Mitchell Kemper is the Head of Partnership Enablement at Solaria Labs within Liberty Mutual. In partnership with teams across Liberty Mutual, Solaria Labs develops new products and partnerships that solve unmet customer needs and expands Liberty Mutual’s protection offerings. Mitchell was interviewed by Andrew Daniels, Founder and Managing Director at InsurTech Ohio.
Mitchell, speaking from experience with a smaller and a larger brand, how do you approach differentiating yourself when working with startups?
“Going from a smaller brand and moving into a larger brand, I think the approach is similar in a lot of ways. One difference is the speed at which you're able to do things or the different partners you're able to work with. At State Auto, I was incredibly connected to the senior VPs of the different organizations: Product, Claims, Underwriting, Risk Engineering, Sales, etc. If they liked something, we would test it directly into the core, and if the core liked it, it'll stick. There wouldn’t be any additional movement outside of that evolving partnership. If the core didn't like it, we were able to pull it out pretty quickly because we were able to test it on a smaller scale.
With Liberty Mutual, you still want to be a great customer and partner, but the interest you may get from startups is a little bit different. In my opinion, we like to pilot new opportunities within Solaria, or on a smaller scale, prior to moving the opportunity into the core business. This gives us an opportunity to move a bit quicker than a partner may expect from a large carrier. As you know, State Auto would have a decent-sized contract, but it’s likely not going to make a huge mark on your bottom line. Whereas, being able to get into Liberty Mutual is huge for any company, let alone a startup. As a startup, you typically have to have significant geographic coverage to be considered a potential partner at one of the larger carriers. If you get a top five or top 10 carrier, others start to take notice.
That can be impactful from a partnership perspective. How Liberty Mutual differentiates itself from State Auto is how it works with startups. It’s no secret that people assume the larger the carrier, the slower they move. You could be looking at an eight to 10-month sales cycle with many large carriers. With State Auto, we were able to differentiate ourselves by being able to move quickly and immediately offer startups the opportunity to partner with the core. Those are two ways I see differentiating yourself as a smaller versus a larger brand.”
How do you provide value outside of the financial investment?
“This was an interesting learning from leading State Auto Labs. Just because you want to cut somebody a check for investment doesn't mean that they want to take your money. Depending on the company, there can be a lot of VCs (Venture Capitalists) interested in investment, and we at State Auto Labs needed to figure out how to provide value outside of financial investment.
We would give the founders of our portfolio companies direct access to our Senior VPs and leaders within the company who they may not get access to when working with other partners. They may only have their relationship manager or the person holding them accountable for metrics communicating back and forth and discussing potential new products. Whereas, for State Auto, we wanted to help that startup grow, especially those that we invested in. Our philosophy was, ‘Yes, we want to make a financial investment in your company, but we want to help you understand the insurance market even better.’ We would give them that direct access and then sit down with the founders and teams for hours, helping them understand how we saw the insurance space, how their solution impacted the insurance space and how they could continue to grow. We were willing to make introductions to other insurance carriers. We saw that no company is going to scale with a State Auto partnership alone. We thought about how to make introductions to larger carriers and help them tailor their offering to be more insurance specific to get better results. That was the State Auto Lab's angle of providing value outside of financial investment.”
What are some things that non-insurance startup founders should do to better connect with insurance carriers?
“First, talk to all of the accelerators out there, the organizations that invest at an early stage that are willing to make introductions. Conferences are great to go to as well. However, finding the right conference is important. Some are more valuable than others. Still, I think what the founders can do to connect with insurance carriers is have a basic knowledge of the industry, know how we approach things and understand that insurance is a highly regulated industry. Just because you have a new data point, a new attribute, a new process, a new way of doing things doesn't mean it's translatable into insurance.
Also, it’s important to understand that insurance is a fairly low-margin business. Think through how an insurance company makes money and understand that an underwriting profit is difficult to achieve. You have all of these carriers looking at over 100 combined ratios where they may not be making money, and you have carriers striving for 95, 96 combined ratios where you're making four or five cents on the dollar. It can be helpful for founders to understand the economics of a policy to help price your product. It’s important to know how insurance operates from a regulatory and financial perspective to understand where the bits and pieces of your product fit in.”
On the flip side, if you are a carrier just starting to work with startups, how do you change your mindset to be open to new learnings with early-stage startups?
“This one's a little difficult because insurance is an incredibly old industry. Things have been done in a similar way for a hundred years, why would we change? You're starting to see the large carriers move toward working with early-stage startups, but for those just starting, there are a lot of accelerators out there that can help you along this journey. You don't have to look very far to find companies that are willing to make introductions to startups. The main thing is being open to learning.
You have to be willing to think about things differently. You will see a lot of things that may not work. As long as your first thought is, ‘Could this work?’ you’re headed in the right direction. That's the most important piece. Instead of going down a list of new startups and automatically eliminating those you think can’t work, you need to figure out reasons why a product would work. Then go through that piece until you eventually get to a real reason why it wouldn't. Get out of the mindset of ‘Well, this isn't how things are done, it's not going to work.’ Really thinking through these new opportunities and being open-minded to learning from others outside of our industry is the key to moving the culture to work with early-stage startups.”
There's lots of noise out there. How do you continually find unique startups that will impact your business? Do you think about this differently at a larger company?
“You’re going to have to filter through a lot of the noise out there. Filtering through a lot of opportunities that may not work is how you continually find unique opportunities. For example, take water leak detectors. There have been a lot of those over the years - some may work better than others, but they're more or less the same. I continue to keep an eye out for them because I wouldn't want to miss the one that's great or that has the data behind it.
I try not to put any type of startup in this box where I'm willing to completely pass on it. I want to see what's going on and be knowledgeable of what's coming. It’s important to identify those opportunities that will ultimately impact your business.
From a larger company perspective, I think about how early on State Auto didn't have a name for itself in the VC and startup community. Eventually, that reputation was built to where startups were willing to talk to us. We then got to the point where startups would seek us out because we had built a great reputation. At a larger company like Liberty Mutual, especially on the strategic side, you have more seeking you out because you have that large, recognizable name. I still seek out new opportunities because there's value in that, but the amount of companies reaching out to us feels much larger than at a smaller company.”