Making risk-taking your strength

By Anna Game-Lopata — ANZIIF Writer | 10 Jul 2017
  • Claims
  • Risk Management
  • General Insurance
  • Insurance Broking
CaribouHonig

When Caribou Honig realised he was jaded after a ten-year stint at Fortune 500 company Capital One, which is one of America’s top ten banks, he decided to consult the universe.

Instead of taking a six-month sabbatical, the ‘smart’ thing to do, he resigned, aiming to step back from the daily grind and figure out how to make his career meaningful again. After a month, he felt his batteries recharging and enjoyed the luxury of getting ideas again.

Just as the inevitable anxiety over money started to kick in, Honig was contacted by a former Capital One executive, which led to the launch of QED, his boutique venture capital firm.

If he had taken the sabbatical from Capital One as advised, such a job opportunity would have been off limits to him as a current employee of the company.

‘Turns out, it was the best decision of my career,’ Honig says, as he can truly say he has loved his job.

The universe talking

While Honig is ramping down from QED this year, he says he’s quite proud of it, especially its reputation for bringing an operator’s perspective to the table.

‘We saw the opportunity to help a new generation of innovators benefit from our experience and battle scars, particularly entrepreneurs building data-intensive businesses,’ he says.

Having spent much of his career in financial services, Honig says there are a lot of analogies between the evolution from banking to fintech and the evolution from traditional insurance to insurtech.

‘I like to say that the answers are often different but the important questions are usually the same,’ he says.

‘That said, what I find so interesting is that we’re at an inflection point for insurance. The consumer-facing tech-stack is ripe to be refactored with the smartphone. The enterprise-facing tech-stack is ripe to be refactored with the cloud.

‘I believe we’re starting to see innovative products, distribution and underwriting based on these new underpinnings,’ he says.

On innovation

In terms of innovation, Honig observes that the core competency of start-ups is risk-taking while that of incumbents is risk management.

‘That risk management capability is a strength but it’s also what slows them down,’ he says.

‘People within the industry need to recognise this, and then look for solutions to be able to move faster without creating undue risk.

‘Partly this is about the talent management and internal incentive systems at insurers, and partly it’s about finding a way to either ring-fence risk-taking initiatives or partner with the start-ups.’

He says often the first wave of [innovative] activity takes the form of B2B companies selling into the incumbents to help them become more efficient or effective.

‘The second wave is more likely to include B2C companies — in this case, the “full stack insurance” MGAs and insurers.

‘Taking this form gives the entrepreneur more degrees of freedom for their creativity and ambition to come to market.’

Favourite obsession

As one case in point, Honig points to parametric insurance as one of his ‘favourite obsessions’.

‘In traditional insurance, we usually think of indemnity coverage as a reimbursement for actual incurred losses,’ he says.

‘There are problems with indemnity insurance, including the operational cost of measuring (and sometimes disputing) the amount of the loss, the typically slow payout timeline for a claim, and the reduced incentive for insureds to mitigate losses.’

Parametric insurance is a policy where coverage is directly tied to some objective, fed by third-party data that triggers at a pre-set level — in other words, it’s based on a specific parameter being hit.

‘I think its most common example of parametric insurance in the commercial setting would be crop insurance triggered when rainfall hits drought levels based on satellite data,’ Honig says.

‘I’ve seen at least one start-up building parametric insurance related to earthquakes and I’m happy to see some existing insurers exploring parametric insurance products as well.’

Passionate about InsurTech

Honig, who co-founded the InsureTech Connect (ITC) conference with Jay Weintraub, says his motivation was simple.

‘I wanted to find a conference where I’d be able to spend time with insurtech entrepreneurs, with other investors looking at the sector and with forward-thinking executives from within the industry,’ he says.

‘At the time, two years ago, I couldn’t find anything along those lines. Being slightly entrepreneurial I said, since I need this to exist, maybe I should just create it?

‘I was most fortunate to then start collaborating with Jay Weintraub, who knows how to build a great event.’

ITC is now the world’s largest insurtech event.

To be held in Las Vegas over October 2–4, the team, led by Weintraub and Honig, who is also chairman of the event, has set its sights on attracting 3,000 industry execs, entrepreneurs and investors.

1,000 flowers blooming

Honig says one of the biggest benefits of attending the conference will be the experience of seeing ‘1,000 flowers blooming’ — or a very wide range of ideas being pursued by entrepreneurs and incumbents alike.

Other powerful take-aways will include hearing the perspectives of venture capitalists, who Honig says are ‘odd creatures, but often have unique and interesting perspectives on how a sector might evolve’.

‘Also, conference attendees will witness how yesterday’s bleeding-edge technology, like drones and artificial intelligence, is moving quickly into mainstream applications of insurance,’ he says.

‘InsureTech Connect is fundamentally an international event,’ he adds.

‘Of course, it skews heavily to the US given the venue in Vegas. But even in its first year we had attendees from over 30 countries and we expect that to rise to over 40 countries this October.

‘The insurance industry is inherently global in nature and we see great opportunity for cross-border learnings when it comes to innovation as well.’

Pitch to Caribou

What qualities does an investor like Caribou Honig look for?

‘It starts with the entrepreneur,’ Honig advises.

‘That person needs to simultaneously demonstrate they have an ambitious vision and the ability to drive results at a tactical, solve-any-problem level.’

If forced to choose between leadership with technology-first or insurance-first competencies, Honig says he’d go with the former.

‘But the best tech-first founders bring on at least one C-level person with industry experience very early.’

As for the underlying business, Honig suggests entrepreneurs remember that most venture capitals are looking to make an investment that if successful it would return their entire investment fund.

‘We’re looking for a 10X or better in the success scenario. A company with low risk of going bankrupt but no path to 10X+ might be a fine investment, but it’s not a good venture capital investment.’

He adds VCs are sceptical by nature.

‘An entrepreneur should demonstrate that they understand the risks, and they should have an optimistic mindset but a realistic plan.

‘When I see a financial plan for a company going from $100K of revenue this year to $100m of revenue in three years, it’s hard to take seriously.’

Curious about the name Caribou?

For those of you wondering about the origin of the name Caribou, Honig relates that many years ago his parents were on a road trip, driving to Quebec.

‘They stopped overnight in the town of Caribou, Maine,’ Honig says.

‘I was apparently named after the town in which I was conceived. This being a road trip, I consider myself lucky not to be named Buick.

‘To be fair, Caribou is my middle name, so in a sense it’s also a choice on my part,’ he says.

Watch this space

As for the future, Honig says he’ll definitely stay active in the insurtech community.

‘I’ll likely join a few corporate boards, public and private, over the next couple of years,’ he says.

‘I’m also in the process of co-founding another conference in the HR tech sector, which builds on the success of the InsureTech Connect event.

‘And I’m keen to reserve some of my bandwidth for serendipity.’

That says it all, coming from a man who generated a career from listening to the universe.

This article is worth 0.25 CIP Points

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