RHS 123 - Alex Bargmann on What It Takes to Innovate the E&S Market

Host: Hello everyone and welcome back to the show. Today we have an absolutely tremendous episode for you. A conversation with Alex Bardman, the CEO and co-founder of Pathpoint. Pathpoint is changing the game on ENS insurance. When I say changing, I know I say changing the game a lot because I'm a hype man. That's what I do. I have a podcast and I hype shit up. That's what I do. But honestly, when I say these things, I believe them. They're making ENS super easy. Pathpoint is making ENS super easy. And frankly, I was almost kind of pissed halfway through this episode because I don't really want you guys to know about Pathpoint and some of these other companies because then you're going to start doing the stuff that Rogue is doing. And whether you can execute it the same way we can or not, I don't know. But you certainly will know all our little tricks and secrets, and Pathpoint is definitely one of them. They are making ENS easy, easy, easy like Tarmica. I was just so excited to talk to Alex. This was our first conversation. I'd spent time talking to his underwriters and other people on his team because we use Pathpoint all the time at Rogue. But this is the first time I talked to Alex, and when I asked if he'd be willing to come on the show and just talk a little bit about what they're doing, I was excited when he said yes. This is really good. This is tactical, nerdy. You're going to like this one. We talk about different things we're doing. We talk about why some of the innovations they're making in ENS are so important to the industry and I think you're absolutely going to love this episode.

Host: Before we get there, I want to give a big shout out to today's sponsor, Podium. Podium is what we use for our web chat feature. We also do a lot of texting through Podium, and we're starting to look at some of their other features like campaigns and the strategic review link. They have a deep link that you can use for reviews, and reviews not just to Google but to Facebook as well, because even though I hate Facebook with a passion outside of a couple groups that I'm part of in there, getting reviews on Facebook can help push your Facebook page in SEO. And again, it's all about capturing the total breadth of the first page of Google for your name at least and hopefully for a search in your area as well if you're geographically based. And that Facebook page, your Facebook page probably ranks. And if you can get some reviews there too, very good idea. I don't want to get too nerdy about it. But Podium has deep links that allow you to do that. It's super cool. Their web chat feature is like web chat to text. So right now we're getting like a 95 plus response rate on all of messages. So if someone messaged us through the Podium web chat feature, we're getting 95 plus response rate because it then becomes a text message for them. So now they're texting back and forth with us and we all know how powerful text message can be. So being able to capture more leads, improve our reviews. Like I said, we're working on some of the campaign features. So there's some follow-ups and all that kind of stuff. Podium is a tremendous tool. Love using it. Love the people over there. Super good people. They've been willing to train my people, do one-on-ones. They've been willing to work with us on a couple feature things that we were thinking about. And just in general, I've had a very good relationship with them. And very proud and happy that they've been willing to sponsor the show. Because I like sharing cool tools with you.

Host: Also want to give a big shout out. Oh, before I do that, Podium.com. P-O-D-I-U-M.com. Podium.com. Podium.com. Go check it out. Just get the demo. Get the demo. Not telling you you have to buy, but get the demo. See what it's all about. See if it fits your agency, and if it does, I recommend. Also, I want to give a big shout out to Mick Hunt and the team at Premier Strategy Box. Guys, you've heard me talk about Mick. Mick is the best. Just absolutely, we couldn't be where we are today at Rogue if it wasn't for Mick. Just working with him week in, week out, being able to set appointments or set meetings with my people, with his people, so they can talk about detailed and nuanced stuff and work through processes. I just can't recommend Mick and Premier Strategy Box enough. And if you have some strategy issues, some process issues, some questions around sales, around service, retention, this is what they do. They help you work through those things. And like I said, Mick's the goat. Mick and the team at Premier Strategy Box are the G-O-A-T Premier Strategy Box. Go to mystrategybox.com. That's mystrategybox.com. Mystrategybox.com. All right. Let's get on to Alex Bargman.

Host: Alex.

Alex Bargman: Yes.

Host: Hey, how are you?

Alex Bargman: Good. What's going on, man?

Host: Good. The old quit Zoom and reload it and it fixes itself type thing.

Alex Bargman: Well, I could be a jerk and just let you think it was your fault. But I had my microphone plugged into the wrong computer.

Host: Good. That means I can use my headphones and microphone, which will be better audio then.

Alex Bargman: Yeah. I'll try to start our relationship with honesty, to some extent. As I'm sitting here going, I wonder what's happening, because you just never know. And then I look down and I see that. So I do my editing. You can't see it. It's off screen, but there's a computer over here where I do any video or audio editing or whatever. And this morning I was dusting up some episodes that have to go out and I forgot to plug my microphone back into this. That was a hundred percent me.

Host: Well, I'm glad it's working now. Can you hear me? Okay.

Alex Bargman: Yeah. Yep. You sound right.

Host: So appreciate you coming on the show, man.

Alex Bargman: Yeah. Thanks for having me on and working with us.

Host: Well, I'm super interested in, and we can kind of get right into it. I was interested in how you got to insurance because if you look into your background on LinkedIn and some of that kind of stuff, it doesn't look like you have a ton of insurance in your background. I might just be wrong about that, but I'm interested in how you got to this space.

Alex Bargman: Completely by accident. I don't think if you asked me 10 years ago, at age 22, if I'd be a licensed surplus lines broker in 40 states, I would have been able to answer the question. But once you explain what that meant to me, I've been on board with that idea. So it was all sort of by happenstance. My background is in software development and product management, sort of technology software companies. I took a job working at an investment fund that did seed stage technology investing, but also incubated companies. It was called HVF Labs. It's now called Sci-Fi Venture Capital. They're one of our investors. They had an interesting model where they'd hire a small team to work on a problem that they thought had legs to spin out into a separate business. It was very focused on fintech or sort of adjacent businesses. Almost all of them started with an initial partner or even customer from the industry, like a legacy company, for lack of a better word. That's how we started exploring what became Pathpoint because a PNC carrier had a relationship with HPF and they said, we have a huge wholesale distribution business and we'd love to see more technology and software being deployed into the wholesale channel, just sort of at large, no real point to it yet. I think it was in part that carrier had seen what had happened in the standard lines market, both with captive and independent agents starting to place business through software, and then looking at their wholesale business and thinking, commissions are going up, but it's not getting faster for anyone. What's the deal here? So they brought that prompt to us. We did three months of research, interviewed 120 people, and got excited by it. That's how I fell into it. It had a lot of patterns that were interesting to me and the people I started working on it with. From the outside, it's a pretty opaque industry, but a huge market. When you're ignorant about how the market works, you think, why haven't they digitized? Classic Silicon Valley arrogance. Then you actually learn how the incentive structure works and you realize, wow, this is fascinating and definitely ripe with opportunity. Pragmatically, we decided to get started on building a business here. It took us a couple years to get to building a digital ENS brokerage, but here we are.

Host: What was one of the first things that you ran into? I'm always interested in people who come from outside because I find that a lot of industries think they're unique. I feel like insurance is one of the few that actually is for certain reasons. I'm interested in what were one of the first things that from the outside seemed like this should be a problem that's solved. And then once you got in, you thought, oh, I can see why this hasn't been solved yet. I can see where some of the struggles may have been and why this still isn't already a thing.

Alex Bargman: That's a good question. There's a lot. I'll give you an academic one and then a more cocktail party one. This is going to make me sound like I don't know what I'm doing, but it took me a long time to really appreciate ENS underwriting and rating and how those concepts are quite different from a process perspective in some ways. Obviously they're deeply related if you're a carrier, but coming from a fintech world where it's just reduce friction to zero, price the risk accordingly, and then have some controls in place to make sure you don't get out of bounds, understanding that that's just not the model in ENS and how it's working day to day took me quite a bit to get through my head. It was interesting to come to appreciate that we're in a segment of the market where binding authority and MGAs and programs exist, and there's just 12 different ways to talk about how insurance is distributed. You have to come to appreciate the different models and why they make sense for different strategies or different products.

Alex Bargman: The second thing, which is more frustration than an epiphany, is just there's so much jargon in ENS insurance. This is where I feel like the door has been shut to new entrants into the market, which is a mistake. You need to be bringing in new and younger people, but the incumbents use the jargon, they weaponize it. I would be in meetings trying to learn how an MGA set up its business, and again, I'm taking their time, I understand that, but they would ask me trick questions just by using esoteric insurance concepts. I don't know if they're being malicious, but they're just testing your knowledge. Obviously I failed. So you just got to keep banging your head against the wall to get the jargon out. I don't want to accuse the industry of being some cabal, but I'm sure you've seen this. There's so much terminology in insurance.

Host: Yeah. I was trial by fire that you will most likely be put through. I tell this story a lot on the show, but I think it's very important, especially when we're having discussions like this. Do you know Sheffy Ben Hutta from Coverger?

Alex Bargman: I know of her, do not know personally.

Host: Yeah, Sheffy was on the show probably six months ago now. I'm a huge fan of hers and have a lot of respect for her viewpoint. We were having a discussion around how insurance in many ways is still done in a dark room, in the back of a dark room over a glass of scotch or whiskey or bourbon, depending on where you're from and how sophisticated you want to be.

Alex Bargman: How big a premium the policy is.

Host: Yeah. She said, "I hate that the industry is still run that way." I pushed back on her and said, "I hate that oftentimes that table is just two fat old white guys. That part bothers me. But the fact that this industry still runs in some modicum of the old school concept of trust and loyalty to a certain extent, although that's kind of being torn down a little bit, I think is a good thing." They're testing you because they want to make sure you're going to be around. This industry, more than any other, still values, are you going to be here? Things are going to go wrong. We're going to have a hurricane. Shit is going to get super hectic. There's going to be money flying all over the place. I need to make sure that you're still going to be here when that happens. That testing and prodding and backroom kind of mafia style relationships, I'm anti any kind of someone not being allowed in that room, but I do think that the level of testing and requirements and prodding, like the punching bag at the carnival fair kind of test your strength thing, I've come to value that. I've been in the industry for 16 years now, and I've come to value that aspect of it.

Alex Bargman: I think you're right. Particularly an agency, a brokerage, a broker, whatever role they're playing, they're selling trust to the client. If you decompose a carrier into its atomic entities, it's price risk, underwrite risk, take risk, and pay claims, build a brand that has the trusting ability to pay claims. Going back to your question about what did I have to figure out, this is an industry where you have to prove that you're going to be around. That's not even as creating a carrier. There are these insure techs that are on multi-year long sagas to create carriers, some are now achieving that. But even for us as purely a distribution platform, we would be trying to work with underwriters at carriers where their boss's boss had already said, "I want to digitize this product with a new entrant." And they'd say, "Yeah, but you got to show me how the numbers work. You can't just disappear in 18 months." It's too risky for us to put our product onto this and not understand how it's going to play out. We definitely had to figure out how to get around that and prove that we weren't just a bunch of people in a basement.

Host: How did you do that?

Alex Bargman: Ultimately, what did it is we raised venture capital. Included in that fundraising round was a few carriers in the ENS market or had ENS units. That was important because it was very top-down buy-in from them and effectively de-risked the supply side of our business substantively because we had this executive buy-in on putting products or giving capacity to Pathpoint to digitize the wholesale distribution platform. That's an expensive way to deal with it, but it's worked. Other insure techs have obviously done this. I don't know Hippo personally, but I think Hippo has also done this on the demand side. They've taken strategic capital from distribution partners, insurance entities, and non-insurance entities. That's also really interesting as a weapon to prove legitimacy and get buy-in. Again, very expensive, but it seems to work.

Host: The other thing that Hippo did that was very smart is right from the get-go, they were very accommodating to the independent agency force. I think the day is gone where some curmudgeon legacy agents, if you have a direct channel, they won't write with you or whatever. It is naive to think that Travelers, Hartford, Liberty, all these big guys that everyone writes with, they all have their own direct channel. So I think it's talking out of both sides of your mouth to knock someone like Hippo. But from my perspective, what they did right is right from the get-go, they were very amicable to the independent agency force. They went through, they were also going direct, but they were upfront about it. They were clear about it and they didn't tailor their product direct. They actually tailored the product more for independent agents and just had a direct channel. That opens a lot of doors, even if the independent channel isn't a huge part of your business. What it does is it says, "I have respect for where this industry came from and I'm willing to play that game. Obviously I'm going to do other things too, but I'm going to make sure you guys are taken care of." It's kind of like going to the godfather and peeling off his portion of whatever you just acquired. It's like, "Here you go, independent agents. If you want this, you can have it. I'm going to make sure you're taken care of. And then I'm going to do these other things over here, but I'm going to make sure that you have access to this." That brought down so many barriers to them because now people are interested in it. They're like, "Is this going to be a good product?" Truthfully, there are places where Hippo's pricing is great. There are other places where their pricing is atrocious, but that's every carrier and everyone's accepting of that because they know that's how the game works because they were upfront about engaging everyone. That's another way to indoctrinate yourself, with Lemonade being the polar opposite case study on just creating absolute hate fire and roadblocks everywhere you go to distribution because of the way that you handle yourself and the things you say in the marketplace. I think about a company like Lemonade. Obviously their founders and early employees got paid. Absolutely paid. They're all making money. But when you think about the legacy of that company, it's kind of like whatever. It's like a dry fart. Who cares? They had a big, unprofitable IPO business that isn't really a good investment, but makes splashes every once in a while with a headline. That's fine. Good for them. But I felt like they missed the ultimate opportunity. If they had taken the Hippo path, embraced some of the legacy market, opened up some of their tools to them, still done all the crazy shit that they did direct, but just been a little more friendly to the industry, I think their legacy could be completely different.

Alex Bargman: Yeah, I don't know Lemonade too well. Obviously they've built a huge business. But back to the independence thing, one thing I really liked about Pathpoint where we were able to sort of figure out our differentiators is we didn't have to deal with this notion of, do we go direct or do we go through agents? The problem we're solving is that there are so many independent agents and they're so frustrated with wholesale insurance. So we just back out from that and we don't have to deal with any of this, "Oh, when are you going to go direct?" That's not our business model at all. Where we sit in the market, because there's a whole other insurance market that has to be intermediated by a whole other type of intermediary and so on, we can really back out from what the independents in particular need. We don't work with an agency. We have a couple offices at large brokerages that sort of function like independents, very sort of fiefdoms and independent in the nature of how they operate. But our bread and butter is working with those smaller, more independent agencies because it just sucks to get a $4,000 ENS policy through typical channels in many cases.

Host: When you first started examining this, what was one of the most glaring difficulties? You said you did 120 or 150 interviews, and you're starting to compile notes like, "This sucks, this is tough, this takes too long, this is frustrating." When you started to compile those, what was one of the first and most glaring issues that you knew you'd have to address either immediately or at some point in putting Pathpoint together?

Alex Bargman: Taking a couple steps back, we can make this process more efficient if we get the data about the applicant or the policy or whatever part of the process the coverage is in, get it out of a document, out of a spreadsheet, ideally into a database. That sounds really simple, but it's profoundly difficult because it's either a deeply technical problem or it's a really complicated user interface product problem where you're asking someone to key data into a web form or something like that. That's asking them to do work, so you better be delivering value on them. When we were first researching this, we could not figure out, and to this day I don't know what it is, we could not figure out an incentive structure for wholesale brokers to take on that work, to get it out of spreadsheets and SOVs and accords and into software or a digital database. That's in many ways why we then took our research to learning what the agency perspective was on accessing the ENS market. There's definitely a meme in insure tech of portal fatigue, like, "Oh, more portals." Well, go to an independent agent. They use portals all day to place all their business and the successful ones do it. So I think there's some value in being able to digitally quote business. The value prop of, "Okay, if we can work with the carriers to automate the underwriting and quoting of this coverage, ENS coverage, true not admitted coverage, and give that an interface to agents," those incentives work. The CSRs or the AMs who are just following up on the email for the 20th time to be like, "Hey, can you quote?" They're like, "Wait, hold on a second. In four minutes, I can at least get some sense of if this is going to quote or not." Boom, gladly, they'll do that. Figuring out that structure, I'm sure to you, you're like, "Yeah, if you'd asked me when you were starting, I could have told you that." But it took us a little while, if that makes sense.

Host: No, I get that. It's one of the reasons that I was searching and ultimately found you guys. In full disclosure, everyone listening, I write business through Pathpoint and court it all the time. The whole thing is, agents have stayed away from ENS for a long time. If you're coastal, I got some buddies in New Orleans and Alabama, and they deal with ENS every day. But for a lot of other agents, ENS is something they really don't want to work with. It comes in and they deal with it if they have to or if it's a client they really want to write, but they try to avoid it at all costs. I've always struggled with that because the way I think about business in general is, what are the shitty parts that no one wants to do? That's where the opportunity is. We do small business. We write in small business. I look at a lot of the companies that have just been funded and guys, it's like they're copying each other verbatim. "If you're a consultant, great. If you're a startup, awesome. If you're main street, great." It's like, okay, so you've taken the three or four easiest classes of business, easiest classes to write in the world, and now you're super slick at that. Congrats. Where's the hard stuff? That's the easy part. Let's talk about the hard stuff. That's why when we did a lot of talking, we have this "no customer gets left behind" approach. We're going to find a way. If we got to do accords and handwritten affidavit Cs and all this other crap, that's going to destroy us. Then a Google search brought me to you guys. Actually, it was Greg Parker. Greg Parker reached out to me. Then I Googled and I thought, "This looks great." That's how we got hooked up and started the relationship. To me, this is a problem that had to be solved. It just had to be solved. What I didn't know, and this is what I'm really interested in, what was it like getting ENS carriers to return digital quotes? You think like Hartford can return a quote that makes sense. Their main street stuff makes sense that they could return a quote in real time and that you might be able to compare it against a Tarmica kind of thing. But the idea that in the ENS market you can do that, because I think a lot of people still think of it as hand underwriting, someone's got an abacus and one of those little wheel things that no one actually knows how to use and they're still coming up with the rates that way. How difficult was it, or were there products in the market already, to get ENS carriers that could return digital quotes, that could do that in that format and had that kind of setup?

Alex Bargman: That's an interesting question. When we started first working on Outline, I would guess that a lot of people thought there's not enough digital product out there. When I say digital product, I just mean accessible through an API, at least quoting, maybe rating sort of thing. Obviously binding and issuance is great too. I'm kind of in the trenches of insurance, so I'll take what I can get. The rate at which APIs have been leveraged as distribution interfaces in ENS has accelerated over time. We used to have to turn the backpack upside down and shake it out to find carriers that had APIs. Now we have a list of people that we're not staffed to actually bring on board. That macro thing just sort of changed. But the thing we got lucky with, whether this is insider luck, you tell me, we do a lot of small commercial ENS because that's where the pain is the worst. It takes so much time to do a small policy. Everyone's losing money. To your point about agents not wanting to do this, the best analogy I heard from an advisor of ours is that small commercial ENS, or even ENS at large, is like plaque. Just by eating, you get plaque. Some of your clients, for whatever reason, one of the things they need is going to have to go to the ENS market. It builds up over time. You got to go to the dentist to get the plaque off. No one likes going to the dentist, but you still have to do it because you want to keep your teeth. You want to keep eating, basically, you want to keep servicing your clients. I completely agree with you that this is not something agents want to do. The point being, as we realized in trying to solve this, the binding authority segment of the market, even if there weren't APIs already deployed, the nice thing about the binding authority area where you're outsourcing underwriting to an intermediary, you have actually built the algorithms for at least the underwriting piece of it. Yes, they're in a 350-page PDF called underwriting guidelines, but those are algorithms, and algorithms you can put in computers. Maybe 25% of them are referrals.

Alex Bargman: Okay. But that leaves 75% to either immediately decline or immediately say, we will quote this. Then you just need the pricing. The pricing is a much shorter path for a lot of these carriers to get pricing at an API, particularly for a specific product. Easier said than done. I know how complicated these things are, but the thing we were able to leverage is that we didn't actually have to convince them to automate underwriting because they had incidentally already done it by writing these binding authority guidelines.

Alex Bargman: They wouldn't tell you they automated it. They'd say, "Oh, we rely on the MGA's underwriting expertise." That's true if it's an MGA that does massive parking garages or financial lines, but for artists and contractors, it's just rules-based. We take the PDF, turn it into software, and give the agent an interface to run through those rules efficiently. Dynamic forms only ask what we need to run the logic tree.

Alex Bargman: We're not the only people that do this. RT Connector, Amwins—they've all automated some of their binding operations and products too. Nothing we've only discovered here. But it gave us a leg up in that you don't actually need the full, fully automated API the way you might think—quote, bind, issue, service, endorse, all that. Because of how binding authority contracts and structure works, we can cobble together software plus services. We have both capabilities to give a fully digital experience to the end user, typically a CSR at an independent agency.

Host: What's up guys. Sorry to take you away from the episode, but as you know, we do not run ads on this show. In exchange for that, I need your help. If you're loving this episode, if you enjoy this podcast—whether you're watching on YouTube or listening on your favorite platform—I would love for you to subscribe, share, comment if you're on YouTube, leave a rating and review if you're on Spotify or Apple iTunes.

Host: This helps the show grow. It helps me bring more guests in. We have a tremendous lineup of people coming in—men and women who've done incredible things, sharing their stories around peak performance, leadership, growth, sales. The things that are going to help you grow as a person and grow your business. They all check out comments, ratings, reviews before they come on. So as I reach out to more people and want to bring them in, I need your help. Share the show. Subscribe if you're not subscribed. Leave a comment or a rating and review. I read all the comments. I love you for listening, and I hope you enjoy it as much as I do creating it. All right. I'm out of here. Peace. Let's get back to the episode.

Host: Yeah. So to me, these are the type of leaps that I feel are underestimated in our industry. I spend a lot of time thinking about this. We're a fully digital agency. I have employees in other countries and in other states that seem like other countries, depending on how difficult it is to get a tax ID in that state. I'm constantly thinking about every minute that is unnecessary for my people to take. I want to reduce the things that take unnecessary amounts of time to zero as much as possible, aspirationally. That'll never happen, but if we're always thinking about that...

Host: I've had conversations. I've looked at Amwins Access, RT Connector. We do some stuff there because you guys have different appetites. We use you guys. We don't really use Amwins, but that's nothing against them. I kind of ping pong between you guys and RT Connector based on who has the appetite for the thing. What I've seen is we can now write E&S business as fast as we can write a Main Street BOP.

Host: When I get a contractor with a loss, or one that also does excavation, or a carpenter that also gets on roofs—it used to be like, "Oh God, throw it on the floor. We don't want that. We're not going to waste our time." Now I'm like, "Are you kidding me? Throw it in Pathpoint. We'll have a quote." Granted, the E&S rate because they're getting on roofs versus a standard contractor—they're going to pay more than their buddy who owns a pickup truck and drives around town. But they're going to have insurance, and it's only going to take us five minutes, just like it would take us five minutes to quote that standard carpenter.

Host: Those leaps in time—my counterpart down the street takes two hours to put together ACORD forms and supplementals and all that crap. I've gone into your platform, quoted it, gotten a rate, and figured out—yeah, maybe I still have to do an ACORD eventually, maybe I still have to fill out a supplemental—but I now have a rate. That guy has said, "I accept it," and we're moving on to the next stages before my counterpart has even considered putting the quote in. That is such a huge win for independent agents.

Host: I feel like it's lost on a lot of people. They're set up with their E&S person, their wholesaler. "I like my underwriter." Your underwriter could be the best person in the history of the world. They could send you tickets. If my underwriter sent me tickets to Bills games, I'd probably do more business with them. But my point is the time you can't get back. If it takes three hours to put a submission together versus 20 minutes to fill out a form, answer a couple of questions, and maybe one follow-up email, and you got a quote—you can't get that time back. That is the most valuable piece of this. How much time are you getting back into your day? Instead of doing one quote, you're able to do four quotes. That amplifies your business at a level I think people aren't really considering today.

Alex Bargman: That's really cool to hear. If you're positioning yourself, you're out selling or just meeting people, and you say, "I am an expert in small business commercial"—the painter that also goes out on the roof, the carpenter that also goes on roofs—they don't know they need to go to a specialist. They just say, "I run a small business. I started it a year ago or I'm starting it right now." They come to you, and you'd be like, "Oh crap." It ought to be as easy as the other stuff, certainly for these smaller accounts.

Alex Bargman: I'm curious. Contractors is our largest segment, with lessor's risk as the second right now—pretty one A, one B. From your perspective, the carpenter on the roof is a canonical example. We talk about that internally too. The handyman that does a little bit of other stuff. The gardener that does snow plowing in the winter. What other stuff gets to the cutting room floor that you wish didn't?

Host: Tree work. Heights and digging are the big ones. Also multi-discipline. If you do plumbing and electrical, you're going to get bumped out of a lot of standard markets for doing both. If you're a big shop—a ten-person shop—and you do both and you have specialists, that might be out. But a smaller shop doing multiple things can get bumped out. Anyone who works on vehicles. The multiple classifications thing took us a while.

Host: We think granularly about our appetite. We're not just adding class codes for some raw number. We're adding class codes that are table stakes, plus the ones that are inherently going to lead to E&S because they correlate with each other. Exactly what you're saying—they get used together on the same quote. That took us a while to figure out at the UI level—how to make it easy to do multiple classifications—and also at the integration with the carrier product level. They're either trying to package property and GL, and some feature of the property is sending it to E&S, or they're trying to do GL and some feature of the operations, some class code, is sending it to the E&S market. You have to solve for those things both in what appetite you offer and how you make it easy to do it. That is not easy.

Host: I just had a really good one. Janitorial services where they had a proprietary chemical mix for gym floors. They created this chemical mix that allowed them to clean a gym floor to get that nice, crisp, grippy feel you want if you're playing on a gym, but it didn't erode the epoxy layer on top of the floor. It got it clean. The issue was that they're mixing their own chemical mix—that's a big no-no immediately. The second issue is they have to purchase this chemical in bulk. They can't just get a little bit. They have to purchase $30,000 to $50,000 worth of the chemical at a time, store it, and over time they may only do three or four orders a year. They'd have to mix it out of that with a dilution process. Everything I just said—a standard underwriter's hair is starting to fall out. That's a no-doubt E&S risk.

Host: One of the things we always have to consider—and I'm sure you've heard this from advisors and people you've interviewed—is this interesting part about the insurance industry that makes it unique. While I firmly believe we have to lean into making the process easier with fewer questions, at the same time, we are literally managing the future of these businesses. If we make a mistake because we wanted something to be easy and we skip a step, we could really hose people up.

Host: You were talking about multi-class code. I had another guy come in. He did sports things—set up backyard sports. He'd build a little basketball court in the backyard or a tennis court. Any kind of sports feature in a park. He put up jungle gyms. That's essentially one class code. But he also rented some of that equipment—portable hoops, other portable things—he would rent them to people who wanted a basketball hoop at an event. Same company. That kicks you out of all the standard markets because now you're renting stuff.

Host: He didn't have the rental piece on his policy. The previous agent said, "Oh, if the renting is incidental, it should be covered." Right there, we're in trouble. Who's determining whether it's incidental? What does that mean? "Should be covered" is every warning sign. I told him, "I'll be honest with you. If someone gets seriously injured on a hoop that you rented somebody, and I see on my policy that you don't have rental coverage, I'm not going to pay that. Why would I pay that?" He said, "Oh shit, I'm in trouble." I said, "Not really." Those little things are what make E&S interesting. If you can make it so it doesn't suck, the interesting part and the not-sucking part come together. That's where the magic happens.

Alex Bargman: One carrier we started working with very early on—before we even had a bit incorporated—we were talking to them about E&S and the types of risks that go to E&S. You Google E&S and it's marine, mud maps, shared and layered business, Lloyd's of London, residual aircraft insurance. This carrier said, "Forget the aircraft. It's about abattoirs." They used the sophisticated word for slaughterhouse. "It's about the small businesses out there that have something weird about them. That's who needs this type of product. If you can figure that out, you'll make a lot of people pretty happy." We don't have appetite for abattoirs yet, so I'm still trying to figure that out.

Host: E&S is such a rabbit hole. When I started my career, I was scared of it like anybody else. The policies look different. You've got financing involved, which is different than how you learn. Everything about it is different and a little weird. It makes sense. Have them sign the Hartford quote, take their credit card, stick it in Hartford's portal, and boom—they're all set. That's easy. Then you get this whole other side, and it's a little nerve-wracking. But once you dig into it and really get a feel for what it is and what it can be—I wouldn't have wanted it to be part of Rogue if I hadn't started to see what was possible.

Host: With some of the stuff you guys are doing, I look at an E&S policy today the way I look at a Main Street policy. What's the difference? If I can quote it through you guys or through Tarmika, what's the difference? Maybe we have to notate a few more things. Maybe we have to think a little bit about premium finance. We use Ascend, which has made finance so easy.

Alex Bargman: That's great to hear. I've met Andrew and Praveen. It seems like they're really onto something with Ascend.

Host: They've been awesome to us. We're way early, probably one of their smaller agents, although we do a decent amount of E&S for our size. I've been trying to give them a lot of feedback, and they've been awesome about taking it and helping us. It feels like they're on the right path with payments. I've been saying for a few years now, there is such an enormous opportunity in payments in general.

Alex Bargman: Do you prefer that the carrier or the whole—do you like direct bill as an agent, or do you want to be able to offer—my ultimate goal is to be 100% agency bill. Today that would be a nightmare if you had to run agency bill primarily through your agency management system, because most agency management systems are terrible. That being said, I think there is an opportunity. Whether Ascend is the one that capitalizes on it or someone else, I think they're on the right path. I don't have a dog in the fight other than I like them.

Host: There is an opportunity to create a portal. Any VCs listening that want to fund this idea, I'm 100% open to working with you. I don't think a lot of VCs listen to our show. But I think there is an opportunity to create a single-point payment structure portal. You as an agency can control the entire experience—whether you're sending it to Hartford, Travelers, Guard, Employers, or to an E&S wholesaler, E&S broker, wholesaler, bonding company.

Host: We use a tool called Agency Zoom. They recently launched a part of their tool called the Service Center. It allows you to track time, touches, whatever for certain tasks. When I look at the amount of time billing takes, it makes me want to gag. It's a choke point in our agency. Chubb will take ACH and credit card and has five payment options, but they mail you physical cancellations. You're like, "What?" Hartford won't take credit card for first-year payments. They'll only take it if you pay in full, which is bananas. I don't even understand the thought process. So what do you do if you've forgotten that and taken the credit card from the person, but they want to make payments? Now you need to go back and get their check. This is all day long. You need a PhD in understanding all the different payment processes for all these carriers. They all think their way of doing payments is right.

Host: My thought is, where I ultimately want to get to: we take all payments through one portal. Payments come in. We give people the option to either finance those payments or pay in full, or finance them quarterly—two or three payment options. Financed payments if it's not paying in full. Then we just agency bill and pay every carrier in full on every policy. Here's what that solves: One, I'm only sending my customers to one place all the time. Two, I now have the ability to know and control messaging. "Hey, you're 30 days out from your payment." "Hey, you're seven days out from your payment. Just letting you know you're going to get a notice to make your payment or your recurring payment." If they don't pay, "Hey, your customer is three days late. You may want to ping them."

Host: What happens now is I don't get a non-payment email for seven days, sometimes a month later. I've got carriers that still physically mail me cancel-for-non-pay notices in the mail. That is just stupid. If you control that place, you solve that problem. I'm solving a problem that has nothing to do with your business. I'm just talking. This is very passionate.

Alex Bargman: No, it actually has quite a lot to do with it. We agency bill everything, but our interface is just email to the agents. We have a payments portal, ACH. You can mail us a check. We'd prefer you didn't. People still do. We have to send invoices to all our agents. Sometimes they forward those to the clients, and the clients just click the link and pay. Sometimes they have to go to another team within their agency. It's all this spaghetti. There's no structured way for us to automate follow-ups on whether you paid or not. There's no way for us to actually get visibility into making the process easier.

Alex Bargman: If you ask most agencies about this, they say, "Integrate with our agency management system." First of all, it's going to take me 18 months to convince Vertafore to do anything with me. See you in 2023. Same for Applied. It's frustrating. There's something missing in this part of the back office that could probably be a lot easier if it was connected through software. Maybe I'm romanticizing it, but I definitely can feel the pain.

Host: Here's the beauty of it. If I'm agency billing everything and paying all my carriers net, I have 100% commission day one in my agency all the time. Time value of money—I'm not getting $33 a year from now from some stupid policy because they made their payment that month. I've gotten the full commission upfront day one. The carrier is paid net and full, so they're happy. They're getting their money upfront. The customer doesn't know the difference. They're paying a small finance charge to make payments. Who loses? I don't have to know how Chubb wants to be paid, how to navigate their system versus Liberty versus Employers versus insert all these different carriers. It's all done in one platform.

Host: That to me is a game-changing concept. If I wasn't running an agency right now and was broke because of that idea, this is what I would be doing. I think this is the next problem that has to be solved in our industry. You can now get multiple commercial lines quotes, multiple personal lines quotes. Propeller Bonds has completely changed the game for bonding. You guys have changed the game for getting a quote for E&S. It still takes us an ungodly amount of time to make payments. It doesn't make any sense. I can buy crypto from 17 different apps on my phone with a button click, but it takes me 40 minutes to figure out how to pay my insurance premium.

Alex Bargman: It's so true. I think this is structural. The carriers we work with don't have direct payment relationships with clients or agents. Or they have the opposite with their wholesale agents. That's the opportunity for us. The E&S carriers don't want to deal with this. They want to run a leaner carrier specialty, focus on specific strategies and specialty, and rely on the wholesaler to deal with the process. That's how it's been traditionally. There's a lot of opportunity for us to run in this area.

Alex Bargman: Our engineering team is approaching 20 people right now. I would guess in 2022, over 50% of their time will be spent on problems around process and back office. I don't use "back office" in a pejorative way. There are so many subjectivities to bind or issue an E&S. Inspections would be a simple example, but affidavits and other things vary by state. Automating those documents is quite an arduous process. Riffing on what you're saying about payments, I suspect we'll probably be doing a lot of thinking on invoicing, payments, collections. There's this gap where you can reduce friction by deploying some software into it. Maybe you pay when you bind on Pathpoint or something. I'm not sure how it'll manifest.

Alex Bargman: We think that as much as our value prop is about access—every wholesaler can offer access—we have to make it easier across the whole life cycle to actually win the business. We're just an upstart. We can't blanket the market with submissions. We just don't have that capability. So it has to be easier for us to continue to differentiate.

Host: Dude, I want to be respectful of your time. This has been tremendous. I appreciate you spending this time with us talking about what you're up to. I hope everyone listening will take two seconds, go to pathpoint.com. Just Google Pathpoint. You'll see it come up. Super easy to get connected, get signed in, get appointed. For contractors, for LROs, you're going to get quotes or at least know whether you have the opportunity to get a quote in seconds or minutes, if not seconds. It's really changing the game for us.

Host: We've rebuilt some workflows in our agency that have really helped us save time and effort. It's opening up a whole market to us because of that time we kind of avoided. We all kind of avoided the E&S market on purpose. I'm glad you guys are out there. I'm glad you're pushing the envelope. I'm glad we had a chance to connect. Appreciate it.

Alex Bargman: I appreciate the conversation. Please reach out whenever you have feedback or stuff we can help you with.

Host: Can people get at you on LinkedIn? What's your preferred?

Alex Bargman: LinkedIn works, or my email is my first initial and last name at pathpoint.com. So [email protected].

Host: Awesome, man. Appreciate it.

Alex Bargman: Cool. Thanks so much.

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