Matching Up Business Insurance With The 21st Century

Most business operations have long gone digital.

There are a myriad of online self-service platforms for businesses to consider – and then deploy – that help them streamline and make more efficient, everything from HR to payroll, to tax and accounting to employee benefits.

A notable absence from that list – insurance.

With nearly 30 million small businesses across the U.S. today, which all need insurance in one form or the other, there is a tremendous opportunity to digitize the commercial insurance space and help businesses address the pain points that can come with having only brick-and-mortar agencies to deliver this vital business service.

Rashmi Melgiri, COO and cofounder of CoverWallet, set out to enable that business opportunity – and take this massive analog industry digital.

“We thought it would be so much easier if there was an online way to not only buy what you needed, but to understand it first and also to be able to manage it on the back end. We set out to bring this industry into the 21st century in terms of having a seamless, intuitive online way to do things,” she explained.

In this week’s episode of The Matchmaker Is In series, hosts Karen Webster and David Evans, economist and author of “Matchmakers: The New Economics of Multisided Platforms,” were joined by Melgiri to discuss why she and her team believe that now is the time to bring a digital evolution to the industry.

It starts with offering convenience. Melgiri explained that small businesses today are really beholden to their insurance agent’s schedule and mode of operations, even if that’s using that office relic, a fax machine.

“To us, insurance is actually a really valuable thing to have. It’s not just something you buy because you have to, it’s really important to protect the business – yet the way businesses have to acquire it and be serviced is the frustrating part,” she added.

Here is an excerpt of the conversation.

KW: CoverWallet is described as a concierge service for small businesses looking for help with managing their business insurance needs. What makes you a matchmaker and what problem did you set out to solve with CoverWallet?

RM: We essentially sit in the middle between insurance carriers and small businesses, so we’re very much about distribution. We are the equivalent in every way of one of those brick-and-mortar agencies, but we just do it online. By virtue of doing it online and using technology, we’re able to more efficiently match businesses to insurance carriers in a couple of ways.

The first is that SMBs can come into the site and get advice based on some parameters about their business – we actually show the types of products similar businesses buy. Not only will it show what those businesses buy, it will show the price, the average price that they paid and how popular it is. We’re able to use the data and technology platform to get SMBs that information a lot quicker than a traditional agent would.

DE: I’ve heard that one of the obstacles for online insurance platforms in the U.S. is the state-by-state regulation, is that true?

RM: There’s a lot of truth to that! Europe, Australia and a lot of other parts of the world moved to online platforms for commercial insurance a lot faster than the U.S. has. There’s a couple of reasons behind that, but I think the technology has spurred along much quicker in those areas. But for sure the regulatory environment in the U.S. is a lot more cumbersome.

This is a highly regulated industry, but by some measures people see it as more regulated than the banking industry. For a company like ours, any officer of the company has to be a licensed insurance agent. That’s one of the first things I did when we started the company, I went to “insurance school” in order to become an agent to sell property and casualty insurance in the state of New York. I got my licenses in all 50 states and then I got the company licensed in every state. And, anyone who is on the phone speaking to a customer and giving advice about coverage or who is placing coverage for the customer, must be licensed in the state that the customer is doing business in. That’s a lot of regulation and a lot of licensing!

DE: Is it true that in order to work for CoverWallet you need to be a masochist? 

RM: Just to start CoverWallet!

KW: You made the decision to have all of your agents licensed in all states versus taking a state like New York, which has ton of small businesses, and focusing on that state and the businesses within that state. Why did you decide to go broad versus narrow and deep in-state?

RM: It’s a fair question and one that we debated quite a bit about.

In terms of our customer acquisition strategy, which is largely digital, we built up quite a presence because our team has a lot of experience in search engine optimization. A lot of the work that we are doing is about being found organically through different search terms – and that’s scalable across geographies. While it totally would have made sense to only do paid advertisements and start small in only certain geographies, we really felt like part of our skillset and advantage here was to do something that was scalable across geographies, and so we wanted to have a national presence.

KW: When you work with the insurance carriers, do they view you as just another broker that they are dealing with?

RM: In some ways they do and in some ways they don’t. Our economics are the same as any mom and pop brokerage, yet on the other hand I think they are starting to realize that the world is going to go online and that they need to have an omnichannel approach. I wouldn’t be surprised if five years from now a lot of these guys actually went direct, whereas most of them don’t today.

They know that anywhere from 60 to 80 percent of businesses are starting the insurance process online, but they’re just ending up in the physical world because there aren’t a lot of online options. They see the opportunity not only for new distribution partners like ourselves to get more business for them, but probably for themselves to eventually get online and do it directly.

DE: When it comes to the ignition strategy for your business, do you have the traditional chicken and egg problem that a lot of matchmakers have?

RM: Generally, in this industry the answer would be yes. If you were a new agent and you started a new office, it would be impossible for you to get a relationship with the insurance carrier because you have to prove that you have business before they’re willing to actually work with you.

In our case, I think there was a lot of excitement around the user experience that we built and how intuitive we made it. The carriers are also starting to realize that a huge percentage of people are going online with the expectation that insurance is something that they should be able to buy online. It’s really up to the industry, both carriers and businesses like ours, to make that fulfillment possible because the demand is there and that’s not the side of the equation that’s hurting, it’s actually the fulfillment and supply that’s hurting. For us, I would say that it was easier than a new brick-and-mortar agent in order to sign these agreements very early on before we were actually doing business.

DE: Why are you and others doing this now as opposed to 10 years ago? Is there something that has changed in the insurance marketplace in the U.S. that has made it more attractive to start something like this?

RM: For us, we saw the elements were right because in the last five years there’s been such massive adoption of other business operations tools online. There’s now a generation of business owners that have actually been trained to use do-it-yourself platforms as opposed to outsourcing to an agent, they actually have a preference for it.

Also, in the last three to five years there’s been more investment in technology from the carriers to move their quoting systems onto an online platform. Most of that has been done for the agents themselves, from the carriers to the agents – for us it’s a matter of actually leveraging that technology and then pushing it downstream a little bit so it’s being exposed to the end customer. The technology is still not where we want it to be, but it’s better, and now you can start having those conversations about having a consumer-facing website.

One of the times I feel the silliest is actually giving the pitch for CoverWallet because I feel like people are looking at me saying, “that doesn’t exist already?”

KW: Where do you take inspiration in thinking about how you design your platform and how you deliver service to the small businesses you help?

RM: We always say that what CoverWallet is doing is bringing data, design and technology to the insurance experience. One of the reasons it’s so hard to build an intuitive experience is because it’s such a complex product. I generally tend to look at companies I think have done a really phenomenal job in terms of building a very intuitive user experience for what people would think of as a very complex product.

An example of that would be TurboTax. I think taxes have got to be one of the most complex things, and they’ve really made it surprisingly simple, both for businesses and consumers. There’s obviously Intuit and QuickBooks that have also done the same thing for accounting. Again it’s one of these very complex things that — with work and starting from first principles — you can actually get it to the point where it’s so intuitive that people can do it on their own.

Those are just a couple of examples of where I look for inspiration every time we hit a wall of “it’s too complex.” I say, c’mon guys it’s not harder than taxes, right?

KW: As we wrap up, we always like to get a sense of What’s Next. So what’s next for CoverWallet?

RM: We just closed our Series A, which is really exciting, and we have a bunch of great investors that we’re working with. With that comes the pressure, so we are focused on continuing to build out the product platform and the experience. We are really trying to streamline the experience right now online for customers, so you’re just going to see all types of improvements in terms of payment options, the ability to add and take away coverages and the basic things you would expect from any industry — we are bringing to those to insurance.

The full interview can be found here.