As Next Insurance launches today a chatbot allowing personal trainers to quote and buy insurance via Facebook Messenger, its founder and CEO Guy Goldstein tells Jonathan Swift how the American insurtech start-up plans on revolutionising the SME commercial market.
"Just last week we found an exclusion in an insurance policy that related to Y2K and that was 17 years ago. And yet, here was a document today that said you could not do something because of it. It is mind-blowing".
Speaking to Guy Goldstein, the CEO and co-founder of US insurtech start-up Next Insurance, it is clear that he is very much of the mindset that commercial insurance is - as he puts it - "broken".
"It is the most outdated form of insurance for two main reasons. First, there is the product that is extremely complex. It is not like home or motor, but full of terms that in themselves mean little to customers and have taken us [as insurance newcomers] six months to learn.
"And second [here in the US] 99% of the [SME] business is sold by agents. So if the likes of Next Insurance were not trying to simplify it, there would be no appetite to fix it.
"It is not that the agents do not understand the issues, but they are local businesses dealing with one lawyer, a doctor, two personal trainers etc, so they do not have the size [or influence] to change things."
Fragmented SME sector
Goldstein also comments that while the [US] motor market has a few major players with shares of 20% to 30% who have invested in technology to remain competitive in a $400bn (£330bn) market, in SME commercial insurance, it is smaller - he estimates $100bn - and there is no player controlling more than 6% to 7%, meaning it is much more fragmented and difficult to shift digitally.
Shunning the online aggregation solution that fellow American insurtech start-up Cover Wallet has introduced to disrupt the SME market, Goldstein emphasises that the Next Insurance model is about taking on niche markets one by one and developing a best-of-class product that stands out in that chosen space.
To date, it has launched a product for personal trainers with Markel and photographers with Munich Re, with contractors its next project.
"All of our products are tailored to their chosen markets," Goldstein explains. "So, if you take our photography product, when we looked at what was available, there were a number of products that would not cover equipment that was taken out of the photographer's premises.
"So what if a policyholder had a shoot that involved them going to a wedding for example? They would not be covered even though that is part of their job. What we do is talk to our markets and then build something to give them the best user experience possible."
Quote and buy via Facebook Messenger
Which brings us on to the most recent development at the start-up: the launch of a new insurance chatbot today that will enable personal trainers to quote and buy insurance via Facebook Messenger. Having partnered withchatbot developer Smalltalk to do this, Next Insurance claims it has become the first company to provide full service insurance via a social channel.
"I have to say Markel have been a great innovative partner to work with in that they have just let us to get on with it and learn as we go along, which goes against the traditional culture of insurance.
"And what we have found is that 70% of our customers are buying insurance on their phones. Enabling customers to buy insurance through a chatbot on Facebook Messenger brings simplicity, transparency and easy access. We're making sure that insurance is working for the small business owner and not the reverse."
Goldstein adds that his previous start-up [mobile pay specialist Check that was sold in 2014 to Intuit for $360m] was at the front of the queue when Apple introduced its mobile app store in 2008, and that he sees great value at "being ahead of the curve because it allows you to learn and innovate faster".
Presently Next Insurance is using the chatbot for buying and customer support, but Goldstein says that eventually it will "get there" in terms of using it for claims too.
Phenomenal insurtech movement
Next Insurance has very much become associated with the burgeoning insurtech movement, but Goldstein was unaware of this when he and his partners Nissim Tapiro and Alon Huri, both formerly of Check too, sat down to come up with the concept of Next Insurance.
"It is phenomenal that there are all these companies now looking at areas of insurance from motor to life to health and seeing that these products are broken but believe they can be changed for the better.
"When we came up with the concept for Next Insurance in 2015, I was not aware that so many people were doing these different things to solve insurance, but now we are happy to be part of this [insurtech movement]."
A year ago, Next Insurance raised $13m in seed funding from Zeev Ventures, TLV Partners and Ribbit Capital. When asked about raising more money, Goldstein says: "We still have lots of money in the bank, so it is not something we are looking at right now"
In terms of future developments, he adds Next Insurance is six to nine months away from launching its contractors product with an insurance partner Goldstein would rather not name.
And while Next Insurance currently works with a third-party supplier for claims, he admits: "We would like to do that ourselves eventually because that is really when the rubber meets the road. We will start with property claims, because the liability element is much more complex with claims running into millions."
Finally, Goldstein confirms Next Insurance has no current plan to become a ‘full stack' insurer, but concedes "that might change in the future".
Having suffered his own claim recently involving a flooded basement, Goldstein is learning about insurance on both sides of the customer-insurer divide, and holds the common view most companies start with the belief that a policyholder is trying to commit fraud, until proven otherwise.
He concludes this underlines how insurance has "lost its way" and is no longer valued by consumers, something he is intent on changing for the Next [sic] generation of policyholders.
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