Steve Lekas is co-founder and CEO of Branch Insurance, a rising star in the insurance industry based out of Columbus, Ohio, offering bundled Home & Auto insurance powered by community. Branch believes that insurance must get back to being a force for communal good and has made it their mission to restore insurance to its original role. Steve was interviewed by Michael Fiedel, a Community Leader at InsurTech Ohio and Partner at PolicyFly, Inc.
Steve, allow me to ask you point blank: does the insurance industry have a poor reputation?
“Insurance is not a well loved industry by its users and has a bad reputation with many consumers, and some of that reputation is deserved. But I believe today’s insurance industry is more pro-consumer than it’s ever been. We have so much strong regulation to keep bad actors out and the market is highly competitive so most consumers have choice. Many of the millions of insurance professionals are good, well-intentioned people. But for consumers who have experienced our incredible complexity first-hand, it doesn’t feel great to have big insurance companies collecting your money for a product you might not really understand and would prefer not to have to fully use.”
What’s led to this perception and what should customers truly expect from their insurance company?
“It’s historically been hard for a person to understand if they’re properly covered. Insurers make and sell a set of products that have been litigated for hundreds of years, and the outcome is a product that’s very difficult to read. A hundred years ago, the insurance product was much simpler or at least shorter. It’s a product that consumers don’t want to think about, they want to get it done and be covered for the absolute smallest cost.
It’s a tremendously complicated business where the cost of making the product isn’t known for many years after it’s sold, it’s highly regulated, it’s users don’t typically understand it, many users pay and never receive a claim payment. The industry brands are so prevalent that although the margins are thin, you’d think insurers were making money hand over fist. There’s so much more that’s brought us to being an unloved industry by our customers, but the macro of today’s environment is that this level of complexity creates distrust.
But that’s not how insurance originally existed. If you look back at the first insurers in the US, the majority were small groups of people who banded together promising to save one another from financial ruin if the unexpected happened to any one of them. Our product is communal by its nature! It isn’t a big insurer who is saving you, it’s all of the other people insured through that company — its community that’s saving you! At Branch, we’re focused on reintroducing that concept of people helping each other and we do it through technology so we can deliver the three key things we all want from insurance: it’s easy, has great coverage and is as inexpensive as possible. It’s why we say, ‘we’re getting back to getting each other’s back’ and we mean it.”
The complexity you mentioned surrounding insurance, does it hold the industry back?
“It holds the industry back in one very obvious way: it’s very hard to communicate effectively. If the complexity were lessened, consumers could be much more confident in their purchase and use of the product, making insurance more loved and more efficient. More efficient insurance is less expensive insurance, which would allow more of the uninsured to be insured. ‘Uninsurance’ is a real financial exclusion problem. Insurance’s noble pursuit is to ensure each of us can progress toward our dreams, without falling off our life’s trajectory due to the unknown, but tens of millions of Americans are without that safety net. This should be a bigger focus for our industry and Branch is aiming to solve that problem through SafetyNest.”
How do insurers get consumer trust back?
“We see cost reduction as the most obvious opportunity and one of the most compelling reasons for a client to join Branch. As a simple example, Branch for the first time can give a consumer a price, not a quote or an estimate, but a price for home insurance or car insurance or bundled home and car insurance in seconds. The consumer can become insured in seconds, they’ll have their policy documents and ID cards in seconds and though they can choose to speak, chat or text with one of our licensed agents, they are never required to speak with a person. While Branch paid to acquire that client once, underwrote that client once and serviced that one client, Branch wrote two or more policies gaining significant cost efficiencies, which became savings passed back to our client, instantly.”
Beyond major improvements in price, how is Branch attacking enhancements in customer experience?
“We’re gathering information that customers would otherwise have to spend considerable time tracking down. For a consumer who would like to shop multiple insurers, the current model forces the shopper to go through the unique processes and questions of each individual insurer. And though there are very few consumers that see a lot of value in answering of hundreds of application questions, that is the bulk of the shopper’s energy. One of the amazing things Branch has developed is to instantly price insurance eliminating the shopper’s burden of answering questions, so they can focus on coverage and price. Branch asks only name and address then uses technology to gather all other information needed on a consumer’s behalf.
Now that Branch doesn’t have to spend our entire client interaction asking ‘How big is the house?’ and ‘What are the VIN numbers?’, Branch can provide insightful tools, using data, to help a person determine whether they have the right amount of coverage. For instance, I could ask you, Michael, ‘Do you have enough liability insurance?’ and nearly no one on the planet will have any idea how to answer that question, but the question actually has a real answer. The answer will be a little different for each person, but it’s a combination of the cost of transferring how much of the risk, and the probability of losing what’s at stake. Data and technology can answer the never before solvable, most important questions.”
Steve, I love your energy, what is it about insurance that gets you so fired up?
“A friend of mine, many years ago, called insurance the oxygen of the economy. In the most basic terms, if there wasn’t insurance, it would be much more difficult to buy things and try things. Would you buy a house, would you drive a car, would you start a business if there was a decent chance you’d lose everything? More simply put, would you take on risk? And if you wouldn’t, what would you do? Civilization is stunted without the presence of a risk transfer ability, like insurance.
There have been examples of small villages around the world where a drought occurs and one village had crop insurance and another did not. The insured village received funds in place of crops necessary to feed their people, while the uninsured village became immediately poorer, had less to eat, and starvation and malnourishment had detrimental multigenerational effects on their society. Insurance is civilization’s accelerant! Insurance has such a noble purpose and while its complexity makes for very challenging work there’s an opportunity to do something really good for a lot of people. How can you not be fired up?!”
In conversation you mentioned the difference between “technological innovation” and “insurance innovation”, expand on that.
“I think of technological innovation better described as tech-enablement like taking the old insurance application and making an online version of it. Insurance innovation involves the entire ecosystem including the insurance product itself, frequently modified through technology. An example of insurance innovation would be to modify the known underwriting science to segment price using only mechanically available data, then algorithmically gather that data so a consumer doesn’t have to fill out an application at all.
Another example of insurance innovation at Branch is how we’ve created a new product and pricing model that allows our clients to take the Community Pledge, asking one client to certify through our mobile app that he or she is not going to commit fraud. Fraud is a cost we all bear as insurance consumers, that can be uniquely exposed through a technologically enabled community. Clients take this pledge and request other policyholders to vouch for them, these vouched-for clients are then appropriately given discounts. This is a reintroduction of a really old insurance idea where the community underwrites. These innovations have to work through the entire insurance process and can only exist if enabled by technology and within the regulatory framework. Technological and insurance innovation are key elements of Branch’s mission and brand promise to make insurance less expensive, allowing more to be insured. All of this is possible through community.”