Nestor Solari is the Co-founder and CEO of Sigo Seguros, a mobile-first, auto insurance technology company serving immigrants and the working class through a fully bilingual platform. Nestor was interviewed by Andrew Daniels, Founder and Managing Director at InsurTech Ohio and COO at LISA Insurtech.
Talk to us about building inclusive insurance products. What is working and what isn't?
“This has been one of the core questions we keep asking ourselves at Sigo. We think about it from the viewpoint of the customer and their needs. Focusing on this has helped us raise questions about some of the building blocks that are used in traditional auto insurance and things like the use of credit score and criminal history for minor violations that are less likely to occur in higher-income zip codes. We see things that may translate into higher costs and cause this redlining effect for auto insurance.
Those that struggle the most to access auto insurance also end up paying the most. The thing that caught my eye early on is that it didn't seem to correlate with risk and loss ratios. We took the building blocks of the products and looked at things like driver class and criminal records and also tried to strip out the use of things like credit score.
That's part of what's required to build inclusive insurance products. What isn't working is an interesting question. Right now, what's been popular is the use of telematics, which, today, hasn't taken hold among the minimum-limits liability auto insurance communities and immigrant working class communities. Whether there's privacy issues or not is a whole separate conversation. I think that it's important that when you talk about devices that are tracking people's location, you consider people's different circumstances. Ultimately, that's one thing that might not be working and something that really needs to be revisited. There's a lot of interest around telematics, but there's still a large market that hasn't adopted it.”
Let’s talk about the future of insurance, what do you see happening especially from the next wave of neo-carriers?
“There's a little bit of a reversion to traditional insurance and risk management. The way that translates is it’s more focused on operations, targeting niches, developing different specializations and data sets on specific populations. The first wave of insurtechs were focused on a very broad market. What you have in this new wave is significantly lower costs to get a product to market. All of a sudden you see advantages in being nimble and the ability to attack certain niches that aren't necessarily geography driven. You see a lot of overlap with our customers' behavior throughout the country.
These low operating expenses are opening up a lot of opportunities to disrupt and invest in new types of innovation. There's always talk around underwriting and rating innovation, but the insurance value chain is pretty deep. A lot of pieces could use some refreshing all the way from tech that's dealing with the customer, to the tech you're using internally for claims, underwriting, reporting and everything in between. There's going to be core competencies that pop up for different neo-carriers. People and entrepreneurs are seeing ways to provide value, lower costs and increase efficiency across that value chain.”
How do you make decisions around buy vs. build? What advice do you have for early stage startups around this?
“My advice is somewhat biased toward a buy experience, and I think we had to be very scrappy early on to get to market and get this product that we wanted to build. We were tight on resources, and we didn't raise a big round early on. I'm not sure we would've changed our decision-making process just because we had money in our coffers. As a company, we’re always conscious of not rebuilding products that are out there and only building what we need to build. Build as little as possible, and try to not lock into multi-year contracts. That's where you can focus on building the highest leverage points too.
Instead of focusing on building our own policy admin system, we were focused on building the best onboarding experience for our target customer today. That type of value starts to be very apparent; you have teams that are in high leverage points because there's already solutions for other things. That's what leads to the lower costs and is part of what's different about this new wave of insurtech. Even the vertically integrated still have partnerships across the value chain. There's a refocus on more capital-efficient spending this way.
That's my advice for early stage startups; provide the proof of concept, build at the highest leverage points and buy what you can buy. At some point, you'll make a comparison of the value of what you're buying versus what it costs you. Maybe you decide to build that piece. Not to say that we haven't built pieces of our system that we could have bought at some point, but we've always been comprehensive about our review of all the solutions out there before dedicating technical resources to it.”
What do you think about talent, especially when you need to both build tech and insurance products?
“Neither my co-founder or I come from insurance, and neither of us are engineers. From early on, we were conscious that the way for us to win here was to build a team around us that could provide the expertise needed and supplement our strengths and weaknesses. That really came down to building both the insurance and the tech side. From early on, we were conscious of building that way.
We've hired both sides. Our vice president of insurance previously worked at another carrier, and on our tech side, our other co-founder, Ivan, has really led the development of our technology from day one. On top of that, we also have nearshore engineers. We have a partner who's also an investor that we develop with. It took a short time for us to build best-in-class technology because our corner of the market is just not investing in it.”