--:-- Host: Welcome back to the show. We have an incredible episode for you today. I'm joined by Steve Lakis, the co-founder and CEO of Branch Insurance, a startup insurance carrier that is doing some pretty wild stuff on the personal line side. And they're working through independent agents.
--:-- Host: Now they also, like many of the insurtechs have come up, Hippo and some of the others, there is a direct arm to what they do, but primarily they are working into the IA space. They're in six states now with hoping, and I think Steve kind of mentions this, they're hoping to be in 30 plus states by the end of 2021. They have a very aggressive schedule for the rollout of their product.
--:-- Host: And as Steve outlines, and you'll see right away, Steve is an insurance wonk, a nerd. I mean, we go deep on some stuff that only people who really love this industry will enjoy. I think you're just going to love this episode. But, you know, they can bind home auto umbrella in seconds. We're not talking about minutes, we're talking about seconds. And that's from an IA perspective, pretty powerful.
--:-- Host: And we talk a little bit about my experience with something similar to that with Plymouth Rock and what they're doing on Home and, you know, Openly and Hippo and Swift, you know, there are a lot of dynamic changes coming to the way the insurance customer experience is presented and it feels like Branch has a chance to be one of those players. So it was a great honor to have Steve on the show.
--:-- Host: Before we get there, I want to give a big shout out to our friends at Tarmica. Tarmica is making small commercial insurance profitable for you, the independent agent. We've seen all these transactions, Bold Penguin getting bought by American Family. We've seen Easy Links getting bought by Applied. You know, these are great things for their founders. And while I'm sure that at face value, nothing may change, those buyouts are not a net improvement for the everyday independent agent.
--:-- Host: To see a company like Tarmica founded by an independent agent, Raghav's dad is a client of Tarmica. When you have these kinds of things in place, when your board and your advisory board is made up of individuals who are pro-IA, what you find is a product that's pro-IA. I just can't speak highly enough about Tarmica and the work that they're doing and the success that companies that use them have. So go check it out, T-A-R-M-I-K-A.com.
--:-- Host: Also, huge shout out to our friends at Better Agency. Better Agency and Tarmica are partnering. So now you have the best commercial insurance rater integrated into the best independent agent CRM out on the market. These are the kind of partnerships and integrations that I'd love to believe are matches made inside the Ryan Hanley Show as they're both sponsors. But ultimately, these are the kind of tools that are lining up to help you just be more efficient.
--:-- Host: Give that quality customer experience that you daydream about in your mind where systems talk to each other and pass data so that you're not spending double entering and your people aren't trying to rush off the phone because they know they have 20 minutes of data entry to do. When the systems that we use talk to each other, it's not just our agencies that benefit, it's our customers that benefit. And maybe even most important, it's our employees that benefit because they get more of their time back. They can work less stressed.
--:-- Host: Ultimately, all of that comes out in the quality of operation that we're able to run, the profitability of our agency, the growth of our agency. It's just tremendous. So if you haven't at least taken Better Agency for a test drive, I highly recommend that you do. Go to betteragency.io. I think for a buck you get a two-week trial or a 30-day trial, something like that. Just take the tool for a test drive.
--:-- Host: I use some of the features, other features I don't, but as a collection, the CRM is absolutely tremendous and it's getting better every two weeks. Every two weeks on the dot, they drop four, five, six, seven feature improvements. It's just expanding what the tool can do. I just think Better Agency is a great tool that you need to be aware of. So go to betteragency.io.
--:-- Host: Okay, let's get on to Steve.
--:-- Steve Lakis: Ryan. How are you?
--:-- Host: How are you? Nice to meet you.
--:-- Steve Lakis: Yeah, nice to meet you as well. I love that New York Central Mutual sign.
--:-- Host: Oh, yeah. Not a lot of folks rocking that one.
--:-- Steve Lakis: Yeah. Well, I've been saying for years, they're one of the best companies in the entire country that only New Yorkers know about. I'm sure you know this, but a lot of people who don't write in New York, a lot of agents, don't realize how mutual company and domestic and specific domestic company driven our marketplace actually is. I think we have something like 300 mutuals and 100 plus of them are domestics or something like that. Some number around there, which makes it a unique ecosystem for a lot of reasons. And then most of those won't write down in the city, and then some will only write down there.
--:-- Host: Yeah, I mean, I've been up to the Edmiston office, yeah, there in upstate New York, it's fascinating. What people don't know is that in 1960, we had over 6,000 mutual companies in the United States. And they grew up for a really specific reason, which was there wasn't regulated surplus and people were just banding together. It's actually one of the core principles on which Branch is founded.
--:-- Steve Lakis: The mutual should have been the perfect insurance model because perfect is frequently defined by our customers as efficient and mutuals don't have a profit motive. The problem has been a problem of motivation. NYCM is a great company. It's got great service, great people, but no desire to leave New York. Best kept secret, not because the rest of the U.S. wasn't interested. The New York Central never cared to try outside New York.
--:-- Host: Yeah. And actually, like State Farm, whose market share rides on the greatest innovation in personal insurance in the last hundred years, just barely. A lot of people don't know that Nationwide only exists because State Farm was blocked from entering Ohio, and the president of the Farm Bureau here paid State Farm to send employees and license the business model. The mutuals have such a strong part of our storyline in U.S. personal P&C especially, but it's always a little bit confounding to trace all the tales of it because of motivation.
--:-- Steve Lakis: Yeah. Without the profit motive, why progress? Such an interesting part of our story.
--:-- Host: Yeah. You talk about the ease of business thing. NYCM, New York Central Mutual, they have a great auto home umbrella raider. I'd put it up against any of the Travelers, Safeco. Actually, they're probably better than those two guys. But you still quote rental properties on an Excel spreadsheet that you can only get to from a Windows PC computer. It's just funny how, and they even said, based on their current rating models or their current rating system, there's not really a big drive to move from that.
--:-- Host: So you're quoting home auto umbrella. And then if they have a rental, you then go into this Excel spreadsheet and use macros to generate the quote. It's just funny how we're in a day and they can be so successful. I mean, they're incredibly successful and profitable company. And I think either number six or seven for auto insurance in all of New York state. I think that's a fairly unheard of thing that a domestic would be ranked that high in a state, especially for auto insurance.
--:-- Steve Lakis: It is interesting. It's one of the things about our industry in general that I find to be so intriguing. I don't know that any little boy grows up dreaming of being an insurance nerd, but we find ourselves in these places. One of the things that I find to be so intriguing are those stories. You just run into all these unique stories about how different companies evolved to serve certain needs and how the decisions they made over time impacted where they are today. I think it's very, very interesting.
--:-- Host: I agree with you. I would add about mutuals, which is so fascinating, is owned by their policyholders, but the policyholders have no understanding of what that means or even that fact. And because of the way capital works, which it's all our businesses, moving capital. If you're a mutual, it's really hard to raise capital if things go bad. And so the reason the mutual should have been so efficient, and remember when the mutual started, policies were all assessable. So you paid in a small premium. And then if premiums didn't cover claims, we'd all chip in the difference. So it should have been perfectly efficient.
--:-- Host: But for a million reasons, you can imagine, that's really hard on consumers to have that kind of uncertainty and then get a big bill at the end of a period. And so we moved to the statutory capital model. And then it became regulated, so regulatory capital. But in this model, when you have to stow so much money away, you don't have a way because your customers are owners, but they don't know they're owners, then how do you get more capital when you need it? And insurance is built for volatility smoothing.
--:-- Host: So you end up with this long-term problem for mutuals, which is give the money back. And how do you do that, especially when no one gets a bonus better if you give the money back? That led us to the late 80s or early 90s demutualization of Met and Prudential. Tens of billions of dollars going back to owners that didn't know they were owners. But then you hear the same subtext with some of the insurtechs, of which you'll hear it from me, which is we built it so it can be hyper-efficient and our customers are owners. But what does it mean and how would it be different? And why does it bend that long-term conflict that mutuals have had with themselves and their customers because they are built for the community only to serve that community, but give the money back? And then having to fend off your policyholders and lawsuits and things. It's the dynamics. And who else's marketplace that's $400 billion big is dominated by nonprofits? That by itself is a super interesting question.
--:-- Steve Lakis: Yeah. So, you know, doing the LinkedIn stalking of your profile, you have a pretty dynamic history in the industry. Give us the 10,000 foot view. That's going to be tough. Just looking at some of the places that you've been and some of the things you've done, but walk us through how, not necessarily right up to the formation of Branch, I have some questions about that, but I'd love to hear just a little bit about your backstory. Most of my guests don't start so authoritatively nerdy, and I mean that in an incredibly positive way, right off the rip. So how the heck did you get all that information?
--:-- Host: Starting with your last question, Ryan. I was at a big company and we hadn't grown policies in force in a long time. Trying to figure out how to help, I started asking the question of, well, how did we get this big in the first place? Big, really big. And that was a hard question to answer. The first observation as I tried to research it was no one record keeps in our marketplace. The rationalization was, well, because nobody would read it if someone actually paid to publish something. So it's really hard to cobble together the history, but I was obsessed with the question of how did big insurance companies become big. That led me to a love of insurance history, but for its prescriptiveness.
--:-- Host: It's actually kind of amazing how short our viewpoint is. Even if you're kind of old guard, you're talking about Hurricane Andrew and its impacts on the industry. And maybe if you've been around a really long time, you're talking about when we invented homeowners as a product in 1950. But it's reasonable to believe that the biggest impacts to our market cycles have been caused by regulatory changes and natural disasters. And those things are not multi-year cycles. We're talking multi-decadal or maybe multi-centennial.
--:-- Host: So how I got the information was just cobbling it all together. I stumbled across this place that anybody listening to your show should visit at some point. I think it's called the Insurance Library of Boston.
--:-- Steve Lakis: Oh, yeah. That is phenomenal. Phenomenal. If you're trying to find answers to why the things that occur today exist the way they occur, there are these gems of places. The state of Massachusetts industry funds the Boston Library, but if you walk in, the librarians all look at you a little bit funny because they just don't get a lot of foot traffic. But the answers, the information is deep. A lot of the things we talk about today aren't new. The way we talk at Branch is we're not trying to disrupt a market. We're trying to introduce some of the oldest ideas of insurance, which are that it's a communal good, that it is good. This all stems from a really long view.
--:-- Host: But your question about my background. I grew up, I was a sophomore in college when I started working nights at Allstate Insurance. I was there, started taking first notice of loss and claims, then small claims adjusting. I was going to school for tech, moved into tech, realized that they probably weren't going to compete from as far back in the back office as I was, and I had a desire to help them win. So I tried to find my way into the business, got into underwriting, then into a strategy function, and then into product development and product management.
--:-- Host: It was at a time where Allstate was kind of slowing down its own direct business and bought a company called Esurance. As they published on the web to Wall Street, the desire was that Esurance could be the Allstate of the web as the direct revolution was well underway. I had the cool opportunity to go to San Francisco and help create the first online home insurance program in the United States. It's a great business. You start from scratch. We didn't have the risk tolerance to be coastal. So in the inland market, it grew to 100 million in five years and it ran its target loss ratio the whole time.
--:-- Host: It's interesting as you think about the bones of organizations and places. Allstate's got a strong pedigree in underwriting and tends to make its targets like some other companies like Progressive and Auto. That was all built into the fabric of that business. The downside was, even being the first, it was 83 questions to purchase, far shy of a digital experience standard for most consumers. Soon after, I left and went to a company called Verisk Analytics. I'm sure you know in the industry. It grew out of the Insurance Services Office. I had a chance to run the personal insurance arm of the ISO.
--:-- Host: The moment I saw the way data worked and grew my relationships across the data aggregator world, I saw a model of underwriting that wouldn't compromise on underwriting integrity, but would allow for different and unique business models in insurance that could be really powerful in creating price value and convenience value to consumers. So my background and the Branch background are very intertwined.
--:-- Steve Lakis: Yeah. It sounds like the perfect cocktail for starting your own insurance company.
--:-- Host: It might be. No one else has used that particular cocktail. So maybe not. We'll see.
--:-- Steve Lakis: So now we're at Branch. Where does Branch come from?
--:-- Host: The name Branch was my own placeholder. It's from my favorite insurance history story. The very first underwriting ineligibility in the United States, as far as my own research goes, was the Philadelphia Contributionship for Protection of Loss to Homes by Fire, I think was the name of the company, decided that homes with trees around the structure were no longer eligible for fire insurance. This was maybe, I'm not sure, but Ben Franklin was on the board and also causing the first fire brigades to exist in Philly. Maybe some confluence of information there.
--:-- Host: A couple of the employees from the Philly quit and started a company called the Mutual Assurance Company for Protection of Homes by Fire for Protection. It's a very long name. And they bifurcated the rate. So they charged X for homes without trees and they charged X plus for homes with trees. So you've got both the first underwriting ineligibility and the first pricing segmentation in the United States insurance marketplace as a result of trees.
--:-- Host: I loved how we built on this idea of community with some real product innovations and how the community can benefit each of the members. I love the metaphor of a tree creating coverage. I love that it grows. It was a name that ended up sticking as we incorporated and went to market.
--:-- Steve Lakis: Yeah. So why start the company to begin with? What was the spark that said to you, there's something missing in the market? There's been, at least from an editorial standpoint on the front lines of the 2016 revolution or evolution, whatever you want to call it. A lot of players came and went at that time. It feels like our system has found a little bit of equilibrium in recent years in terms of the agency and carrier world working more in kind with insurtech and new insurance players versus fighting against them, which is a good thing for all of us. It's not a small thing to do what you're doing. So I'm just interested what the spark was.
--:-- Host: It was the combination of these three insights. First was insurance would have to be cheaper to be better to its customers in the commoditized market that is auto and home. Second is that technology and data could change the underwriting model in a way that it could be incredibly easy. And in the frictionless acquisition, new business models that could also make insurance less expensive appeared in my head as obvious. And then the third was that insurance could be good. Good, like orthogonal to how most of my customers and focus groups have ever gone about how people think about their insurance. But insurance provides such a wonderful thing to society. How do you pull that through in a different kind of brand?
--:-- Host: If you could make insurance less expensive, I think Geico's business model is the moat that it's had for 40 years since its near insolvency in the 70s. It's difficult to match because of how others go to market. How could you take that a step further in real economics, in appropriately pricing the product, and create real value for consumers? What I knew was the biggest and highest lifetime part of the market was people who owned homes who owned cars, who frequently needed umbrella. And these multiple needs consumers were unserved digitally.
--:-- Host: All of this was hitting me at the same time. It was this confluence of experiences and this real eye-opener in the capabilities of data as I ran a large data aggregator. At some point, I just started penning it out and I couldn't sleep. It felt like it had to be done. That led me to making a first pitch to a VC corporate kid here. I didn't know anything about fundraising and got some advice. I should think about a technical co-founder. I called up some of my friends saying, hey, do you know anybody? I had the wonderful fortune of Joe Emerson, who had founded five companies, five or six by then, the last one being BuildFax, which is a data company aggregating building permits from across the U.S. and for 10 years been building products and selling them to home insurance companies. His deep background in tech, but also an understanding of insurance. He got what I explained the moment I said it and we'd been at it together since. Definitely some good fortune.
--:-- Host: I think we come at it from a little bit different angle because of the experience of working with consumers and understanding their buying and shopping behaviors and architecting a business that was built to solve the problems I couldn't solve in some of my past lives.
--:-- Steve Lakis: I'm trying to figure out the right way to ask the question I want to ask. What I heard you say is that there's a market opportunity from the standpoint of consumers who own a home, own a car, and sometimes buy umbrellas. At face value, every agent who heard that went, really? Every carrier rep who's ever walked into my office ever has told me that they're the best at writing homeowners who also have vehicles and sometimes write umbrellas. So what is it about Branch that makes it different than any of the other companies who've been underwriting for 150 years? You don't have to drop into ones and zeros, but what is it?
--:-- Host: Well, and Ryan, maybe level setting. If I turn you back the question and ask you, why do you think GEICO and Progressive Direct have moved 20 points of market share over the last 35 years? Why do I think they have?
--:-- Steve Lakis: Yeah. I mean, I think part of it is pricing. I think a big part of it is brand. Those would be my two big ones. Pricing and brand.
--:-- Host: Yeah, I mean, I think those companies do a ton of things well. But Progressive, by the time we're in the early 90s, was already the largest auto writer in the independent agency channel and had essentially no brand unknown to consumers. But both Geico and Progressive Direct have a business model price advantage. It's an expense structure advantage that they give back to consumers because a lower expense ratio, if they paid the same in claims, you'd have a higher combined, a higher loss ratio, but lower average price for the lower expense ratio. You can think of that as why Geico can say 15%. It's the simplistic way to think about it. And no one was doing that for home and auto.
--:-- Host: We wrote the first online umbrella policy last year when we launched as well. Inside, I think our fastest customer buying both home and car insurance purchased insurance in 37 seconds. With two more clicks, they could have had umbrella as well, been fully underwritten, fully insured. We don't quote. We only give prices. It gives us an ability to do something that's hyper unique, which is we flip the model in its entirety.
--:-- Host: We love agents. We've got an agency business. We've got an rbranch.com business. And then we've got a business that's entirely new. The way we think about it is consumers will want to buy in many different scenarios and settings. In each setting for each customer, they'll think differently about how important price is. Agents have great distribution. They've got great relationships. It's why that business can be so sticky for them. In that model, we have a price that considers agency commission and reduces the amount that we would spend ourselves on acquisition. In our branch.com price, we have a price that considers our own advertising expense but doesn't have a commission expense.
--:-- Host: Then you'll see us in new places, like as you're buying a home in Rocket Mortgage. You may need insurance still. Get an instant price, check out, have us cancel your existing insurance for you on your closing date, have us transmit all the documentation digitally back to the mortgage underwriter, and have to exert no effort of your own. This becomes very unique to us because we can serve that need of a consumer to bring multiple products in a frictionless way.
--:-- Host: We had an agent we were working with who heard what we were doing and said, there's no way you can instantly purchase the bundle. And then they did. They actually purchased policies and were insured in seconds. It's high quality, good coverage. That's the big flip. We're not necessarily pushing any specific model, but we are the first to truly embed insurance. Leverage the full stack to create value across the value chain from the customer's point of view, allowing them to buy when and how they want, but at the most appropriate, unblended price point.
--:-- Host: You'll pay less with us through Rocket than you'll pay with us on ourbranch.com. You might say, doesn't that bother you? Doesn't that worry you? No, I think our mission is to make insurance less expensive. And by making it less expensive, we can help more people be insured, which we most explicitly go after through our nonprofit arm Safety Nest. That space is unfulfilled because you really can buy insurance bundled except through Branch digitally today. It's very difficult to do.
--:-- Host: The phone rings and it's that one man contractor and he needs that general liability and he needs it quick and he was referred to you. So you've got to do everything you can and you're really not going to make any money because you know it's going to take a lot of time and heck, you probably can't even get anybody in the office that's going to want to quote it. So after hearing that pain and that frustration, Tarmica, T-A-R-M-I-K-A.com. They'll solve everything I just said was terrible. Check them out. Tarmica. They're awesome.
--:-- Steve Lakis: It's interesting to me that this is a conversation that we still have to have. How is it that we still don't have multiple players who are able to do this? Why is it still so challenging? I know the answers. I guess that's more rhetorical or philosophical, or we would call it waxing, than it would be a real question.
--:-- Steve Lakis: I have a lot of emotions with something like that. The hardcore independent agent in me says you always hate that someone like Rocket Mortgage can take a lot of business from the independent agency channel and direct it away. Obviously a lot of agents do business with mortgage brokers who refer business to them. Rocket Mortgage is one of their biggest competitors. So the more business Rocket Mortgage does, the less business independent agents do. But that's not your fault.
--:-- Steve Lakis: The other side of it is I work with a company here in the northeast called Plymouth Rock. You may or may not be familiar with them, but they are a more traditional independent carrier who has put in a tremendous amount of work to become more of a leader in the digital space from the standpoint of making it easy to purchase policies. I think they've done, while not perfect, they're way, way ahead of a lot of carriers. I've seen the way even my own company, myself and I have a personal lines producer, the way we've gravitated towards, geez, if it's a hundred bucks and we know Plymouth Rock is going to take us 10 minutes, I'll gravitate towards the one that's going to take 10 minutes versus the 30 minutes it's going to take to finalize a quote from someone else.
--:-- Steve Lakis: It's really hard for me to not think what you're talking about isn't the future of how we're going to do business. To think that we're still going to be plugging all this information into systems or even still using raters like PL Rater, which is still a duplicate entry machine, regardless of what carrier you have. It's exciting to think that there's options like that. So how are you, as much as you can, how are you making it happen? How are you getting all of it? Is it proprietary systems you've been able to piece together? Did you slip the right number of ones and zeros together? How are you able to piece this together when everyone else has not been able to?
--:-- Host: Well, Ryan, on your first point too, I know the Plymouth Rock guys a bit and am familiar with the new homeowner's product, especially. I love that the industry is advancing. Ultimately, it'll be the benefit of consumers. It's funny too, as we started doing some business with independent agencies, the challenge for us was the agent's process is about throughput.
--:-- Host: And you get processes, you try to scale them, you try to be efficient so that you can be quick for your customers and also deploy your resources effectively. But so many independent agents are then relying on comparative raters. We had early chosen not to get involved because our superpower was that it was instant. You could be insured in less than a minute. You could have one of your customers have three products in less than a minute. You could focus on relationship and coverage. The decision to make is how much liability insurance you need, not tell me your escrow account number. We're wasting time in the wrong places.
--:-- Host: But putting Branch in a comparative rater just meant that we had to wait until all of the data fields were entered for other people before the process drained, and we just looked like another Travelers. So we decided not to. Instead, what's been fascinating and exciting for us is our independent agents. As we grow our footprint and our relationships in that space, they're installing us differently so that they can max value for themselves and their customers. I do think that's got to evolve.
--:-- Host: When I was a data aggregator, we were making products to make these processes faster. But you get into this place where carrier A would say, "Well, I'm not buying data earlier in the process because it's just going to advantage my competitor in the rater." And it's like, you guys know you're working against each other now, right? The independent agents are kind of wedded to your weakest link. That will evolve, but I think it takes a little longer because a lot of that is owned in the stack by the carriers. They need pressure from guys like me to care, and then they'll invest, and then it'll trickle down. The raters will evolve and the method will evolve, but I agree it's a barrier.
--:-- Host: What you don't want, worst case scenario, is that because we know that on average, GEICO has a cheaper price point than the independent agency channel in auto. That's been true for decades, certainly for 27-year-olds and below. Well, it's not the only value that an agent provides. What we don't want is that the agent would be further handicapped in ease. As a consumer, and I'm a very old millennial—the most ancient—I think I'm thinking right on the front end of it.
--:-- Steve Lakis: I think we're the same age. Graduated college in 2003?
--:-- Host: Yeah, yeah, yeah, we're the same age. So as ancient millennials, I love relationships and I love low friction. Agents can be great with those two concepts in mind, but the tech's got to be there. There are a bunch of companies in the startup classes that are really focused on the agency space. I think we're kind of evolving from direct to agency, which in some ways is neat because the agent can solve so much friction.
--:-- Host: When I was an agency writer, we relied on the agents to solve how bad the systems were. Engage the customer during all the waiting periods, clean it all up after the fact, just get through the sale. But when you have to build all of the UX, every corner case, every unhappy path for a consumer, you build things that can work exceptionally well in an agent's office. I think that's a really bright spot for our future. We're excited about that.
--:-- Host: And your question to you, Ryan, then about—I'm sorry, I talked myself out of your question about it.
--:-- Steve Lakis: That's okay, because I forgot whatever I asked you. So it's fine. I have another question anyways.
--:-- Steve Lakis: So I think about Branch, and I look at some of the things that you've said, and it reinforces an idea or a concept. I don't know how much you know about my history, probably not that much, but I have been preaching for more than a decade now that marketing has to move out front of an agency and be as much a pillar of an agency's operations as any of the classic operational segments. While today that feels much more like an acceptable idea, back in 2010 when I did my first keynote on content marketing, I had cut my teeth using early YouTube videos to grow an agency. I was sharing that case study and people would look at me like I was crazy.
--:-- Steve Lakis: I think about how much of running an agency is the operation side. Now owning my own agency, looking at where you spend time and resources, I think about a company like Branch and I imagine how much of your day as an agency owner is freed up to be a marketer, a salesperson, a relationship builder if you aren't spending so much time dealing with the nonsense of the systems.
--:-- Steve Lakis: I just processed an auto renter's policy. This is $1,100 in premium. No one's getting rich off $1,100 in premium, but this individual needed an auto and a renter's policy. I process it. I put it in, get it all through. This is 400 fields later. Verify no errors. Click verify no errors. No, everything's good. All green checks. Everything's fine. Submit business. Whack. Underwriter referral. Motherf***er. If I was a cartoon, you would have seen all these crazy emojis coming out of my head. What is going on?
--:-- Steve Lakis: So now I'm calling people and I'm going, "Guys, all I need is to get this poor woman a freaking auto ID card and your stupid system won't give it to me because I got an underwriter referral after an hour for an $1,100 premium freaking account." I'm like, what am I even doing? What am I doing for $175 in commission? I've now spent three hours of time on this thing that should have taken 15 minutes. I literally want to put my head through a wall.
--:-- Steve Lakis: And then it's, "Well, does she have five years of prior auto policy?" And I'm like, who the heck keeps five years of prior auto policies? I have her dec page right here from last year. What are we talking about? So imagine if that was a more reasonable process. Let's just say it took a half hour to quote, bind, and issue an auto renter's policy for a single woman paying in full. That gives me two and a half hours of my life back and a reduced blood pressure. Imagine what the rest of my day would look like after that. I could maybe write another account because I had that time back.
--:-- Steve Lakis: These are the kinds of things that agency owners have put up with for so long. Unfortunately, carriers will look at you like you're crazy when you tell them that their system is terrible. My poor Travelers rep, I give her so much. It's not her fault at all. It's her boss's, most likely her boss's boss's boss's fault. But someone's fault there that their system is still terrible. She's like, "No, it's fine. I never hear any complaints from my agency force." And I'm like, that's because they're just used to it and they're nicer than me.
--:-- Steve Lakis: This is the kind of thing that gives agencies back their life to be marketers and salespeople and relationships, and it allows them to reduce the burden in operations. I'm assuming this is where you're going, and probably the type of agents that you're looking for are the ones who actually want that out of their company.
--:-- Host: Entirely. And it's funny, I was on a panel back when I was at Verisk with one of the executives from The Hartford. Really, really good guy. They were asking us each about insurtech, and they said, "Well, what do you guys think about it at The Hartford?" And he says, "We're going to wait. We're going to watch like they always do." That was his point.
--:-- Host: The thing that I think is so interesting about that point is that in representing the industry, our market moves slowly, largely because of the regulatory structure. Nothing happens overnight. I was a company and Geico and Progressive's autos weren't growing off of unbundled customers, right? There wasn't such a thing. State Farm, who made the market, launched auto in '22, then they launched Life Next and then Fire, which became homeowners. These were the core things people needed, and they did a great job of bundling them.
--:-- Host: When customers are bundled, you know this, their lifetime is much higher. They retain much better. The complexity of the need means the effort to shop goes way up, and the price benefit is all baked in. For all those reasons, natural retention is high. You've got less than 15% of the market that shops every year. So the tension is high, the urgency is low because that person's boss's boss's boss's problem. But by then it'll all be bookended differently because the starting point will be reset. If no one can see it look like this, why have urgency?
--:-- Host: The market has changed. I mentioned 6,000 mutuals in 1960. Over a 50-60 year period, the world is so different, but it took 60 years. By the way, I know what the comp structures are. Everybody's making comfortable livings. Wealth creation is occurring. Half the industry or more than half gets to make its own paychecks because it isn't publicly traded and isn't privately held. It's non-profit with no governors. The question to ask is if they tell you that the system is going to get better, the big question would be why in any reasonable time frame?
--:-- Host: I think the best thing that'll happen is those of us that stand to gain something from turning it all upside down will make progress because everyone needs that impetus for innovation. Otherwise, things move crazy, crazy slowly.
--:-- Steve Lakis: Yeah. I remember I was at Agency Nation back in 2016 and we were doing a tremendous amount of reporting on insurtech and everything that was going on. We had a ton of the hot new startup CEOs on our podcasts. Being associated with Trusted Choice and being familiar with the Big I national, we also had access to a lot of super regional, regional, and even some national carrier CEOs and top executives and got their opinions.
--:-- Steve Lakis: It was very interesting how the major movers and still even today investors are the super regionals, not the nationals. The nationals tend to play an even longer game. Like a Hartford, when they say they're playing a long game, it's like, yeah, we might adopt that technology in a decade. There's a reason for that. When you have as much to lose by making a bad decision, regulatory or otherwise, as they do, you don't just turn on a dime. It wouldn't be prudent, nor would you expect an executive in any capacity to make that kind of decision.
--:-- Steve Lakis: But these super regionals and some of the mutual super regionals—I think about some of the things that Westfield, Central, Acuity, Grange, Ohio Mutual—some of these companies have made really substantial investments into insurtech companies and been leaders in partnerships in different technologies. I think that has been a huge driver of both insurtech companies coming to the industry and agents' greater willingness to adopt both new startup insurance carriers and insurtech companies that before they were completely turned off by.
--:-- Steve Lakis: It was, "Well, if The Hartford isn't buying into them, I'm not buying into them." I liked The Hartford, but it was this mentality. I feel like now people are much more open. If you had come into the—ask someone from Hippo. When he first came into the space four or five years ago, they were getting slaughtered by agents. They were getting trashed all over the place. Now I feel like the agency plant is much more open. I'm sure a lot of people listening are probably on your site right now figuring out how to get appointed.
--:-- Steve Lakis: I feel like today the independent agency plant is much more open to what you're saying, to a carrier like yours and what you're trying to do. For as much M&A activity as you read about in the agency space, there are a lot of startup agencies, a lot of driven, sales-focused startup agencies that have come into the marketplace that would die to be able to operate with a company like yours.
--:-- Steve Lakis: So I guess that leads me into my next question: Where are you guys today? What does the future of working with independents look like for you? The independent space is most of what listens to the show, so that's why I'm asking in that direction.
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--:-- Host: It's a great question. Thanks, Ryan. We are live today in six states: Arizona, Indiana, Illinois, Missouri, Ohio, and Texas. Because of our unique model, where sometimes I am working with major U.S. corporations, you'll see us in the press in a really neat way in a couple of weeks. On that point, I need to be nationally available much quicker.
--:-- Host: It's hard to be an insurance company. There's a great VJ Dowling quote from a long time ago. I think it's Dowling's that says there's nothing that looks worse on paper than a growing insurance company. In some ways it's not totally unlike the pain of growing an agency because you are extending acquisition in anticipation of residuals. You're always a little bit ahead of your skis. That same model, but amplified. Then you have to put just for the scale of the cost, and you have the regulatory capital to solve at the same time because the whole game is paying claims. That's your privilege here.
--:-- Host: For the race to scale, it becomes critical. If you choose to be full stack, which I don't recommend for most because it only makes sense to be full stack if you're more than a marketing organization—you should be innovating on the whole stack. Branch is a reciprocal. It's an esoteric model, but even a unique model in reciprocals because our customers who are owners vest in the dividends. It's a really neat model. You'll see more of it as we do some experiments and press.
--:-- Host: We've got to get everywhere quickly to get to scale and to be able to appropriately serve all of our customers. You'll see us launching states fast and furious all year long. Probably most of the folks that would be listening will be there soon if we're not there now.
--:-- Steve Lakis: When's New York? When's New York going to happen? Is it going to be 50 out of 50?
--:-- Host: It's not. We budgeted 12 months for New York. We know New York. We've been doing this a long time, so you can kind of predict how long each state takes. You should expect 12 months from New York, which means that we were working on it in 2020.
--:-- Steve Lakis: Well, I look forward to the day that you guys launch here. I'd love to be part of the journey. I think what you're doing is really interesting. I think these new carrier opportunities and new models deserve our attention. I know a lot of independent agents say stick to the old guard. There's a reason they're the old guard, and I have a tremendous amount of respect for that opinion. At the same time, while the players who have been around for a hundred years deserve our respect because they've proven they're able to continue to pay claims for that long, I think the new models need our attention as well.
--:-- Steve Lakis: I'm honored that you came on and shared what you have going on. I think it's super interesting. Being able to put an auto, home, and umbrella in someone's hands in seconds, not even minutes, that is an impressive feat. You have a lot to prove obviously over the long term, but my hope is that you guys are open to younger startup agencies as well because those are the ones that often get pushed to the side by some of the older, more established carriers. Those are some of the most hungry agents that are going to be the ones that are loyal long-term. I got to give you my push there, but I think you're on the right path and I'm glad you came on and shared with us.
--:-- Host: Well, Ryan, if I could too. We were starting out with agents, we were trying to understand each other. I'll give a shout out to Chris Becerra at Cleveland Insurance Brokers. Scratch agent, just as you described, looking for new and better ways to do things. We've got a number of those relationships and we're excited by them because they're excited and they're thinking about things differently.
--:-- Host: The old guard has tended to spawn old guard. Mutual Assurance Company I mentioned came from the Philly. Geico was ex-USAA employees. Nationwide exists only because of State Farm. I had one of the big insurance companies refer to us as the Allstate group. We have no affiliation with Allstate, but a number of us were employees there. If you know the problems well, just as you articulated, then you can engineer solutions that are unique and solve them.
--:-- Host: I would ask folks to think of us as folks that come from the old guard because we've got that level of depth. If anybody wants to talk about it, Steve at rbranch.com. I'm happy to engage. Wish you the best of the show. I will definitely be in touch as we approach New York.
--:-- Steve Lakis: Awesome. And guys, it's ourbranch.com. I'll enunciate: ourbranch.com. Give it a check. I know a couple of people in your organization and obviously this is the first time we've met, but very impressed with you and your background. Anyone who can nerd out as far beyond me as you can is someone we thoroughly enjoy and has an open invitation back to the show. Thanks, man. I wish you nothing but the best and I look forward to watching your success in a crude laboratory in a basement.
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