Chris Bayley says he’s not an insurance veteran, but he heads up one of the fastest growing insurtech companies in the world.
The former Google sales executive co-founded Cover Genius, a global platform distributing dynamically-priced insurance to some of the world’s largest internet companies.
‘As a general observation, there’s an extremely small chance of disrupting the insurance industry using the Clayton Christensen definition,’ Bayley says.
‘Quite frankly, insurtech players that get licensed as underwriters aren’t disrupting the industry because they’re still subject to all the provisions that the regulator imposes on them.
‘We believe that risk is trending downwards dramatically, but that alone isn’t “disruptive”’.
INSIDERS NOT INNOVATIVE, OUTSIDERS UNPROVEN
Bayley argues the nature of the industry itself doesn’t attract entrepreneurial activity in the same way as fintech, which is much more familiar and easily understood.
‘No one really knows much about insurance other than people that work in the industry,’ Bayley says. ‘Those on the inside are not really the innovative or entrepreneurial type. They know what they know.
‘If you look at the insurance industry in London for example, the level of tertiary education among insurers is about 60 per cent whereas it’s about 90 per cent in the rest of financial services.’
On the flip side, Bayley says those insurtech players from outside the industry are unproven.
‘It’s yet to be seen if a player like Trov has product fit, same with Lemonade. And there are big question marks over Oscar and Zenefits,’ he says.
‘It’s not clear if many of the well-funded insurtech models currently in the market will be successful as innovators or disruptors over time.
‘Their copious funds can be generous runways until they find product market fit.’
Bayley concedes it’s still early days.
‘People within the insurance industry will slowly start innovating from the inside,’ he says.
‘I think insurtech will play a role in terms of distribution as Cover Genius has done.
‘There’s investor bias in the US towards B2C because it’s familiar to investors and there’s no doubt that tech companies do user interfaces well.
‘But most of the value creation will be in insurtech platforms, especially those that can introduce data science to the value chain.’
TAKING THE BULL BY THE HORNS
Bayley pivoted his Online Travel Aggregator startup to solely focus on insurance distribution, a challenge he experienced first hand.
A startup called Viator, which was sold to Tripadviser for $200 million, provided Cover Genius with its first development team in what Bayley describes as ‘a natural transition’ to a B2B model focused on the distribution of insurance.
Cover Genius raised a $1.1 million seed round in 2015 from London-based insurtech investors at a valuation of $US10 million. The same investors participated in a follow-up round in December 2016.
Headquartered at Sydney fintech hub Stone and Chalk, the startup currently boasts offices in the UK and recently, the US.
Its expansion to the US followed the successful completion of KPMG and Advance’s 2016 elevate61 program which saw 11 Australian startups paired with industry mentors and experts to assist expansion to US markets.
‘The problems are many in insurance, but the one we sought to resolve at our first effort was that insurers lacked a global platform,’ Bayley explains.
‘Online distributors are underserved, untapped and problematic for insurers and traditional brokers who’ve built their online distribution capability on a model of eroding underwriting margin, irrelevant, outdated and poorly constructed policies and the actuarial-based pricing of premiums.
‘In addition the vast majority fail to access or understand Big Data,’ he says.
GLOBAL END TO END SOLUTION
Cover Genius’ flagship product RentalCover.com is a B2B2C distributor of car rental insurance with clients including the Priceline Group and other large global online travel agents (OTAs).
It’s an end to end solution covering promotion, product, claims, sales support and regulation in every major source market and utilises machine learning rather than a risk-based model to generate the pricing of premiums.
The technology has been marketed separately to insurers and their distribution partners branded as the BrightWrite platform for the last year.
‘As well as setting price, BrightWrite boosts sales for distribution partners by optimising their front end and provides bespoke products for customers through the application of artificial intelligence,’ Bayley says..
‘We believe it’s a world-first in that a single customer’s needs can be analysed and a customised product and price returned in real time.’
To explain further, Bayley says the investors on the Cover Genius board are actuaries with C-Level experience at Fortune 100 insurers, whereas its team are all data scientists.
‘We’re focused on collecting and analysing data and turning it into real time insights that drive more sales and decrease risk,’ he says.
‘We’re working with insurance partners on using contemporary digital data-sets to improve their books.’
FILLING THE COFFERS
Bayley asserts the Cover Genius business model and differentiation allows flexibility in deal-making.
‘We work in high margin sectors, which has enabled us to be reasonably agile and always profitable, while accelerating growth,’ he says.
He doesn’t consider BrightWrite disruptive, given it has has underwriters as channel partners, it’s certainly innovative.
‘While RentalCover.com is a technology platform that automates significant parts of the insurance value chain for one niche supply line, BrightWrite just focuses on distribution optimisation, so that’s pretty disruptive,’ he says.
Bayley aims to communicate his insights into the insurtech space at ANZIIF’s inaugural Insurtech Conference to be held March, plus share some of the success factors promoting the growth of Cover Genius.
‘Cover Genius' vision is to be the distributor of insurance to the world’s top internet companies,’ he says.
‘Our primary focus on learning and development helps ensure we’re top of the charts for the insurance industry, but most importantly our partners keep improving.’
WHAT I LIKE ABOUT YOU
Forthright about the insurtech business models he has doubts about, Bayley is equally quick to point out the two he admires most.
‘The first one is called The Climate Corporation. It was set up by an ex-Googler, who has a PhD in data science,’ he says.
‘The model is to sell crop insurance but it is unfortunately quite low margin.
‘Another one I like is a warranty business called SquareTrade. It took them thirteen years, but they recently exited for US $1.4 billion.’
CHRIS BAYLEY IS A SPEAKER AT ANZIIF’S INAUGURAL INSURTECH CONFERENCE, TO BE HELD 28 MARCH