Insurtech Q+A: Chris Bayley, co-founder, Cover Genius

When did Cover Genius begin and how many employees do you have?

Bayley, pictured: We commenced operations in 2014 and have 40 people in London, Austin (in Texas) and our headquarters in Sydney; we also employ a separate claims team in Manila.

Briefly explain how Cover Genius operates within the insurance ecosystem.

We are focused on distribution. Our first product Rentalcover.com was in car rental insurance. As there were no customised policies, or any deep understanding of the industry, and as there was no distribution platform, we built a full stack solution.

We now sell 100,000 policies per month, through B2B and direct, from 12 underwriters in 25 languages, 80 currencies and over 70 source markets where we are an MGA. It’s a $7bn (£5.3bn) niche and we are seen as a champion of consumers who for years have been gouged by the rental companies, so there’s still plenty of room for growth.

Last year we introduced a new platform called Bright Write which focuses on the optimisation of distribution for insurer D2C and B2B channels. Bright Write was originally built for Rentalcover.com but we also spent 18 months interviewing insurers to better understand what bits of our distribution platform they might actually want.

It turned out there’s three things that neither insurers nor their distributors really focus on - price, product and promotion - and we found from pilots that the actionable data that we use for dynamic pricing and product generation is also useful for risk.

So everything we collect, including user and browser data, behavioural, search and social data, and the methods that we use to drive yield improvements, are made available to partners via the Bright Write application programming interface.

What is your Asia-Pacific footprint and in which areas are you having most traction in the region?

Our first fully integrated Bright Write client is an Asia-Pacific travel insurer. Our second is a European travel distributor and our third is a global general insurer who wants to use us for travel, property and specialty lines. There’s no Asia-Pacific bias - just a lot of time in planes!

For the other side of our business, Rentalcover.com, Asia-Pacific is not as big as the US and EU, but our brand is so well known in Australia and New Zealand that we generate about 15% of sales here. Japan and Korea are also in our top 10 individual countries. As an MGA, we have authority or pending authority or fronting in the major Asia-Pacific countries.

What is the next stage of Cover Genius’ development plans?

Bright Write is a big focus for us and to give it the space it needs we separated it operationally, with a view to full separation soon. While I run Bright Write, our group CEO is my co-founder Angus McDonald, and his focus is on the car rental business.

Bright Write is a nimble enough platform that it can optimise almost any line of insurance, however if a distributor needs claims, support, translation or a payment solution, those responsibilities fall to the other side of the business. We see those bits of the value chain as helpful to have, but data science is really our unique selling proposition.

What are the most significant changes going to be in insurtech over the next few years ?

1. Motor premiums will go to zero as autonomous cars kick in. When all general insurance starts with motor and cross-selling opportunities decrease, the rest becomes fragmented and super competitive.

2. In a competitive market, the only way to differentiate is distribution, specifically product (mass customisation), price (dynamically generated pricing based on what is known or inferred about a single user) and how it is sold. 90% of insurers are looking in the wrong direction, they’re entire focus is on risk rather than growth. Growth will improve and increase the pool.

3. Insurtechs focus too much on claims and chatbots.

4. Chatbots will be a web development function in five years; if all search activity starts with a vocal command, it will finish thus. In five years you won’t need a PhD in natural language processing to replace eye-hand navigation controls and content parsing. If they don’t think you do it well enough, Google will do it for you.

5. Only the user experience will matter, at the expense of the user interface.

6. A lot of pure-play D2C insurtechs will burn their acquirers or VCs. The only customer-facing model that insurtechs should go for is B2B2C, like RentalCover.com and Square Trade which sold for $1.4bn on the back of 15 years of Amazon distribution.

7. Most insurtech value creation will come from strategics partnering with research-oriented insurtechs based anywhere, for deployment anywhere.

What is the biggest learning curve you have been through so far on your journey?

The “five whys” approach works in ‘insurance land’. When we started - underwriters didn’t understand a major issue with the industry was the lack of any global coordination for underwriting.

We had B2B partners with millions of customers around the world and the big global general insurers would tell us that 32 different agreements would need to be signed in order to get semi-global coverage, and it would take years, and we couldn’t write user-friendly policy wording, couldn’t handle payments and claims, couldn’t control the frontend, pricing or branding etc.

So we learned to speed-date underwriters super-fast: if the response to the first “Why?” didn’t change much four whys later, we were never going to the altar.

The second phase of the journey, what you might call the Bright Write phase, has been different. The learnings there have been much more about the interplay of strategy and corporate structure. It’s quite rare for a start-up to have two products with distinct go-to-markets.

Insurance is a land of opportunity where technology will bring about fundamental innovative change (rather than disruptive change) to multiple parts of the value chain. Hence our type of “success pivot” won’t be so rare in a few years’ time.

On 29 August Bayley spoke at Insurance Data & Technology Australia in Sydney as part of a panel discussion on digital disruption.