How This International Insurtech Broke into the Agency Space to Skyrocket Their Growth


Darcy Shapiro – Director of Insurance (Americas) at Cover Genius on the Connected Insurance Podcast presented by Agency Revolution

Darcy Shapiro – Director of Insurance, Americas at Cover Genius

What exactly is the shape of insurance in the modern age? The best answer may be this: different.

As entrepreneurs solve insurance problems in new ways, that ‘shape of insurance’ will continue to change. In this discussion, Michael interviews Darcy Shapiro, Director of Insurance at Cover Genius. Together, they explore:

  • How the modern insurance consumer has changed—and how savvy insurance innovators can respond to that change and delight the customer and marketplace. 
  • The tricky and challenging issue of finding a strategy for success in the modern market—and why Cover Genius is the perfect object lesson. 
  • Darcy’s simple but clear-eyed perspective on how to create a successful launch—and how Cover Genius achieved what few insurtechs do: exponential growth with positive cash flow. 

Darcy is a longtime insurance pro—The Hartford, AIG, Liberty—so she speaks the language of modern insurance. If you have time for ONE conversation this week that shows you where our industry is going, do not miss this podcast. It’s that important. 

What are other agents & brokers doing to thrive? What are the biggest trends affecting the retail insurance agent & broker? What are the most important strategies and tactics you need to grow faster? Find out here in the Connected Insurance Podcast, where our hosts discuss the biggest issues affecting the independent insurance agent & broker with the industry’s leading figures.

Transcript

Michael: Darcy Shapiro, thanks so much for joining us again. How are you?

Darcy Shapiro: I’m doing well. Thanks for having me, Michael.

Michael: Well, I’m excited about this in part because I do know a thing or two about the company that you’re associated with. You and I have spent a little bit of time talking before and I’m fascinated about what you’re doing. Boom. If we could, first, maybe share a little bit about you. I think it’s really interesting because you have a real solid insurance career not to mention a pretty solid legal career. [laughs] Now you are providing some leadership in InsurTech. First, let’s talk a little bit about how you got to be where you are now.

Darcy: Sure. As you mentioned, I am training as a lawyer. I started my career off in private practice, working on some insurance defense work, really, which was my first taste of the insurance industry. Did after a couple of years, I’m also working on some HIPAA privacy stuff and had an opportunity to go over to AIG a couple of years in and work on claims and litigation management over there. That was really the transition I need in-house, if you will.

Really, when my insurance big carrier experience starts. I’ve actually worked for a number of large carriers, doing a number of things there. I was at AIG for about five years and also spent some time at a subsidiary of Liberty Mutual. My most recent was at The Hartford where I was doing product development and portfolio management over there. As you mentioned, my insurance career has really spanned multiple facets of the industry from product development, portfolio management, underwriting, claims, and even legal defense work. It’s been quite a ride.

Michael: You do know this industry and presumably, that probably was an important criteria for you to be director of insurance for Cover Genius.

Darcy: I have to assume so.

Michael: Let’s now talk about what the company is doing. As I recall, Cover Genius, I think was started by people who are not insurance career professionals, but there is an interesting story about their experience. How did it get started?

Darcy: Cover Genius which is the company that I now have been with for a bit over a year now was started in Australia, in Sydney, about five years ago by our two founders, had actually started an online travel agency. What they were looking to do was to be able to offer travel insurance products connected to the underlying travel products that they were selling.

Michael: While they had the travel agency, they wanted to add insurance products too.

Darcy: Exactly.

Michael: In other words, if somebody, they’re online, they’re booking a trip and then they have an offer, “Do you want travel insurance?” Am I getting that sequence right?

Darcy: Exactly. As they were trying to source travel insurance products to match their market which end customers in different global locations, they found the challenge was that every different region that they were selling in had different regulations and different products and it was becoming a full-time job for them to try to figure out how they could do this.

Michael: They discovered that the insurance industry wasn’t quite as easy to work with as they thought.

Darcy: Exactly, especially on a global scale. I’m sure even with the large global insurers, a lot of times, they’re, within countries specific, not even talking to each other. It was a challenge for them. They figured that, if they were running into this challenge, there are probably a lot of global players out there that are also running into this challenge that could have insurance products as part of their offering, but would have to go out and source everything, country by country and make sure they were operating to legally compliant with local regulations operations.

Their focus shifted and Cover Genius was born. On the back of their experience within the travel industry, they started out with travel as the primary use case for their propositions. They had a partnership through industry contacts, developed a partnership with booking.com brand, their rental cars platform, and basically went and developed a rental car insurance product to be sold at the point of sale through this online platform and quickly had to basically run around the world getting operations and products up in place to match their partners global footprint.

It was successful, the company became profit positive within two to three years of the rollout, operating on its own revenue which is really cool, and proved out the use case for a company like ours that can offer these global solutions to large global partners.

Michael: As I understand, they dropped the travel agency, right.

Darcy: Yes, correct.

Michael: They realized that there was a big opportunity in providing the insurance solution. Really, everything became the insurance part of the business.

Darcy: Exactly. I think they quickly realized that the world does not need another travel agency, but they had identified a problem and were able to solve it.

Michael: They solved that problem before their big partners were solving it, because one would assume that let’s say, the partners that you have now, let’s say the travel agencies, or what have you, were they actively attempting to solve that problem?

Darcy: I think in some cases they were. In other cases, the insurance industry is a really complex piece even within just one market. I don’t need to explain to your audience how complicated insurance is in the US, with 50 plus different regulators. I think that a lot of our partners, it’s something that they didn’t even want to touch because it’s just too complex of a problem to solve.

Michael: The experts are now solving the problem for the partners.

Darcy: Right.

Michael: Now, I have one other related question. The business model for Cover Genius is sales through partnerships not direct to consumer.

Darcy: Correct. We do have our brand rental cover, is basically the platform that was created for this rental car insurances. We do have a customer-facing brand, but most of our sales and out value proposition is finding the right partners that we can distribute insurance through as a point of sale.

In terms of how people shop for insurance, it’s not something that when I’m just sitting at home watching Netflix and eating popcorn I’m like, “Can I go online and buy some insurance.” We find that when you offer it in conjunction with a product that people actually do sit on their couch and shop for, that leads to much better conversion rates. It’s really that engaged customer that’s already online doing some transaction that this provides extra value for, that is the customer we like to target.

Michael: Well, you are getting the customer. In some instances, let’s say during the course of a 365 day a year, you are getting them in the rare moment where they are open and susceptible to an appropriate insurance purchase.

Darcy: Exactly.

Michael: As an example, they just booked a trip to Norway and then you guys pop into the sequence and say, “Do you want to ensure that trip, something along those lines. Right?”

Darcy: Exactly. In terms of value proposition that we’re offering to our partners, still, we find that when you offer a product like that, at the point of sale, it actually leads to even better conversion rates on the underlying product. If somebody is wanting to book that trip to Norway, but they’re thinking, “I mean, my mom’s been sick, or should we actually go ahead and do it?” “Ah, well, well I can insure this.” It actually leads to better conversion of the underlying product-

Michael: Everybody wins in that case, right?

Darcy:  That’s the idea.

Michael: Okay. The story in itself is fascinating. In as much as I work with a lot of insure techs and ran one myself, to know that this is a company that got profitable within two or three years. It has been bootstrapped, so there presumably was some founder money, but no external money, as I understand it.

Darcy: We did have an initial fee funding them, and fairly modest amount. When I say we became profit positive, our headcount now is over 100 people globally. It’s pretty impressive growth. Everything’s moving very fast here, that’s what I was would say, which is definitely different from my old life of the insurance career.

Michael: Okay. Yes, things do tend to move fast. I mean, I think the last time you and I spoke was maybe four or five weeks ago, and I suspect that a lot happened since then.

Darcy: Absolutely.

Michael: I’ve got a question for you and it’s maybe just a little bit off-topic, but to me, it’s one of the most important question. We’ve got a company here that is beating the odds. I mean, most tech companies fail and it appears that this one is clearly succeeding, and is profit positive in a really relatively short period of time, with a now growing global footprint. I suppose, what I’m looking for is beyond the clichés and the platitudinous answers we could give like, “We got great people.” What do you think are the factors that have led to its success?

Darcy: That’s a great question and I will avoid saying we have great people.

Michael: I have a guess but I’m curious. I could be a mile off, but what do you think it is?

Darcy: I think the point of the founders’ story. A problem was actually identified, and a way to solve that problem was posited here. I think a lot of tech companies fall into the trap of, “We have a great idea,” but they’re not exactly sure what problem they’re solving. I think other InsurTech companies that have put the cart before the horse, if you will, where they’ve invested a lot of money putting out a product that we’re not… you know… Whether there was really a need for the product is questionable, then once they’ve invested all this money, time and human capital and actual capitals towards putting out that product and nobody wants it, we run into problems.

Michael: Yes, so your company identified a real problem and delivered a real solution?

Darcy: Exactly.

Michael: Okay.

Darcy: I think it’s as simple as that, honestly.

Michael: Yes. Well, I mean, it’s really related to the solution, or the answer that I had, which I think is the strategy. I think you’ve got a terrific strategy. One of the questions strategies he has to answer is, where do you want to play? Well, you’re playing right in front of people who are most susceptible to inappropriate buying decision for insurance. I mean, you are right there, which is the ideal place to be, and from a marketing perspective, getting customers is always the most expensive part of the proposition. To some extent, I think you guys have really cracked the code on that, so it’s a terrific strategy.

Darcy: Yes, and you’re right about that. I will add our timing of our company was fortuitous too.

Michael: Timing is everything.

Darcy: Yes, we’re operating in a world that’s increasingly digital. 10 years ago, could this have been a successful proposition? I don’t know, but certainly, this type of digital environment, and not to be cliché, but millennials conduct their lives online, which includes all their shopping. Being able to plug into that environment at that right opportune time has also enabled us to- [crosstalk]

Michael: Yes. Timing arguably, I think in the tech world, maybe all businesses is perhaps the single most important factor for success or failure. I have one other related question. When you went to market, presumably, you were able– I know that this precedes you, but the story probably still lives. I presume you were able to get to market with a minimal viable product that allowed you to test its traction.

Darcy: Exactly. Absolutely.

Michael: Within a lot of expense. Right?

Darcy: Absolutely.

Michael:  How did you do that? Are you aware of that part of the story? How it got first into the marketplace?

Darcy: Well, just by way of example, I’ll use the US as an example. As jurisdictions go, it’s extremely complicated, because there are 50 regulators that you see it get through.

Michael: Yes, there’s a lot of innovation in Europe and Asia right now in insurance tech maybe that’s why.

Darcy: Absolutely. Innovation is really difficult in the US for those obvious reasons. It’s also, by the way, a very challenging, legal environment were, Americans we tend to sue, but I’m happy we sue which you don’t have that level of litigiousness in other regions.

Michael: That is interesting because I think to some extent, the country has a reputation for being innovative and supportive of entrepreneurs and certainly, we’ve seen a lot come out of places like Silicon Valley, but you’re right, there are some serious barriers to maybe especially InsurTech technology.

Darcy: Some states are getting on board with sandboxes and are trying to be more accommodating to what’s- [crosstalk]

Michael: Oh, that’s interesting. Okay. You’re seeing commissioners respond to the changing environment?

Darcy: Exactly, I mean, even through my background from the insurance carrier roles within CyberTech Media. In terms of within the insurance carrier, it’s the innovative portion of the kinds of coverages because it’s so new. Insurance love data, there’s not a lot of data in terms of cyber because it’s such a new threat. You don’t get your 50 years of auto data that they want to rely on.

Michael: Yes, right.

Darcy: I had been accustomed to that innovation in-house, innovation, if you will, but it was like moving a boulder up a hill. I have noticed, even in the last say three years, a recognition within the carriers that if they don’t catch up and this extends to the regulators as well, some of them I should, say some of the commissioners, that if they don’t catch up with the way technologies are moving, they’re going to get left behind.

Michael: Yes, more and more are investing in their own InsurTechs or InsurTech start ups or supporting the incubators around the country.

Darcy: A lot of these insurances have strategic innovation groups now that are coming and seeking us out to figure out how they can partner with us.

Michael: Oh, interesting. Okay. Got a number of the guests that I’ve had on the podcast series are from the research and the big advisories, they’re all pretty much singing out of the same choir book for their carrier clients, that they have to innovate, that they have to go digital.

Darcy: Absolutely.

Michael: Okay.

Darcy: There’s a push towards that, but it’s still not dissimilar to my experience within the carrier. There’s still a bit of pushing the boulder up the hill, but it’s more of a recognition that we’re going to get flattened by the boulder if we don’t get it over the hump and it’s really interesting time within the- [crosstalk]

Michael: Well, and on the other hand, Darcy, I think we’re seeing more of the tech side of InsurTech partner with existing organizations in the industry as opposed to try to come in with a cap and disrupt the whole thing.

Darcy: Well, look, given the regulatory environment that we have, we have to. We need to find the right partners that are willing to innovate with us and are willing to come on that journey towards digitization. I worked for three really large carriers. I can tell you that when it comes to technology, they’re understaffed, they’re short on resources. It’s not always the priority internally. They need to find the right partners to be able to deliver those technology solutions that will enable them to compete in this new market.

Interviewer: All right. I have a couple of questions for you. Well, first one is about where do you see Cover Genius going? What does the future look like?

Darcy: As I said, we started out this test use case proposition within travel and rental cars specifically, but in the last couple of years, we invested a lot of money in creating a platform called X Cover. What’s really cool about it is that it’s product agnostic. Pretty much through a single integration point with one of our partners, we can deliver any type of insurance policy through that single integration point anywhere in the world, that will be compliant and can crossover different product lines.

What I think is cool about that is that it will enable us to think of different ways to insure what people are doing. I’m trying to think of a good example, maybe like a large retailer. Traditionally, there are offerings, and I know this is not insurance, but there could be insurance components of that, might be around warranty products or extended service contracts.

Michael: We see that.

Darcy: Yes, absolutely, but if we can then also deliver some more traditional insurance products to their customers when it makes sense, like, let’s say travel insurance, they’re buying luggage or pet insurance if they’re buying pet products. It really enables us to, again, be that one point where we can connect them to all of these products that will benefit their customers, benefit our insurance partners by creating this distribution channel that they don’t have access to right now. To your point before, meeting people where they’re shopping already, for things, they do need it for things they want and offering valuable products that they may not have thought about before, but we’ll provide value to them.

Michael: So the business model and the strategy remain the same?

Darcy: Yes.

Michael: Got it. You look for partners who are, one, online, and they have a customer stream because of whatever purchasing process they’re engaged in, that they may be susceptible to an insurance purchase, whatever it is.

Darcy: Exactly.

Michael: Yes, you could go from pets, did you say?

Darcy: Yes.

Michael: Pets to a trip to Maui.

Darcy: Exactly. When I say it remains the same, it remains the same, but understanding that insurance can really provide value to our partners’ customers. You used the word susceptible, which sounds a little nefarious to me. We’re not trying to trick people into buying from us.

Michael: I was mentally hunting for a different word. There’s some truth to it.

Darcy: Absolutely.

Michael: The other word that came to mind was vulnerable, and I just maybe didn’t want to say that.

Darcy: I don’t know if that’s any better. That’s the point, is that we want to provide something of value to our partners’ customers. We’re stewards of our partners’ brand as well. We are the insurance intermediary, they’re giving us access to their customers, their most prized possessions. Really.

Michael: It has to be a lot of trusts.

Darcy: Exactly. We don’t want to fix people into buying something. We want to offer value and we think we can do it across– There’s just an innumerable amount of ways that in this digitally connected world that we can provide insurance solutions that are valuable to people without them having to go and hunt it down themselves.

Michael: Right, which they often won’t do and then proceed unprotected. Here’s my other question. You come from the independent agency system, right?

Darcy: Yes.

Michael: AIG, one of the Liberty companies, Hartford. Am I hitting the right?

Darcy: Yes.

Michael: Checking off the right boxes there.

Darcy: I know where you’re going with this question.

Michael: Well, so there you go. Well, I’m not questioning your loyalty to my listeners, but your perspective is what I’m looking for. Given the breadth of your perspective on the industry, and that you’re with an InsurTech now who’s really direct to consumer through partnerships. What do you think the future looks like for the independent insurance agency system?

Darcy: I don’t need to tell you or your listeners probably that this is one that gets debated a lot, what the role of insurance events are going to be moving forward. I’m not sure that my perspective will be a welcome answer to some of your listeners that have agencies. I think that as things move online, you see a lot of big players, let’s say, in personal lines insurance, which are really where insurance agents probably, not just personalized, commercial too.

There’s so many solutions that are coming to market that are direct to consumers that agencies are probably going to suffer that. I think there’s going to be a thinning of the herd, and I think it’s going to be the agents that basically can find a place within this digital world for their expertise that are going to survive. I don’t think they’ll go away completely. I think that there’s absolutely a need for agents.

Insurance can be really complicated, especially around certain risks. People still need someone to kind of guide them and hold their hands through some of these processes. I don’t think they’ll go away completely, but certainly, on simpler products there will be a need in my perspective.

Even as you know, you see some of these other InsurTech startups that are offering commercial insurance online. I was at a conference a couple of months ago listening to the founders of another InsurTech company that’s doing mock commercial insurance online. I tested it out just out of curiosity because I wanted to see how it works, and they have agents working for them. Two actually called me. That was impressive.

Again, the point of within an InsurTech there’s got to be a recognition that we still have to operate within the bounds of the industry. We can push it forward, but there’s a need for expertise. One of the things that I love about my company is that they’ve actually brought insurance people on board. People that really know the industry. You had mentioned before, that’s not the case with a lot of InsurTechs, that a lot of InsurTechs it’s entirely technology-focused and-

[crosstalk]

Michael: I think a lot of them, they ran into their wall and they suffered because of that.

Darcy: Exactly.

Michael: I’ve seen a lot more partnerships and a lot more– We’re seeing more technology firms bring insurance people in or insurance people, often, with some technology expertise bring more technologists or programmers in. That’s what I’m seeing more of.

I want to see if I can summarize your perspective on the independence side. On one hand, a thinning of the herd, and I think you’re probably right, we’ve seen it before. A lot of people don’t know this, but historians of the industry will, there were probably around 80,000 independent insurance agencies in the ’70s and in the ’80s, we saw considerable thinning of the herd. There were some historical reasons why, which have some similarities to some of the trends and forces that we’re experiencing right now.

In the travel industry, we saw obviously significant digital disruption, and it happened at the dotcom boom. I did a little bit of research on that because I was very curious how that was going to affect my client base. What I discovered was that indeed, the collapse was fairly significant as I recall, it’s been a while since I did this research, there were, let’s say around 40,000 independent travel agencies and it collapsed down to about 14,000. However, in the thinning of the herd, what they discovered was that the survivors were selling three times as many air miles as the average independent travel agency prior to the dotcom boom.

At least I’m optimistic that if there is some thinning of the herd, those who understand strategy, those who understand marketing, and those who are willing to appropriately embrace technology and find their way in the digital world will not only survive, they’ll thrive.

Darcy: Yes, I agree.

Michael: Okay, good. [laughs] Right.

Darcy: We had some conversations with agents out there, and I hear the same thing and they are actually interested in how our technology can help them.

Michael: Oh, interesting.

Darcy: I totally agree, and I think that’s a fair summation.

Michael: Well, I think it’s a turbulent time and turbulent times tend not to be easy. They do require more strategy and more navigation. Hopefully, this podcast series helps them. That is my dream and that is my goal as my listeners, hopefully they know that. Darcy, if somebody was listening to this and wanted to learn more about Cover Genius, or make a contact, what’s the appropriate way to do that?

Darcy: Yes, sure. I’m going to direct them to our website, which is covergenius.com. There’s a lot of information on there, including some contact information for some of us in the company that might be worth reaching out to.

Michael: Okay, very good. Well, Darcy, this has been a pleasure and I appreciate your honesty. I always am fascinated by the precision of the strategy that Cover genius uses, you and I’ve talked about that before. Hopefully, there is a valuable lesson that our listeners got from that as well. So, Darcy, thank you so much for joining us today.

Darcy: Thank you, Michael. It’s been a pleasure.


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