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#15 Distribution: the lifeblood of insurance

This week on InsurTech Bytes, we welcome Karn Saroya, CEO at Cover, to discuss why providing extra value, keeping the customer engaged and making the most of the people within their team have proven the keys to making a new InsurTech business a success. Karn will be at InsurTech Rising US this may, discussing why insurers are struggling to come up with new, novel forms of distribution. 

Karn starts by explaining that Cover is "a technology company, with a US insurance brokerage built on top". In this essence, their customer base provide photographic and video evidence of the items they want insured, anything from their cars, TVs and even pets, and Cover fulfill these requests through their 30+ carriers. The other niche is that Cover is mobile only and makes the majority of their sales and customer touch-points through technology, often via internet messaging or text.

This may strike a cord with traditional insurers who are trying to implement chat bots and more user-friendly ways for a tech-savvy  base to engage with their services. So how do Cover make this work?

Karn explains the teams background is in eCommerce and says, "we're fairly adept at building mobile products," and combined this with his knowledge of financial risk from previous roles: "we're not entirely outsiders!"

Cover started with the aim to prove that lead generation and distribution on mobile was a big enough pipe to build a "fairly sizable insurance business" and the moved down the chain towards brokerage when they realised their partners didn't have the ability to immediately engage with the customers via the channels they expected to be engaged with.  Now they build their own software to handle price comparison, payments and outreach - effectively taking more control over the customer experience - and work with their partners to deliver the insurance policy.

"When it comes to working with our carrier partners, we prefer that they treat us like any other retail brokerage. Most insurance carriers don't have simple pricing, payments or document generation APIs that we can tap into, so we don't place that burden on them. We build out the tech that necessary to automate that kind of stuff in-house."

Value add and customer experience

With the majority of sales being made over text and internet messaging, it seems logical to have great front-end staff to handle demand. The change in tact for Cover is ensuring that their human capital is spent in a purely advisory manner when selling insurance. This allows their agents to hone in on who the customer is and apply their expertise to getting the right broker to match them with. "This really scopes the human piece very narrowly to what is the most value add - which is providing advice".

Karn also recognises that Cover operates in a crowded and commoditised market, where in order to compete a business needs to be able to offer more value and go above and beyond a simple transaction. To do this, Cover offer price alerts and allow customers to document their property ahead of sever weather events, which helps the claims process as well.

Customer acquisition and distribution

The insurance industry also has notoriously high customer acquisition costs, and many new entrants find themselves in a constant battle for the customer. So with new tech and the right idea behind keeping customers engaged and happy, how can InsurTech's ensure they attract the right audience in the first place, and don't break the bank to do so?

"What you see right now is InsurTechs raise a lot of money, and just hammer at existing channels where they're paying market prices for eye-balls, like any incumbent insurance carrier... you're seeing some InsurTechs spend $1 in advertising for every $1 that they generate."

Karn's advice? InsurTech's need to get creative and develop more durable acquisition channels, and take a portfolio approach to it.

And what about distribution? With two thirds of InsurTech investment has gone to companies taking aim at that part of the "value chain", what does Karn have to say about the skepticism some have around any legitimate disruption happening here?

He advises that you look closer into the background of the company and whether they have a demonstrated understanding of distribution in the past and note the number of InsurTechs which have pivoted to becoming more "tools" for incumbent carrier partners, rather than distribution solutions in their own right.

Ultimately though, "if you own distribution, you own the lifeblood of the insurance business - which is why you see so much money move into distribution. The people that do crack it are going to be incredibly valuable. companies."

InsurTech Bytes

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