The InsureTech Geek 43: Surrounding the Insurance Needs of Gen Z with Kate Terry from Surround Insurance
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James: Man oh man oh man. Another week, another week, winter is here definitively in Texas, had a first hard freeze, killed all my flowers out in front of the house. Kind of sad. It looks sad and droopy now. But no snow. We don’t have snow and ice like you guys in Boston do. We’ve got Kate Terry with us from Surround Insurance, Kate, how’s it going up there in beautiful Boston Massachusetts?
Kate: Good. I’m delighted to be here, but you’re right about winter. We’re getting our first snowstorm tomorrow morning.
James: Ooh. So exciting. It is exciting that first dusting, and then you get the snow and then the lawns are covered, and the kids make snowballs, and they make snowman. And then you’re like, ah, okay, I’m tired of it. Let’s get back.
Kate: It’s really beautiful until the moment you pick up a snow shovel
James: And then you’re like, Oh, not this again
Kate: Oh, I’m out of shape.
James: So Rob, you grew up in Michigan. Were you best friends with a snow shovel?
Rob: Hated it. Hated snow. I tell people one of the reasons I’m in Texas is as early as six years old, they would send us out for recess and kids were building igloos and forts and having snowball fights. And I would just sit out there wondering, when is recess over, this sucks.
James: Some people just aren’t made for it. And that’s all I’ll say about that. You just got to go South. And some people love the snow. I have friends in Michigan who cannot wait for the snow to drop because they break out the snowmobiles and the parkas, and it’s officially winter sports time and hunting and all the other things that they like to do. It’s just funny, the world is bifurcated in so many ways and that is one of them, COVID has exposed some of this Kate where you have people who hate having anything on their face and others don’t mind a mask. People who really genuinely don’t like others, and have used this as an opportunity to isolate themselves and use COVID as the ultimate introvert’s excuse to never be around other people, and others like me, who literally go stir crazy mad when you can’t be around others, it’s fascinating how you pick a single issue and it’ll be a 50/50 response rate on all of them.
Kate: I think the only thing we can all agree on is that today’s date is the 700th of March. It’s getting old, you know?
James: It is, can someone just come inject me with something that’ll fix this so we can move on. I am thankful I’m in Texas, because it’s warm most of the year here, even in the winter, it’s warm. And so you’re not trapped indoors breathing other people’s air particles, and I’ll be honest, I’m a germaphobe and an extrovert. Wrap your brain around that one. I’ve always been a bit of a germaphobe. So I’ve always loved the Howie Mandel fist bump. Who knew that Howie Mandel was a visionary, but he was, and I’ve always been a fan of the fist bump. I’ve always been a fan of sneezing and coughing into your elbow, and it always made me really angry when people don’t ever cover their mouth when they cough. You know some people do that Kate, they literally will walk up and cough. We had to go through education with 7 billion people on how to wash their hands. Apple rolled out a feature on my Apple watch. When I start washing my hands it times how long I’m washing my hands for, did you know this? You can enable it. It’s called the hand washing reminders. It’s a new feature.
Kate: Do I want to enable that though? Is it helpful or does it kind of disturb you, how your hand washing technique is off?
James: I found it helpful in the beginning and now it pisses me off because I’m like stop telling me how to wash my hands, they’re fine!
Kate: Everything’s dinging at you all the time. There’s always a notification.
James: Well I’ll be honest. I did not enable the exposure notifications in iPhone. I didn’t because I think it’s going to be so severely misused. CDC just lowered their guidance to 7 to 10 days because people don’t want to quarantine for 14 days, turns out it was overkill anyway because 7 to 10 is all you needed. And so people were literally not quarantining because it was too long. And so now they’re hoping that it’s 7 to 10 days. I tell people all the time, don’t call me a Republican or a Democrat. Just call me a capitalist. I’m a capitalist. I am just an unashamed, ardent, militant, capitalist but it’s been a weird few weeks, and I’m grateful Christmas is coming. Kate, we’re going to deep dive on some fun stuff with you. And we’re going to geek out for a little bit before we do. I want to remind all of our listeners that you can subscribe to our podcast by texting GeekOut to 66866. We do a little email newsletter with the show notes and the links we talk about and the interviews and I hope you all have enjoyed it. We’ve passed several thousand listens now, so we have a lot of people listening now. It’s been really fun to grow the listener base here and interact with you out there in listener land. And so we hope that all of you have enjoyed listening to this this year. And I wanted to say it’s the first show past Thanksgiving, and Rob and I each took one by ourselves before Thanksgiving. So I haven’t got to say this, but I’m saying I’m thankful for Rob for volunteering to be my co-host in this venture, and I have thoroughly enjoyed getting to know you, Rob. I just wanted to thank you on the air for doing this with me.
Rob: You’re very kind, James. Likewise. I’ve had a blast doing it. I appreciate the invite to bring me on board way back in episode 13 or 14. I don’t remember the exact first one and you’re right, we missed each other in the last two episodes. So, it’s actually great to be back together again.
James: So we’re going to do a few and then we’re going to take off for Christmas and new year’s and then we’ll be back in 2021. I want to point out that the roaring twenties came right off the heels of a pandemic. And I want to remind everybody of that, someone said to me today, ‘if this goes away,’ it’s going away. First off, the influenza pandemic was way worse than this. If y’all think this is bad in listener land, my great-grandfather died in the infuenza epidemic in 1919, left my grandmother without a father for the rest of her life, and she wrote about it to me. Thankfully, my grandmother wrote me some notes before she passed away about her childhood and her dad. That was far, far worse. You’re talking about a fatality rate that was several times higher than this one. It was really bad. It impacted kids and adults and it ended in year and a half. I just want to remind people that this, like all things in the planet, will come to an end. Good and bad. Unfortunately, good things come to an end. So do bad ones. So just stay focused on that. We’re going to talk about something really interesting today and in our pre-show conversation I was getting to know the enigma that is Kate Terry. As they would say in Boston, she’s wicked smart, she probably parks the car in the yard and, she did some studying back in the day at Harvard, because she went to Harvard, got a BA in history and, get this, Celtic studies.
Kate: It was the medieval Welsh that I studied, that led me to my successful insurance career.
James: I believe that actually, so Kate, I have a really interesting Celtic study story.
Kate: You do? Literally nobody has ever said that to me before.
James: I was going to say, I bet you’ve never heard that. By the way, she got an MBA at Harvard too. So we’re just going to throw that in there. Oh by the way, she went to one of the hardest MBA schools to get in to.
Kate: The second time was remedial.
James: So she went to Harvard for MBA. You went to Harvard for undergrad. So Celts. I love history. And Rob has had to listen to me multiple times, unfortunately, pontificate about the history of insurance. Because it started with bottom rate contracts and the Babylonians really invented insurance. And it started with loans and finance agreements, which is why you can kind of confuse FinTech and InsureTech because banking and insurance have always been like this because the first insurance contracts were forgivable loans. I love history. It’s just fascinating to me. And what infuriates me when you study history is how many people don’t study history and they repeat the same stupid mistakes that if you just read one or two history books, you could be like, Oh wait, We already tried that as a people before and probably shouldn’t again. The Celts are an interesting study. I love listening to a guy and I love recommending other podcasts on my podcast. The Dan Carlin Hardcore History.
Kate: Oh Hardcore History, great podcast.
James: Let me tell you about Dan Carlin. Amazing, amazing, amazing historian. I listened to him talk about how he podcasts, he literally free forms that crap, which is amazing, which means he’s got his outline, but the rest just comes out of his head. And you can fact check him all day long. He’s accurate. He’s not making stuff up because he has a whole team of fact checkers. It’s a free podcast, but each episode is literally a full audio book and it’s free. And they just ask for a donation of a dollar an episode. And Kate, I give them a buck an episode every time he releases one.
Kate: It is totally worth those things are like four hours long too. They’re amazing.
James: Four hours per episode. And he did a whole episode. Did you listen to it on the Celtic Holocaust? So the fascinating thing about the Celts is, what is a Celt? Actually, according to Dan Carlin, which he read a bunch of other definitions, a Celt is anyone who identifies as a Celt,
Kate: It’s pretty much true.
James: That’s the actual definition! Now the Celtic Holocaust, people are thinking that’s like when the Romans invaded Ireland and Wales, no no no, this is all the Celts that lived in France and Germany that the Romans came and wiped out. They just wiped them out. It was an amazing show of force. So that’s my side note on Celtic studies is that a Celt is anyone who identifies as a Celt. That day, when I found that out, I’m like, okay, I’m just going to identify as a Celt. Then I’m like, you can’t tell me that I’m not a Celt because I’m saying I’m a Celt. So you studied Celtic studies. What was your goal when you’re sitting there at Harvard and you’re eating lunch in Harvard yard and you’re having probably, maybe a lobster roll or you’re eating some typical clam chowder, and you’re 19, 20 years old. What are you thinking you’re going to do with a history degree?
Kate: Well, my parents asked me that question and I didn’t have a good answer for them, but I will say this, I actually thought my degree would have nothing to do with my future job. So I went to college and I don’t come from a super educated family, I’m not second generation Harvard or third generation. My name is on no building there, and so I had this job at a consulting firm In Harvard square, where I did research for them. And I worked 30 hours a week for four years and full-time in the summer. And so I thought I was going to be a consultant and I was a consultant. So I spent four years after college doing the exact same thing I’d done in college, but the cool thing is I actually got hired by a competitor to the firm that I was working for. It was a Spanish company, and they were opening their first US office in Boston. And their real estate deal fell through just before I was supposed to start, it happens, they said to me, either we could delay your start date by a few months, or if you want to come to Barcelona for a little while, we could make that happen, but we don’t want to make you do that if you don’t want to. I was like, are you kidding me? I’d never been anywhere before; I’m going to Barcelona! I actually worked abroad for the first four years of my career and people sometimes see that on LinkedIn and they’re like, how did you get that job? And I say, like every other major career move in my life, I have absolutely no idea. But when somebody asked me if I wanted to do something cool, the answer was yes.
James: Amen to that. My general answer to everything is yes. I disliked saying yes. Remember that Jim Carrey movie called the Yes Man, you never watched that? Oh, your homework this weekend Kate Terry, your homework this weekend, it’s a 2008 film by Jim Carrey called Yes Man. I laughed so hard I almost peed my pants at this movie. My wife says I have the world’s most severe case of FOMO, and so as a result, I say yes to about everything. I tried to get your gig getting out of Texas A&M business school. And I went to Pricewaterhouse because I did two internships with them and I was like I want to work in your Mexico City office because I was already fluent in Spanish at the time. So I was like, I’m fluent Spanish. I lived in Mexico in ‘95 and ‘96, you liked me as an intern, and they literally almost patted me on the head and said, Oh, sweet boy. Just come work here in Dallas, in the suburbs, in a small cubicle for a few years, and then we’ll consider your requests, which basically meant that’s never going to happen. So evidently, you’re like, Oh Barcelona. Sure. Okay. So you went to Barcelona, what’d you learn?
Kate: I learned all kinds of things. I learned how to speak Spanish. I learned how to understand Catalan. I learned how to be a consultant internationally. I learned a lot of things about, this is going to sound really dated now, mobile telecom, because Europe was far ahead of the US with the mobile technology, they had application protocol, like surfing the web on a little Nokia device. The cool thing was everyone thought I was really cool because the internet generally was way ahead in the US versus Europe. So I was the cool American who knew about the internet, which was really laughable
James: Barcelona is the epicenter of mobile. That’s why the Mobile World Congress is held there. Of course got canceled this year, which sucked. You have this amazing early life experience in Barcelona, where do you go from there? How do you wind up at Progressive? Because you obviously you had to go to B-School for your MBA and then you’re done with your MBA. How do you wind up at Progressive?
Kate: So you mean it’s not a reasonable story that I was in Barcelona one day I said, I want to move to the Midwest and work in insurance.
James: Totally unreasonable. No offense to anybody in the Midwest.
Kate: There’s nothing wrong with the Midwest. It’s just, if you’re in Barcelona on the beach… I spent one year in Barcelona, the company I worked for opened a London office, they said to me there is this London office open. Is there any chance you might want to go there? I was like, yes, I do. So I spent three years in London. I got to the point where I had been promoted to an engagement manager, so I was managing projects. And that’s the moment in professional services when you either put your head down and grind away a million hours a week until you start to sell projects, or you leave. And I was kind of like, I don’t want to be a consultant. Like I literally do not want the partner’s job. I’d just sold my first teeny tiny project. And I was like, this sucks. I started thinking to myself, it was just time to come home. My family’s all in Boston. I’d spent four years abroad. I wasn’t planning on doing that. It was time to go home. And I also realized that given the number of years of experience I had, I was working in a consulting company that was growing so fast, there were lots of opportunities, but nobody was going to hire me into a non-professional services job anywhere near the same level of seniority. At this point I thought I needed to do an MBA. So I applied to some MBA schools, got into Harvard, came back and I had no idea what I wanted to do. I’ve always done professional services, and I know I don’t want this life. I think I want to do a general management kind of job, like a lot of different stuff, and then when I started looking at jobs, one option was product management type jobs focusing on physical products, and I just thought I am not the right person to decide whether the box should be orange shade 12 or orange shade 13, because they all look the same to me. I am not the right person. So you have to know yourself. Don’t ask me what color something should be. So I started applying to consumer services companies with kind of the combination of data and people. And it turns out that insurance is exactly that. Lots of data and taking care of people in their moment of need. I interviewed with Progressive. So now I’m going to tell you the embarrassing story, which is that I’d never owned a car before and I had not lived in the US as an adult, and I grew up in Massachusetts and Progressive didn’t write Massachusetts at the time. I wasn’t actually clear when I walked into the interview that Progressive was an insurance company.
James: Did you have it confused with Progresso soup?
Kate: There was this thing where you had to apply for interviews and then if there was a cancellation, then you could just sign up on the door. I was in an off-campus location that was really annoying, and I already had a suit on, and it was so uncomfortable. So I thought, well I just finished my interview and next door there are slots with this company, maybe I’ll talk to them. Ron Davies, who I may or may not have run into, talked me into insurance. So I blame him. It’s totally because I thought they were making soup. Insurance is better than soup. I’m sticking with that story. That’s how I ended up in insurance.
James: You were a product manager at Progressive, then you were a product manager at Plymouth Rock Assurance, and then you spent six years at Liberty as a director of state operations SVP of commercial markets SVP of commercial insurance. That was a period of 13 years, so you had 13 years to really soak it in. What did you learn about the great things about insurance and where were the big pain points that led you to wanting to start your own?
Kate: We were talking about Louisiana before we started the show, and various visits we’ve all made to Louisiana. And I have to tell you that Louisiana is the reason I stayed in insurance. So I started at Progressive down in the Southeast in the Richmond, Virginia office in July of 2005. We probably all remember, if we’re old enough, that hurricane Katrina happened in August of 2005. I didn’t have responsibility for Louisiana at that time, but I was due to inherit it. What happened was utter devastation, for people who aren’t familiar, people’s lives absolutely destroyed, a lot of people didn’t evacuate because there’d been a lot of storm warnings and they weren’t sure and whatever else, and everything they own just gone, and Progressive made some decisions really quickly, and ahead of the regulators and ahead of the rest of the industry, where they decided to do things like Glenn Renwick, who is the CEO at the time, decided to crush every car that had been touched by the floodwaters because of the potential for biological contamination, regardless of whether it was repairable or not. We were writing checks to people who were stayed in there with a plastic grocery bag and bare feet in tears in the dust because they had no idea where their pets were. They were separated from their family. They had nowhere to go. They had nothing; they couldn’t even locate their car. And we were writing them checks. The Progressive‘s claims response team got kicked out of the hotel they were in by FEMA, which hadn’t made the plans that Progressive did. There was so much rightness in that and taking care of people the right way in their moment of need in a way that also is profitable and good for employees and shareholders and everybody else too. There was just so much goodness in that and I realized that this is where I want to be. So that was really inspiring really early in my insurance career.
James: What’s so cool is that you have those watershed moments, and of course COVID is another watershed moment, where people’s true colors come out. This is when you actually prove your mettle, are you for real or not? Are you going to do the right thing? There’s a lot of movies out there about insurance companies not doing the right thing. And unfortunately, there’s not a lot of movies about them doing the right thing. Because they just don’t make for good movies. Oh, the CEO stood up and did the right thing and took care of everybody. And they were all housed the next day. Well, there’s no drama in that because it’s literally, he just did the right thing. It certainly shows the social need for insurance.
Kate: I’m not saying that there are no bad people in insurance. Of course there are, it’s a giant industry. There are bad people on occasion everywhere, but your teenage son gets in an accident late at night and is afraid to call you and calls the insurance company because he’s got the insurance card. The first question that person who picks up the phone is going to ask is, are you okay? And they’re going to send an ambulance if need be, or they’re going to tell him what to do next. In that moment, that’s what they’re going to do. You get in an accident, you’re at home. The claims adjuster comes out to look at the car they’re kneeling and the snow in the driveway, looking at the front quarter panel, they’re doing the best they can to make sure that they’re being as fair as possible, and that you’re going to be put back together the way you should be. Those stories don’t make good television do they, but that’s the reality of most of our industry, the vast majority.
James: So what did you learn, and what were the pain points over these 13 years of three different major insurance companies that led you to want to start your own, what we’ve been calling it, digital MGA.
Kate: Ooh I like that. I think one is just the rigidity of the IT infrastructure. The ecosystems are so complex and so old that it’s really really hard to innovate. The second is the rigidity of our culture, and this is something we’ve done to ourselves as insurance people, you get trained in this narrow little silo, and typically you stay in that for your whole career. I spent the first six years of my career in personal lines and then moved over to commercial lines and it was a completely different business. Even though most of the cars are still Toyota Camrys, but it’s was completely, it was an unusual move. So I think that’s the second, we can’t see when we have these highly matrix organizations and we work in these silos and doing something different would mean stepping in someone else’s silo. And then the third piece is just that a lot of insurance products are built on very old court cases. And so you end up with these situations where the products match the court cases of yesteryear and they don’t match people’s lifestyles. And so there are giant segments of the market that we just miss entirely because of this agedness and rigidity. For example, Inland Marine, did somebody make that up for a reason that makes any sense? No, no. It came out of a court case, we need something that’s not ocean Marine, what are we going to call it? Inland Marine. Normal people don’t talk like that.
Rob: Amazing background. Thank you so much for sharing your biography with us., and it’s so great to have you on. So, before we learn more about Surround, which I’m excited to talk to you about, I’m kind of curious to get your thoughts on the pros and cons of working in corporate insurance. I know you have your CPCU designation, which I have as well. So that’s kind of the stamp of a true insurance nerd, and what would you say to anyone out there listening who’s thinking about making the leap? I want to tease, we are going to get to the new section later and you had a great article on LinkedIn. I’ll talk more about it, I think this is something that’s very, very timely, obviously with COVID with 2020 we’ve got recession, we’ve got layoffs, the economy’s been coming back, but now the numbers are spiking up. And so I know it’s been a tumultuous year and people are in different phases either they may have lost their job or they’re afraid they’re going to lose their job, or they’re kind of thinking this isn’t a time I feel like I should be changing jobs, but at the same time, maybe I can’t wait indefinitely. So I would love to get your thoughts on that.
Kate: These are really really tough times for a lot of people. And so all joking aside, that’s something we got to figure out how to handle as a society. I don’t think that there are entrepreneurial people and corporate people, there does seem to be this mythology that never the twain did mean, that just doesn’t make any sense. That is not a growth mindset, as I would tell my daughter. They do take very very different skill sets though. I’m also going to start out by saying that being an entrepreneur is a privilege. With my massive student loans coming out of my undergrad, this would not have worked for me then, but it does now. I’m acknowledging all of that. A lot of corporate life is about going along to get along, fitting in, figuring out how the system works and then supporting that system and working within it. Or if you’re breaking it, you need to understand it well enough to break it in ways that you can accomplish your objective. That is a skill, and some of the greatest things in human civilization have come about because we have been able to coordinate large numbers of people working together on a single project. And that’s what a corporation is. So there’s nothing wrong with it. I am not critical of corporate life. Generally speaking, you do end up with a lot of slow stuff and old stuff and politics that are a result of all of these people. But those are real skills. On the entrepreneurial side, on the other hand, you eat what you kill, so you need to ship, you need to turn things that you need to have a lot of different kinds of skills. You need to be willing to do things that you don’t know how to do very well. You need to do the grinding elements of making sure that everybody has health insurance or buying your own small business insurance is the most complicated thing on the planet, and I’m a licensed insurance producer. I don’t even understand these accord forms, so there’s a grind to it as much as there’s an excitement, and I think that’s something that gets overlooked. I also think that InsureTech, if we’re going to combine the two, has had a lot of tech people coming in saying, Hey, this industry is broken. We’re going to fix it. The industry’s not broken. There are pieces of it that are, what’s accessible to them is a lot of the front-end distribution stuff or the back-end process stuff. And so that’s what got fixed. And then I think now you’ve got this wave 2.0 of insurance people who are saying, wait, we see ways to change the industry as well. Hopefully we get this melding of the best of technical expertise and the best of insurance expertise and we build something new together.
Rob: I love it, that’s a fantastic answer, and I’ve met more and more people over the past two, three years, like yourself, Kate, that have their roots in insurance, and I think you’re absolutely right. I talk a story in my book about meeting somebody from Silicon Valley for the first time in 2015 at a CPCU annual meeting in Indianapolis. And it was like, why are view here? And they said I’m going to learn everything there is to know about your industry in four days, and then when I go back, I’ll put you all out of a job
Kate: There’s a hubris to that, so we’ve been very lucky. Our investors are people who know insurance or where their funds that invest specifically in the InsureTech space. But I remember very early in this journey sitting in front of a partner, large Silicon Valley VC, who said to me, Oh, well we have a similar investment already. It’s a company that invented telematics for auto insurance. This is not Root. It was another company that I don’t know if they exist anymore. But he literally said to me, we invested last year, their series A and they invented telematics. And I told him, Progressive ran the first telematics trials that they did in 1999.They invested in something thinking they invented a technology that has existed for 20 years. So there’s a hubris there that I think that it’s fantastic to hear about someone like that being at a CPCU conference. I don’t think four days is enough to suck up the whole industry, but it’s a start,
James: Oh, bless their hearts, as we would say. We have two phrases for that in the South. Bless your heart, and you’re so sweet.
Kate: Neither of those are a compliment, right?
James: Neither of those are a compliment. It is not. So let’s, let’s talk about Surround. By the way, thank you for clearly delineating that people are not either corporate or entrepreneurial. You can be entrepreneurial in a corporate environment, and then you become an entrepreneur by launching your own business, for example, one of my good friends and I can’t announce it yet, I’m looking forward to announcing on the show. I can just say that one of my friends just got named president of a really neat venture that’s a wholly owned subsidiary of an insurance company and I’m really excited about it for him. It’s a really neat opportunity, and yes, he’s an entrepreneur. In every way you can define entrepreneur, but it’s not a separate company. It’s not binary. And I worked for a 150,000-person company before I started JBKnowledge. I just decided I wanted to have my own gig rather than be an entrepreneur in somebody else’s gig, and that was just my decision. I appreciate you defining that. So what was the Aha moment for Surround?
Kate: So, this is where I’m supposed to tell you some glossy story about how I secretly always wanted to be an entrepreneur at career day in sixth grade, but actually it was kind of an accident. So here’s what actually happened. I up and quit Liberty Mutual. It’s a great company. They take good care of their customers. It can be a very good place to work, especially earlier in your career, you get great training, but I was at this point where I had an organization of several hundred people. I had the modeling team reporting to me doing all of the modeling for underwriting rating models on the commercial line side. And some days it felt like my typists in Wausau, Wisconsin were doing more for our consumers than these $200,000 a year people that we were hiring away from Google when we could, and it wasn’t the statistician’s fault. It was just that in a large corporation, it always makes more sense to improve your workers comp loss ratio by 0.1% than it does to do anything different. And in retrospect, that was the moment when it was probably clear to me when I was ready to leave for those reasons that it was time to become an entrepreneur, but I didn’t for a while. I left; I actually went back to school for a while. I am officially a graduate school dropout. I have finished four of five semesters of a clinical nutrition master’s degree, and I started doing some consulting. I’m a geek of maybe a slightly different sort than you, but still one. So I started doing some consulting on the side because people started calling me up asking if I could do some insurance product consulting. Frankly, it was easy money for interesting work. And then, Kristen Beset, who’s the chief actuary at QB in North America who used to sit next to me at Liberty called me one day and said, you must know Jake Grayson. And I said, nope, don’t know him. And she was said, Oh, well, he was one of our peers at Liberty. And he’s got this idea for a company called Surround he’s really, really early on and doesn’t have anybody to help him on the product side. Are you interested in doing some consulting for him? And I was said sure, why not? So that was back in early 2018, I guess. And I did some consulting for him, and it was really interesting, but I was in school, so I was consulting on the side. And one day he said to me, have you ever thought about co-founding an InsureTech? And I said, no. And he said, I meant actually do you want to start this Insurtech with me? I wasn’t quite sure for a couple of reasons, first of all, because I scarcely knew him, and they do say you should know your co-founder before you start a company. And second of all, I was a little bit unsure about the regulatory kind of regime and whether the regulators would like this. So I said to him, why don’t we go out and visit some regulators and see how that goes? So we did this trip out to the Midwest, visited a bunch of regulators out there, spent a lot of time driving through corn fields in a car, which is an excellent way to get to know people and I discovered two things. One of them is that it is in fact true that he and I can talk about insurance for 16 hours a day and then wake up the next day and do it again. It was also the case, I told my husband before I left that one of two things was going to happen, either I was going to come back and say, Hey, I want to be an entrepreneur, or I was going to call him from the side of the road in Peoria and say, I can’t find an Uber, but Jay threw me out of the car. I learned that there is in fact good cell phone reception outside of Peoria. And I did not get kicked out of the car. So that worked out well too.
James: The quest of Surround was to provide modern insurance for people who don’t own a lot of things because in modern economy they’re renting and sharing stuff.
Kate: That’s exactly where it came from. There are a number of segments in the U S and every place else that are really underserved by insurance, but this is one of them. Property and casualty insurance typically comes along with things. And if you think about a lot of the stuff that P&C insurance protects you from is not things, if you get in a car accident, it’s your liability. That’s not a thing, It’s your responsibility or legal responsibility at least. But the reason that that design worked was because traditional lifestyles used to be more tethered to those things. So, you’d graduate from high school or from college, you finished your military service, and you would buy a car and you’d be 18 or 22 or 23. And you would go to your parents’ insurance agent or an insurance company, you would buy your first car, your first car insurance policy. And with that, you would get that liability coverage for the most likely thing to happen to a young person, which is to get into a car accident and cause some damage or injure somebody, and then a couple of years later you might get married. You buy a condo or a house, you get your homeowners insurance. And with that would come worldwide liability protection. If you happen to do anything and your stuff would be covered then too, because you’re sure new accumulate stuff, then you have a child and you get life insurance. It’s this whole thing. And as long as your life is exactly traditional, then these products work really great for you. And so we’ve got these giant insurance ecosystems of technology that are built around serving up exactly those products. So then what happens when young people start delaying the purchases of cars and rings and homes and everything else, there is no product for them, and yet they’re exposed to more risk than ever before. Our social safety net is not what it was. The job market is not what it was for people 20 years ago. Their student loans are sky high and they worry, we interviewed hundreds and hundreds of consumers and we ran into people doing things like buying term life insurance because they had private student loans that their parents had co-signed for, and they were concerned that if they died, that their parents would get stuck with those loans. So they bought term life insurance for that purpose. That’s not what term life insurance is for. That just shows you that there are products that are out there that people are trying to twist around to work for them and they just don’t. So that’s what we’re doing. Our first set of products is aimed at young, modern professional within the city. They drive rented, borrowed car–shared cars for personal use. They rent an apartment. They might have a side gig as well. We have a super simple, easy three minute to quote policy, $60 a month launching here in Massachusetts any day as soon as we get our regulatory approval.
James: So it’s going to cover renter’s insurance. It’s going to cover when you’re renting a car, Hertz Zip car, any of them, so it covers renting things. It covers renting bikes. For example a bike share program, if you get into accidents, turns out you have liability if you hit somebody when you’re on a bike. Did you know that? The most dangerous time I ever had on a bike share program. At the time I was in London a couple of years ago speaking at a conference and I love riding bikes a lot. I like it a lot. They joke and they called them Boris bikes because the Mayor of London came up with the program, but it was the city bike share program. And so I got on the bike and I’m riding around, and I almost got in two accidents within the first hour, because I looked the wrong way. Traffic’s coming from the left in the United States and in the UK, it’s coming from the right, and so I looked the wrong way and, it was scary, but it turns out if I hit somebody, I actually have liability there and I can’t think of an insurance policy that covers my activity during that bike rental, and that’s what you’re talking about. So you’re covering things that a modern millennial or Gen Z is going to need if they’re not going to own all the things, even if you do own policies, not all of them have an umbrella that covers an activity like that
Kate: So this is a bunch of bottom-line policies that we’re sticking together. So if you want to get into the guts of what we’ve actually built is a system that allows us to take bits and bites of insurance and to recombine them so that they feel like one policy. We’re not hiding from consumers that they’re multiple documents, we’re just putting them all together, but it allows us to personalize. Initially this model T is pretty static, but very quickly we can swap in and out either products that we create as the MGA, or partners’ redistributed products into our bundle. So accident, health products might be a good example of the kinds of things that we would redistribute.
Rob: Whenever I visit Surround’s website, I feel like you guys are trying to make coverage fun. Maybe that’s too strong a word, but you have tools on there, like the Surround simulator, where you see things that you could face. And making people think about the exposure part of it, not just, ‘well I was told I need XYZ.’ You also have, what you call a starter pack, which is exactly what you described, these model line policy. I think you’ve told us a little bit more about how you’re different from traditional insurance, but maybe you can just go a little deeper. I’m interested are you connecting with your partners via API? What is your distribution channel? It looks like you sell direct on your website, but you also have a tie in with agents and brokers. How are you finding these consumers and then how are you supplying them with, the products you need?
Kate: So early on, my assumption was that, of course we were going to be direct to consumer because isn’t every InsureTech startup? There were a couple problems with that, which you can see in the S1s for many of the InsureTechs that have gone public. One of which is that customer acquisition and the direct channels is really freaking expensive, I mean, Progressive spent more than $2 billion, that’s billion, on television advertising and support for their direct channel. And something like a third to a half of their business is actually independent agency rights, they’re paying commissions over there as well, which are not in that number. So to be competitive, especially in a world where there’s so much noise with Google AdWords and Facebook and all of the rest, the economics just don’t make any sense, especially when you’re talking about relatively lower average written premium policies. These are not $10,000 business policies or anything. And so we ended up having some conversations with independent agents pretty early on and independent agents still have about half the market in the US for property and casualty, about $350 billion. they have about 40% of the personal lines market. And although that shrunk at first, as things kind of came online 10 years ago, it’s now holding fairly steady. And they’ve got three things that are really interesting. One is that they actually have long experience in intergenerational client relationships, so most independent agencies, even the largest ones are family businesses at heart, or were family businesses. And some of them have been in operation for three or four generations. And so it used to be that when you bought your first car at 18, you went to mom and dad’s insurance agency and you got sorted out. And it was probably your parents’ insurance agent’s son or daughter that was serving you. That’s not how that works anymore. That moment has disappeared because Junior’s not buying a car at 18 anymore. And independent agents are very aware of that. So they have access to the family. They know when Junior gets removed from the parent’s auto insurance policy, but they’re left competing with Progressive and Geico eight years later, which is ridiculously expensive. So they have this burning platform, and nobody’s really built a product that’s for this younger consumer designed well, digital, beautiful, quick, easy, and that also works for independent agents. So there’s just this total lack of product innovation. So that made a lot of sense to us in terms of getting into the market. It also turns out that parents pay at least one billion for half of the people between 20 and 40, who are full-time employed in the US. That’s not student that’s full-time employee. So whether it’s the parent buying the policy or the kid, so be it. The other thing is that a lot of large, independent agencies also have employee benefits brokerage businesses as well, that are quite sizeable. Our traditionally property and casualty hasn’t fit very well in that space. Because you’ve got all these accident and health and disability products that are voluntary, supplemental benefits that are quick and easy to sell 20 bucks for a cancer policy and 10 bucks for something else, whatever. They’re easy. And then it’s like, Oh, and if you want property and casualty, go talk to the nice people at that table over there, and three days from now after asking you 40 questions, they’ll give you a quote for your homeowners’ insurance. It’ll be great. It just doesn’t work. But our product is basically three questions, three or four minutes and you’re done. So it fits that channel as well. The agents we’re working with are going in both channels. And then the third piece that’s really interesting is that I think that we have this idea that independent agents are all down at the rotary club talking to their golf partners about insurance. And that is true for many agencies, but if there are 40,000 insurance agencies in the United States, which is roughly right, 35,000 of them at least are less than a million dollars in premium, so the other remaining 5,000, many of them are actually very large, very sophisticated businesses. And many of them have very sophisticated digital businesses, they have digital marketers, they have a presence in every channel that any direct business would. In the same way that there’s no such thing as a corporate person or an entrepreneurial person, there’s no such thing as a director and agency consumer. Nobody at age 22 wakes up in the morning and was like, I definitely want to buy my insurance from an insurer who sells direct to consumers. No, that’s ridiculous. If you ask people in the street who their insurance company is, six of them will give you the name of an agency. And the remaining four, half of them will give you the name of some insurance company they’re actually not insured with, because this is not top of mind or something that people are actually thinking about.
James: Kate, it cracks me up because I’m a pilot, and on all my aviation forums, my pilot buddies would be like, ‘does anybody know another insurance company? I hate all the quotes I’m getting,’ and then they’ll give him the names of eight other brokers and I just reply back, and I’ll say ‘there’s only nine markets. They’re all shopping all nine. You’re wasting your time.’ I do this because it keeps coming up. I guarantee you once to twice a week because the aviation market got really hard this year and it’s just been a tough year to buy insurance in aviation. And so I just reply back and say, you’re literally wasting your time. And I do it every time. Stop asking this question, stop asking, delete your account because you don’t understand how insurance works. You’re going to get frozen out anyway by these guys, because they’re going to say I’ve already quoted that guy. It’s challenging.
Kate: It’s totally true. And if you look at most of the products, the insurance products that do sell really well online without any help, two things happen. Either they’re very simple products, like a travel product that you buy to cover a specific trip, or what you don’t see is the massive call centers that those direct-to-consumer companies have. Because people have questions. They want somebody to talk to after they get through the digital part of the process, if they have a question, they want to pick up the phone, they don’t want to ask a web chat. So you need to have both, you need to serve them digitally, but then that human voice for complicated purchases like insurance is really important. And so that’s the role we see for agents. We’re giving them the digital tools they need to bring these customers in and to get them through the quote really quickly and to give them the product they need, and the agent is there to talk at the moment that somebody has a question.
James: Well, this has been a really fun conversation. I’ve thoroughly enjoyed talking about where y’all are going and certainly around the reality of insurance going direct to consumer, and doing it without $20 billion, $2 billion or $1 billion or $200 million. It sounds so wonderful, but brutal card hold reality, locks in play, and that is sometimes, in fact, almost all times, you have to have people there to talk to other people. There’s a lot of ways you can streamline the underwriting process and the claims process. There’s a lot of ways to cut down on the incredible amount of waste there is in policy and claims. But the reality is that customer acquisition costs have eaten many business models alive because getting them to just come to your website is a big deal if you’re not going to play ball with the existing distribution channels that exist in the market. That is the name of the game. So you have an interesting news story, Rob, and I think it’s by someone who’s here. So what you got this week?
Rob: I already kinda teased this, but Kate had a wonderful article on LinkedIn this week, titled Corporate to co-founder: the Insurance to InsureTech jump after a layoff . So we’ll include that link in the show notes and I just want to thank you Kate for writing this article. I’m kind of curious, about your inspiration. It’s well worth a read, even if you’re not in this position, it’s very thoughtful, but it’s also funny. Kate, your personality that people have got to know on this podcast also comes out in your writing. So, we’d love a comment, what caused you to write this and what kind of response have you gotten this week?
Kate: So I get a lot of calls because I made that corporate to entrepreneurship transition. And so there have been some more layoffs announced recently, and so I’ve been getting a lot of calls from people I’ve either worked with or know, asking about the transition and just what I find is that people ask really practical questions that frankly, you could probably search online. What are the early InsureTech startups in my area? What are the later stage ones? But what they miss is that what I think is really hard about entrepreneurship is that you need to be somebody different, you need to grow into a different kind of role and figuring out if you’re actually going to enjoy that is hard, if you don’t understand how the role is different from corporate life. So I think that was what inspired me. And I’ve gotten a lot of reads and a lot of comments and a lot of calls, it was funny the articles that I’ve exited over that are technical insurance stuff. not so much, but this, I just think there there’s so much change going on for people. I think entrepreneurship is a thing that people are thinking about. And so I’ve had a lot of people reach out.
Rob: That’s awesome to hear. So definitely connect with Kate on LinkedIn. If you haven’t, she’s also a great Twitter follow as well. She’s, delivering good content on top of all the other things that she’s doing around, and actually this struck a nerve, not that you knew this timing, Kate, but I actually have a buddy of mine has been a InsureTech founder for a couple of years, trying to sell technology into the marketplace to carriers. Pretty limited success, to be honest with you, he’s been talking with VC funders and I think he started a bootstrap originally and did a convertible note, things like that. But now he’s been talking with funders, and they said, have you thought about an MGA model? So it’s kind of funny that we’ve been talking about your MGA this week. And so he was asking me about that and what I thought about it and whether I might want to come on board. And I was like, well two years ago, I would’ve never said yes but now I’m a little bit more open to thinking about. So I didn’t say yes, I’ll keep everyone posted whether that works out. But so it was very timely that I came across this article this week. So James, the other thing that I had we talked about funding, we talked about early stage and late stage so in late-stage news, Hippo took in another $350 million
Because why not?
Rob: Because why not? Because it was out there. So kind of following their series E, Mitsui Sumitomo was the one that made the investment. So definitely check out the article in Crunchbase. They continue to rocket, lots of speculation on that 2021 IPO, and we’ve seen lots of IPO activity, Lemonade, Root, et cetera, this year or so. Definitely one of those companies that is looking to expand to all the States and be available to something like 95% of homeowners. So the money will help them do that. And then, on the earlier stage a Series A for Flyreel, which is based in Denver, Colorado, and shout out to Flyreel. They were one of the early sponsors of my book tour events, when I came to Denver. So they got $10 million, and Google said, Hey, can we get in on that as well? So these guys do some pretty cool stuff where you can actually take video walking around your home and have different systems like your water heater, and then they actually are able to use machine learning to see, what is the make and model number of your water heater? Let’s hit that against the database and see how often those water heaters fail? And guess what? They told you it’s all good for ten years, but in our data, it shows it’s only good for seven, things like that. Very innovative technology. I’m super excited that they’re getting traction in the marketplace. So definitely check out my friends at Flyreel.
James: Kate, did you see the link I just texted over to you. So that’s, let me Google that for you. LMGTFY. So when people ask you questions that they could have Googled, I want you to go to that website and once you do it, it literally replays how to use Google and then it puts the query in for them and then shows them. Shows them how they could have filled out that query instead of asking you the question that you’re just going to Google. I have a smart Alec buried deep inside; this is one of my favorite things to do when people ask me questions that they could have just Googled. So there you go. Let me Google that for you. That’s the fun way to prank your friends when they ask you silly questions that they could have Googled.
Rob: I’m going to use it for my 19-year-old as well James, we had to sit down and have this conversation with her last week to say, honey, yes, we are your mom and dad, you are our child, but you are 19 now. And you’re asking a bunch of questions that we don’t know any more than you do. Things like how do I get a bus pass and go around? I haven’t taken a bus in 20 years in San Antonio, I don’t know. I gave you the website, viainfo.net. Check it out. Look it up.
Kate: I have to say that the career that you’ve put in here begs the all-important question about InsureTech, does it, or does it not have an E?
James: Yes. I think he does, but that’s me. I don’t like that they truncated the E, I’m not a fan of truncating character strings, but that’s just me. Maybe it’s because the trunk function only cuts off empty spaces in coding and I learned that a long time ago. I’m a super geek, I don’t like to truncate now. And so I like having the E in InsureTech, but that’s just me. The E stands for excellent and electronic, and everything. And that’s our show today. Kate Terry, I could talk to you for three hours, but we’re not doing a Dan Carlin hardcore history podcasts on the Celtic Holocaust, we’re actually talking about insurance technologies. Thank you for jumping on The InsureTechGeek.
Kate: Thank you for having me, I appreciate it.
James: Rob Galbraith, good to be back with you. We got a few weeks until Christmas and new year’s break. I plan on thoroughly enjoying it, doing some recording together.
Rob: Likewise. Likewise, we’ve got a great lineup coming up.
James: Yes, we do. super excited. Just stay tuned and all of you out in listener land. Thank you as always for joining us for another episode of The InsureTech Geek podcast powered by JBKnowledge. It is all about technology that is transforming and disrupting the insurance world. I have been your host, James Benham, JamesBenham.com with co-host Rob Galbraith, endofinsurance.com. Big thanks to Jim Greenlee, our Podcast Producer, Kara Dalton-Arro, our Creative Producer, and thank you for joining us today. I look forward to talking with you soon.