Prediction #2 from my 2018 Insurtech predictions focused on 2 buzzwords that I thought would be quite prevalent this year; API and Ecosystems.
For APIs, this centered around a couple key premises:
- APIs help to enable digital ecosystems/platforms to distribute Insurance products with more ease and,
- Insurance carriers with API-enabled police admin systems/infrastructure will be able to be more nimble in their ongoing operations.
There are quite a number of companies within the Insurance industry now offering APIs across the Insurance value chain. There have also been a number of new API announcements over the past couple of months.
This week, Clearcover, an Insurance MGA headquartered in Chicago and currently selling auto policies in California launched an expanded API offering for its product.
I had the chance to catch up with Clearcover’s CEO and Co-Founder Kyle Nakatsuji to learn more about his background, how Clearcover compares to other incumbent and startup Car Insurance companies as well as what their expanded API offering is all about.
Kyle’s background and why he started Clearcover
Kyle started his career as a startup attorney. In 2013, he left to co-found American Family Ventures (the VC arm of American Family Insurance) along with Dan Reed.
‘I spent four years there investing in all sorts of really cool insurtech startups. At the beginning, we were mostly investing in software companies that sold to the Insurance industry. Towards the end of 2014 and early 2015, Insurtech started gaining momentum and people started getting interested in the category. We started to see all sorts of really interesting startups that were no longer just doing things that were adjacent to Insurance, but were actually trying to be integrated in the insurance value in a more meaningful way,’ Kyle explained to me.
He went on to add, ‘One of the things that we got really interested in as we started exploring Insurtech more in-depth was this idea we called incidental Insurance. What we believed was that if you could use a modern technology stack and APIs to integrate Insurance more naturally and seamlessly in places where it was going to be highly relevant to people, you could give them great customer experience, make the product easier to buy and use, and also save them a lot of money because you could avoid spending on things that end up driving costs.’
With this in mind, Kyle left American Family Ventures in 2016 and founded Clearcover with co-founder Derek Brigham. They decided that Car Insurance was the right line of business to start experimenting with this model.
‘In P&C, we thought that the last fundamental distribution innovation was back in the 1930s, when GEICO started selling its product without the traditional commissioned agent. In doing so, they were able to dramatically change their cost structure as an insurance company. Because of that, they were able to offer the product for less money. Fast forward 80 years, the Internet came around and it changed how much money people spent or where they put their money, but it didn’t fundamentally change anyone’s (Insurance carrier) cost structure the way that the first distribution innovation did. So, when we looked at what categories where customers serve to benefit the most from the affect of our distribution and business model, it was clearly Car Insurance.’
Clearcover went live with auto products in California February of this year. As of today, they have sold over 6000 policies with annualized written premium approaching $10 million USD. Their premium run rate for the year is $17-18 million USD.
Clearcover’s Value Proposition
When it comes to startup Car Insurance providers in the US, many look to Root and Metromile.
Both are fully-licensed Insurers, have raised some recent large funding rounds ($90m Series E for Metromile and $100m Series E for Root) and have Usage-Based Insurance (UBI)offerings within their products.
Further, because they are fully-licensed Insurers who file quarterly earnings, their financials are regularly analyzed by Insurtech Influencer Matteo Carbone and Deputy CEO of P&C Partners for SCOR, Adrian Jones (a great quantitative analysis I must say!).
While these type of UBI offerings can be an interesting propositions for consumers, they are not for everyone. ‘With a lot of these UBI-based products, you have to drive around for a while before you can get a quote. It’s not the type of system which lends itself well to relevant moments, because you have to commit to the insurance process for a very long time before you can make a decision,’ Kyle shared with me.
Personally I agree. While I like the concept of UBI, it is a bit of a commitment to me in terms of time and my personal data that I am not willing to give.
Building on the concept of incidental Insurance which Kyle mentioned to me above, is where Clearcover stands out in the current new offerings of Car Insurance in the US.
‘Kudos to them (Root and Metromile) for positioning and marketing this way. For us, we have an Insurance product that doesn’t have a lot of complexity to it and is of really high quality, which also doesn’t require you to do much different than you would do if you were buying from a GEICO, Progressive or a State Farm. The difference is that the technologies that we’ve built allow us to deliver a better customer experience at a much lower price. Further, the use of integrated channel partnerships and our API to deliver the product in moments when it’s relevant to people allowing us to be more efficient with our advertising marketing money compared to what incumbents and startups spend,’ Kyle said.
‘When we launched, we began with a product called Quote API, which helped us to work with price comparison engines and neo agents (digital agency platforms). These were places where the customer is already looking for an Insurance quote. The Quote API also works in places like online shopping for a car, financing for a vehicle and online personal finance managers. We think these areas were where we thought seeing an insurance quote would be relative to people and signed up a whole bunch of partners really quickly to use that API.’
Expanded API Offerings
‘What we’re now launching is an expanded API platform with more integration options for a partners outside the insurance industry so we can go directly to a consumer whether it’s when they’re shopping for a car, financing a vehicle, managing their personal finances, getting a loan, looking for ways to save money on bills, exploring different vehicle options, etc.’
‘There’s all sorts of opportunities for us to now say, look, you are doing something where Insurance is relevant, if you’re interested in saving a bunch of money, here’s a really easy way to start and finish that process with Clearcover. We’re expanding the breadth of opportunities to bring Insurance to people when it’s going to be relevant to them, but the time in which they can go from interested shopper to Clearcover customer [and all while saving a bunch of money] is the fastest it’s ever been,’ Kyle explained to me regarding their new API offering.
‘By the end of Q3 2018, we should have somewhere around 20 integrations live and that’s just the beginning.’
Some of the companies they are working with are Cars.com, Gabi, Insurify and The Zebra (to name a few). They are also starting to add more independent agencies as they continue the move some of their business online.
If you are interested in learning more about their API for your business, visit this link. A further write up of their expanded API from Clearcover’s VP of Product, Adam Fischer, can be found here.
Summary
As I was preparing for this article this week, I was speaking with one of my closest friends, who is in the tech industry. I told him that this week’s article was on APIs. His reply was ‘oh, are APIs now the buzzword for Insurtech? That’s soooo 3-4 years ago, bro.’
Well, we know the Insurance industry has taken some time to catch up to the rest when it comes to digital and innovation. Once we are in it, though, there is no turning back.
There are a number of reasons why the API is important to the Insurance industry. As mentioned at the beginning:
- APIs help to enable digital ecosystems/platforms to distribute Insurance products with more ease and,
- Insurance carriers with API-enabled police admin systems/infrastructure will be able to be more nimble in their ongoing operations.
Ryan Hanley, now CMO of Bold Penguin, wrote a very interesting article last week about the value of APIs. In this, he highlighted the APIs of Lemonade, Ask Kodiak, Roost, Bold Penguin and Risk Genius.
A list of all Insurer, Intermediary and Enabler APIs can be found here from Coverager. You can also find links to many of the Insurance APIs themselves here.
Looking at all of these offerings, one can see that APIs are adding to the flexibility that needs to come into our industry.
What Clearcover is doing is leveraging the concept of that flexibility along with the power of the ecosystem (the other buzzword mentioned in Prediction #2) to create cost-savings that they pass along to customers in the form of significantly more affordable car insurance paired with great service.
The combination of these two buzzwords and the concept of incidental Insurance may help to turn it from a product that is sold, not bought, to one that is bought without the need to sell.
Stephen Goldstein is an experienced Insurance executive and Insurtech dealmaker with a core focus on growing revenue, launching go to market initiatives and advising industry leaders.
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