may not be right every time. I suspect we won't be right every time, but that's the objective. And we think about all of the, all aspects of that as an investment and to the extent that we can help that company succeed. So where's the value add that we can provide for that business because that also allows us to leverage this, our sweat in the business too. So we met David, clearly a guy who was extremely knowledgeable about his subject, been working with the Royal Mint, with one of his co-founders as well, who comes from working with security services, on similar security type products as well.

18:07 RC: And they came to us with a proposition to build a product which frankly there is clearly an enormous amount of demand for and absolutely no supply. So there aren't many of those in the insurance industry where you see a product you can build where people are phoning you up before you've even built it, telling you, asking you, how they can get hold of the product. And so yes, all the necessary bits in there. And the question was, can we, can we get this to market and can we convince an insurer that this is an insurable risk? So we sat down with David, went through it for a number of, number of weeks, putting together a proposition that we felt was presentable to a couple of our partner insurers, in a process we call bonkers or brilliant. And spoke to those insurers and said, "Do you think this is something you could ultimately insure once we've done some more work on it?" And they said, "Yes, we think we could." So at that point, we had the green light to go ahead.

19:19 RM: And roughly how long did it take from when David walked through the door to you taking the decision to go and having an insurance partner round, and in not too much detail, what's the process? What do you put your people through to get them from idea to the finished article?

19:42 RC: Clearly it varies from one company to another. And David's product is not the most vanilla of products. Fortunately, time foreshortens when you look backwards. It felt like a couple of days, it may have been a little bit longer.

20:04 RM: And there's a tech behind this? Who put the tech together, is that part of your job, you guys?

20:08 RC: No, David and his team built the tech. We provide appointed representative status on our regulatory permissions, we've partnered him with insurers and we've navigated him through that whole process.

20:26 RM: Cool. So same questions we asked earlier, having been through this brutal process of bringing something to market, have you any advice for people out there who are thinking about it?

20:38 DJ: I guess, I would say I split things into the ‘what’ and the ‘how’. And we spent a lot of time on the what. And if I could do it again, I would spend more time on the how early on, particularly with... I don't claim to know much now, but I came from no background in insurance whatsoever. And so I think the how and getting into the detail of what it takes to make something a reality takes longer, costs more, is far more rigorous than, I guess, I'd anticipated. If I could say one thing, if you're going to get in on it, absolutely get the what right. Assume that it's wrong, by the way, because if you get it... What is the right at that moment in time will change a dozen times between when you think of the idea and when it actually goes live. And spend a little bit of time on how to actually make it a reality.

21:33 RM: And exactly where are you in the process now?

21:36 DJ: We have a technology piece of the puzzle as well. We are live at this moment in time, we've been live in a undercover kind of quiet way for the last three weeks. Traction's been good, given that we're not telling anybody about it, apart from everybody here of course. We have customers in 53 countries already, we're really starting to see that. So we're very, very early on. We actually haven't put the insurance piece live yet because we're just managing very carefully that delivery to market.

22:13 RM: See how current we are in InsTech London that we know about these things, we bring them to you even before they go live. Okay, we've got the time for a couple of questions.

22:24 Audience question: How difficult was it to get insurers on-board compared to the other challenges?

22:30 DJ: Compared to the other challenges, yes. [chuckle] It surprised me. I guess, I came from a place which was government backed, where we got into cryptocurrency before Etherium. If you know what Etherium is... Before that even existed and so I was expecting a really long hard slog. It surprised me how knowledgeable most insurers are about cryptocurrencies at large, digital assets even more so. Has it been easy? No, but I would say it's comparable to everything else. When you're building something at a technology level, it has to be secure all the time and up all the time. They're equally as challenging, I think I wouldn't say it was any more difficult or less difficult. It's a different type of difficult. Education, although we start from a much stronger base than where I came from, is the key thing. And we're only just... And if you want my view on it, I'd say the whole world of digital assets, we're at about 1996 in comparable years to where the internet was. We're only a decade into digital currencies, I guess. And I think there's at least another decade before we hit some sort of maturity level.

23:52 RM: Last one.

23:57 Audience question: I find it fascinating. What aspects of the cryptocurrency are you insuring? Is that just loss or is that theft? And do you have any exclusions like the recent...there was a sector who took hold for a majority of the blockchain for a period of time and...

24:13 DJ: Yes, so thank you for that. We cover loss and left. They're the two that we cover. Whether you lose access to your phones or somebody maliciously steals them. We are careful about which currencies we support. A 51% attack that happened with Bitcoin Gold recently is something that we are very cautious of and that's... I think we look at prevention rather than cure. So there's a good example where we wouldn't take on insuring that particular currency, because it was weak. It was obviously weak before that happened, quite frankly. And it is no surprise that it did.

24:49 RM: Thank you, last question from for me. What do you drink in a Slovenian pub?

24:55 DJ: Anything they put in front of you, yes.

24:57 RM: Sounds very dangerous. Thank you both very much. Cheers, thank you.

25:05 MG: Well, I hope you enjoyed that fascinating discussion. We'll be back with extracts from more of our speakers. In the meantime, if you're interested in what we're doing at InsTech London, you could follow us on www.instech.london where you can see our forthcoming events and sign up for our newsletter.