Classic Car Insurance For The 21st Century

INTRO

On episode 21 of the InsurTech Geek Podcast talking about Classic Car Insurance for the 21st Century with Desiree Mettraux from OCC. 

The InsureTechGeek Podcast powered by JBKnowledge is all about technology that is transforming and disrupting the insurance world. We will be interviewing guests and doing deep dives into specific technologies we see changing the industry. We are taking you on a journey through insurance tech. So, enjoy the ride and geek out!

INTERVIEW

JAMES: All right. All right. All right. Another week. Another week. Another week! Temperatures are getting hotter in Texas. I can tell you that. It is interesting times right now. Some places are getting shut back down. Cities are having panic. Oh, my goodness. This is an interesting time with the virus right now, but I tell you what, we are still here with you. Of course, we are all broadcasting from our respective domiciles, and this time another international show. Of course, from the great state of Texas, Rob Galbraith, one of my fellow Texans, Rob. Good to see you again. How are you doing? 

ROB: Good morning, James. Good to see you. Yeah, because we have got Desiree on, who I will let you introduce, but we are recording this in early am our time, which is the late afternoon over in Europe. And so, yeah, we will have extra coffee this morning to get us up.  

JAMES: Exactly. Got to get rolling. You know, I swore off caffeine 9 years ago. All of it. And have not had a drop since, I used to, tell you what, I think they say it is like a sign you are ADHD if you have caffeine and it makes you sleepy, and that is what caffeine does to me, it does not help me at all. So, it has the inverse effect. And so, I do not do any of that stuff. No stimulants at all. It is a high on life. High on life. So, with us now, she is in Germany, I believe. She is Swiss and she is got a French name. So, she is just, a European woman of mystery. Desiree Mettraux. Desiree, good to have you on the show. Where are you joining us from today?  

DESIREE: Thank you, James. And thank you, Rob. Thanks for the invitation and good morning to Texas.  

JAMES: Yes.  

DESIREE: Currently I am in Hamburg. 

JAMES: Nice. Hamburg Germany.  

DESIREE: In the North of Germany. So, and the weather is nice. We have like 4 p.m., so everything is quite good.  

JAMES: Awesome. Awesome. Glad to hear that. And it is good to have you on the show. We are going to talk about classic cars. We are going to talk about technology. We are going to talk about insurance. We are going to talk about how someone who is not a car nut is running a company that specializes in serving car nuts and what that is all about with classic cars in Europe. There is all kinds of interesting differences between the United States and Europe of course when it comes to vehicles and how they are taxed and how they are licensed and how they are insured. And so, we will talk about that a little bit too. We are going to have all kinds of fun chatting about that but before we do just a quick reminder. If you want more information on the InsurTech Geek Podcast, you can go to insuretechgeek.com. That is insuretechgeek.com. You can sign up for our weekly email newsletter, and then we email you the show notes every week, along with the links to what we talk about and it is pretty useful. So, it will help, go check that out.  

And back to our guests. So, Desiree it is nice to have you on. It is always good to have some people from across the pond on the show, so we can talk about kind of the differences in the markets and the similarities in the markets there. Before we jump into talking about your company, and that is OCC, that is occ.eu. You can check out their website. They specialize in insurance solutions for some awesome vehicles. Before we jump into that, I want to talk about you. I believe you are you are Swiss, but you have got a French name and then you live in Germany. So, give me the story of you. Where were you born and raised? What did you think you were going to do when you were growing up and how did you wind up doing what you are doing now? 

DESIREE: Okay. So, I am a 40 years old. I was born and raised in Switzerland. I am a mother of four years old twin girls. So I am also challenged at home, not just challenged at work, so that is quite good because if you are going home after a quite busy day, you have to relax and focus on the real problems of life and the real questions of life with my girls, and my past is like, I am since over 20 years, I am in the insurance industry. And I am passionate about it because it is like, I always had this solution for me. A lot of people think, oh it is boring in insurance, it is always about relation and stuff like that. And I am quite not in that direction. So, and then I was running a big insurance company in Switzerland. 

I was as a woman young and I was responsible for the whole car insurance, intro for the car insurance. And I did this a couple of years. And after that I was known and was connected with OCC because OCC is like, they are already like 36 years on the market. And, so that is quite a long time. And I always say that was the first real intro-tech, not in the tech ways, but in the innovation way, because at that time to run such a business model is quite something new. And then I was at OCC. I did some stuff with, it was like the first wave of digital transformation, and then I went back to so Switzerland. I was running my startup. I was founded to Switzerland biggest sharing platform for campers. Then I did for a “-“ 

JAMES: Whoa. Alright, pause. This is like a sharing economy play where if you had a camper, you could share it with other people? 

DESIREE: Yep.  

JAMES: So that is a pretty big deviation from being heavily involved in insurance. What peaked your interest about the sharing economy around campers?  

DESIREE: The insurance solution because I am really into this platforms and the economics of platforms, and every platform you run, every platform, there is some point you have to think about insurance. And I am deep into this topic. And it is really interesting to do new policies, new formats for insurance solutions for new interests. So that was the thing that dropped me into this whole, my camper business thing, and build an insurance solution because I am not a camper girl too, I am not a cowgirl, I am not a camping girl. 

JAMES: So, it did not start by having the twins and wanting to take them camping and could not find a camper? 

DESIREE: No, it was like, I was spending time with my twins and I was sitting at home with the girls and I was thinking, so, I have to work again. I have to do something. And then, so I have found someone, then we were connected, so, okay, let us do this campus sharing thing, so. And it was not real as a bootstrapped. So, we built it just with the two of us. We built that with our own money and parallel I was building an intro-tech company for an insurance player in Switzerland, who was like, they built and founded the corporate venture intro–tech and I built this up this up as CEO.  

So, I was first one that they told me, there is the garage, use the money, so, let us do digital, let us build some digital business models for the insurance industry for tomorrow. So, I was deep into that thing. And then I was doing some coaching and mentoring for startups all about this platform economy, and then in this digital way, because I am deep into this thing, into this team. I do not have a tech background, but I am really interesting in this whole user experience in digital way insurance and connect all these things. And I was always like the oldest business model that I was building. And stuff that I have done. It was always like getting stuff done and do it by yourself and learn. So, I was always like, my person was learn–build–measure, and so on and so on. And so, I am happy with this way because you have to do it by yourself, then you can talk about it. Yeah.  

And the last year there was the possibility to take over OCC, in the role as CEO and make like the next big thing or the next digital transformation, in all countries. And we have also liked the other film companies, we are running a community club and stuff like that. And that is what is for me like, the chance to transform a business model that is highly running successful, but in an old way. And bring that with the whole digital thing and the startup mindset and use centric mindset. Bring that in this company and go and make them next step of growth so that is why I am sitting in Hamburg.  

JAMES: Yeah. And you have been in this role at OCC since July of 2019, I believe, and just tell everybody what, because for our American listeners, they are not going to be familiar with OCC. So why do not you tell everybody what OCC does? You provide insurance for classic cars? 

DESIREE: Yes. So, we are like, over 36 years, we are a Germany player at the markets, we are the market leader now in Germany and Switzerland and Austria for the insurance for classic cars. And in classic cars, that is quite a big name because everyone is thinking about their classic cars. Okay. Oldtimers always got something for rich people, it is only like this high-end cars, the Ferrari’s and deco‘s and the porches. And that is not the fact because it is also about this whole beetle style, it is about cars that everybody knows. It is like childhood “-“ 

JAMES: Sure. It is like the Volkswagen campervans.  

DESIREE: Yeah, stuff like that. 

JAMES: I mean those are not crazy expensive. They popped. They are really in a resurging popularity. Of course, Jeeps, old Jeeps are very popular. Old Volkswagens are popular, old Porsche 911’s that are not that expensive are still really popular, but you still have to get insurance on these things. And your typical insurer, do you think they have a hard time understanding valuations of classic cars? Where do you think that you cannot just use a traditional mainline auto carrier to ensure a classic car? Why, why is there a specialty niche for classic cars? 

DESIREE: I think it is the topic of the valuation because that is real specific, but it is only about the coverage, because you have a lot of people that are buying a beetle because that is a childhood dream, and then they go and renovate the car and they put a lot of money in, so that the valuation of the car, that is another thing, because you have this valuation of, if the car tomorrow is gone, so you do not have just like the market’s valuation, you have to have a valuation of another valuation. And so, you have to think about that topic.  

And it is all also about, a lot of these people, they want to talk with experts. They want to talk with people that understand the needs for the security for this cause, and also, I mean, that is like a little bit of mainstream, with all the beetle stuff. And then we also do like premium cars. We do like, super high–end cars and we are also really deep into the collectors. And there you have like people that are collecting cars, you have people that have like 5 Vespa bikes, but you also have people that have cars of 50 million in their garage. So, that is really, you have to have this understanding of what the needs are for the coverage. 

JAMES: Sure. Yeah. The coverage, just your coverage is different. Your limits are different, the valuation and understanding how to value these vehicles is different. Cause it is not nearly as simple as going to, here in the United States, Kelley Blue Broker Any of these things you can just value. I mean, it just does not work that way because they go to Mecum Auto Auctions and they will sell for 5 times what their book value theoretically could be because that year it is a popular car and if you are a collector, you want to ensure these things for their market value, because that is the value to you if you collect and then sell them. It is interesting. I have a very good friend from high school who is really into a Rolls Royce vehicles and he is just fascinated with it and he has a, really, really old one that he loves, you know? And they are valued very differently.  

So, I am a pilot. I fly, I can tell you, aviation insurance is very similar. I have a collector plane. That is my dad’s plane that he bought in 1970, and you have got to find someone who understands how to value a 50 year-old machine, and its replacement cost and its value and how it works and the liability, because you get metal fatigue, you get all kinds of things that happen to a machine when it is 50, 60, a 100 years old. And it requires an understanding set of eyes and ears but before I toss it to Rob, just a quick understanding, roughly, if you can say this, how many policy holders and how much premium are you guys at? Like what is the size of OCC?  

DESIREE: We have over, I can tell you, we have over a 100,000 cars.  

JAMES: There you go. Perfect. Yeah. Over a 100,000 cars. 

DESIREE: We have a solution and then I think another thing that is quite important about the coverage is also that we also do all risk policies. So, I mean, that is also a topic of coverage that is important to a lot of customers and you have to understand what is always, what need in reality, if you have like, claims and stuff like that. So that is quite interesting. And I think it is also important that we just do that. We do nothing else because we are the experts in classic cars and that it is also a trust thing for the customers. 

JAMES: Absolutely. Rob?  

ROB: That is right, so great to have you on. So, I am interested in you know, OCC is an established company, like you said, you had been around over 30 years going on, getting up to 40 years and you have a very niched, specialized marketplace. And it is very similar to Hagerty in the US, for those that are familiar with the American market, which is a great name that specializes in classic cars based in Traverse City, Michigan James, so yeah, you have to go visit them some time. But you are in a segment that a lot of folks in other specialized segments, that a lot of folks say they are going to be the last to digitize.  

We have seen it on the personal line side has gone right to everyone who wants to get their application online for their motor insurance, for their home insurance or renters, etcetera. Folks like Lemonade have expanded to Germany and others. And then we are seeing it in the small commercial space as well, starting to now get digitized. But the specialized, the Large Commercial, the London’s brokers, Lloyd’s brokers, etcetera, those are the ones that I always hear are going to be the last, because you need that specialist. That human touch. So, what motivated OCC to make this leap into kind of move forward into the 21st century? When I think a lot of other companies in a similar position have decided to keep doing business as usual. 

DESIREE: I mean, it is like you guys should have known the Kodak philosophy? So, it is like similar. If you do not do it then others will do. Because the changes happens. The society is changing. Everything is changed and things are still going on. And since you have to go with the move. And another quite interesting thing, it is always said so in the classic car sectors, the classic car niche, it is like so these old men business and they are not interested in digitization and all stuff like that, and that is not true because a lot of our customers, they are quite little bit older, but now the sons and the daughters are coming and they take over the cars, and they are like, they are in our age and then they have other responsibility also with this new team, also with insurance within a digital way. So, and that is also what we feel with our customers. So, everything is changing, so you have to go this way. 

JAMES: Yeah. 

DESIREE: And, something that I really can say, it is we have our B2C direct, OCC business, we do now for a specific kind of cars. We do completely online, and it works well as the conversions are fantastic because the needs are there, so, it is proven.  

JAMES: Yeah. It is interesting. If you are on Instagram at all, and you spend any time looking through feeds on Instagram, classic cars are not the domain of old men anymore. The vast majority of photos I see, cause I love all things mechanical. If it goes fast, I like it. Whether it is a boat, or it is an airplane, I like to take boats out on the water, I like to go fly planes, I love to drive cars fast. If it is fast and it is got a big engine, I am into it. Even if it is electronic, I am good with electric cars too. And, when I go on Instagram and I look through pictures of classic cars, I mean more than half of them are owned by people that are in their 20’s and early 30’s who have decided that, like camper van conversions became popular about 8 to 10 years ago.  

And you started seeing a lot more camper van conversions, where they are taking really old VW on the bus or, ripping out the insides and rehabbing them and turning it into a real sleeper van, and then they started doing the same thing with the Volkswagen beetle. So, it has become a much bigger thing. And then the other thing, a question that brings you on insurance, is that people are taking these older vehicles and they are living in them. And so now, it is their house, which changes the dynamic of your insurance as well. If you are sleeping in this vehicle, that is a classic camper and it happens to be your primary residence.  

So, let us circle back on tech cause referenced Kodak and you said look, I mean it I have been to Rochester, New York. I have been to where Eastman Kodak was headquarters and they used to own that town and they do not anymore, but people are still taking photos and something I say often, is disruption occurs to companies because industries persist. The car industry will persist. I mean, people will still be in cars. People will still take photos. People will still have insurance. They are just not going to do it with the companies they are doing it with right now necessarily. And certainly I, as a consumer, I am 40 as well. I was born in 1979, a very good vintage year to be born in, the year of 79. It gets better with age. There is a smell of fine Bordeaux.  

It is interesting. I am making decisions on which brokers, I am changing brokers, right now, and I am doing some other stuff on my insurance and I am making a lot of decisions based on the technology offerings that my carriers and brokers have. It is now. It used to be in a nice to have list. It is now in a have to have list. And so even for me as a consumer of insurance, the technological capabilities of my carriers and my brokers has become a have to have. And I know I am not the only person. So, what have you done at OCC to deal with the fact that your customers are now saying technology is a have to have? What specific, have you adopted specific policy and claims management software? Have you developed a specific in-house proprietary technology? What have you done to deal with that?  

DESIREE: I mean, we have started just inside the company with right mindset to be a customer centric. So, you have to have the view on customers eyes. So that is the first thing, because in the past there was like limited other views. When they went into their world. And outside, a lot are going on and we have done a whole new IT infrastructure as the backend. This is completely new and also the whole front-end technology. And I mean, it is not the next AI machine learning or whatever, I am not a tech geek, but I mean it is quite important because we are not on the green field and started to move more on check infrastructures or because we have a big running business. So, you have to think about that. We all have to go on. And for us it is like quite important that we can use like the rest of the connections, we have the basics that is important today that you can go online, that you can either take Richards and build in every broker’s software, and that you cannot do all this stuff. And we are now able to do that. 

 If you have seen where OCC is coming from, it is like a huge step. And in my world or my imagination, I am always like deep into one thing that you use machine learning and image processing that you can take your car, your car plate, and that you can take a photo, the data is coming out and you have this instant quote, and it is the institution’s thing, so that is my vision for, also for this classic car thing where you have to go and also connect like the community with technology because the data’s of the cars are quite anything important thing. 

JAMES: Yeah. So that is your hope and aspiration. That is not where you are at right now. You hope to be able to streamline and automate the underwriting and binding process so that you can do it all from your app? Taking pictures and using you know “-“ 

DESIREE: Yeah.  

JAMES: And certainly, claims is another big area that we have seen a bit of a revolution, both in homeowners and in auto, with claims processing. I mean really, ideally the ability to auto adjudicate a significant percentage of claims and pay them out quickly. Where is claims on your radar? 

DESIREE: We are not at the stage of claim situation, because if you have a classic car, it is not the topic I want fast, my money. Because it is a special thing because every car is specialized. You have to, that is really, it could be quite difficult. Sometimes you have to bring your car back down to Italy. You have to call to Ferrari directly because you have to remodel some things. So, it is not that easy. So, I think, in the claims section, it is the personal treatment, it will be, still very important. So that is not on the highest topic list.  

JAMES: Understood. Yeah. And I can see the complications there. It is not like you can just use exact value or MSB or use some simple replacement costs or mechanics repair book cost, when you have got a 50-year-old classic car that parts have to be custom made for. 

DESIREE: It is independent also from the valuation. You have 5 years ago, you have a valuation for 50,000, but now maybe it is 70,000. And, but if the car is not in a good condition, it can be 40,000. So that is all things that you have to challenge and to check. And maybe at some point in the future, also with technology, you can go this way, but that is quite something complicated. 

JAMES: But your first target is underwriting and binding. So, you to get through quoting and binding, much more quickly, so you can focus your time and attention on the rest of the business.  

DESIREE: We have done quite a big step because we can do fast in the standard classic car. Things you can go through it and check that you are insured, but in this section, you have also like, difficult things because you have so much individuality in this car section. I mean, you have this whole farmer cars. You know, how do you say farmer cars?  

ROB: Tractor or “-“ 

DESIREE: Tractor, yes. So, we have also a lot of customers with old Porsche tractors, and also that is not something that you can go and easily put in an online stream and tech tax. So, it is like you have really to think about it. 

JAMES: Makes sense. Rob? 

ROB: So, we talked about a little bit about the technology side. You talked about the back end and you mentioned at the beginning thinking about insurance as a platform, as an ecosystem. I love that. I love that thing talking about using API to connect and kind of modernized, right? We are used to insurance companies, really having silos of information and big core systems that can do a lot of fast processing, but they do not necessarily integrate well with others and making that a mental change. So, I want to go beyond technology for a minute and talk about the human side of it. How did you get your team on board in kind of embracing change? What are the things did you have to do culturally at OCC to bring all of your employees kind of along on this journey? Cause I know that, can be sometimes as difficult as executing on the technology front itself. 

DESIREE: It is the constantly way of communication and transparent communications, or it is also like, do what you say and say what you do. I think that is something of key and I am like, there are a lot of people that are talking a lot and we have to, and I am like always the things you have to show it, you have to prove it, you have to be that role model. And I improve myself also really critical on myself and think about, okay, have I done that? And so that is my way. On the employee side and also, think about the topic leadership. What is leadership? There are all of big passwords, also.  

We teach leadership. Everyone is like, but you have to think about the meaning of that. What does it mean for you? And, and I have invested lot of time in the new brand of OCC, because, and that is not a thing that is only all we have new callers, and we have not used sign in, and we have a lot new images. So, I have invested a lot of time of the core values of our brands and for what we stand and what we are. And, I always take a lot of time to bring that in the company. And I am not tired of communicating our core values then. So that is something that is I think it is really important.  

JAMES: Yeah. When you talk about core values, do your employees memorize them? If you asked your employees what the core values are, would they be able to repeat it? 

DESIREE: Yes.  

JAMES: Yeah, that is something I say with my staff, if you cannot repeat it, you do not believe it. And so, if they, if they cannot repeat our 5, and we do not do value words, we value sentences. Do the right thing, even when no one is looking, be self-motivated and resourceful, show respect to everyone, be a JBK ambassador 24/7, have each other’s backs and enjoy the ride and geek out. And if they cannot say that, they are done. I mean, it is like, you know, you do not believe it, you cannot repeat it. We use it in hiring and firing. We use it in promotions. And I mean, we use it in every aspect of our business. It is important. Because if you do not understand the core tenants, in particular, in a business like yours, where you have to really at least appreciate your customer, appreciate, you are selling to a 100,000 very unique consumers, right? I mean, fact that they collecting Porsche tractors makes them different and unique. And, having a customer service attitude, and aligning with your values is so, so critical. That fascinates me.  

What is what is in the future? What, what do you see next for auto insurance classic cars? I mean, there is crazy things is happening right now with auto insurance. Just in general, here in the United States, all states announced they are going to lay off thousands of people, yesterday, or the day before. They announced, I mean, literally thousands of layoffs as they enter into a very interesting price war was state farm. And so, in the main line auto insurance business, you are seeing, discounts, rebates, a really, really, really strange market where the pricing is getting, very, very competitive and they are slashing jobs. There is talk about auto insurance completely changing anyway, because of the sharing economy and people not wanting to own cars, futurist like Peter Diamandis are predicting that car ownership will be dead by 2026. I think that is maybe in major Metro areas. He does not know Texas very well.  

DESIREE: They are like Germany because Germany is “-“ 

JAMES: They are car crazy. I mean, right. I mean, this is the “-“ 

DESIREE: “-“ all the technologies “-“ 

JAMES: Yeah, the home of the Autobahn. I mean, but still car ownership is down 10% in major Metro areas where Uber and Lyft have been president it is down 10% in the last decade, with people under the age of 35. So, there is a record number of 16-year old’s choosing not to get driver’s licenses and to defer getting their license until they are in their late teens or early twenties. There are some wild things at play right now in auto insurance. What is in the future in general, and what is in the future for you in your company? 

DESIREE: I mean, I always think about that, all this thing that happened, everyone is talking about it. This is fast. And if you, if you go 10 years back then at this moment, everyone should be driving electric cars. But the reality is not that everyone is driving electric cars. And the reality it is not that adapted that there is only 50% of the cars. So, the change in this specific area, I think it is not going also fast, but a change is coming. So that is a fact. I believe that in specific way of car insurance and the whole market, I think this drop in solution will be coming more and more. You want to have this all-in solution, you do not want to have, okay, I have this car and then I have to care about the insurance so that everything is getting more together.  

And also, the whole aspect of mobility and mobility is sharing. Mobility is my car. It is all sorts of, take a bus, take a train. Everything will be more globally and more connected with an insurance solution on top. So that is my personal belief. But I am not a believer of over 10 years, there is no classic cars anymore and it is forbidden because of the forbidden because of the climate change and stuff like that. I mean, there always will be people who can afford. They have enough money for their passion, and to afford their passion and they will be also ready and able to pay extra money for the whole climate situation, so that is little bit, that would be also going on.  

But things will be changing in the way of that it will be more user centric and people will be more at ease you know, and if I look at me, I will decide in which way I want to choose my solution. I want to talk with you. I want to go online. I want to do that. I want to tap instant with my phone, with my glasses, with my watch. It is more, it is this whole integrated thing, but of course you have to think about this whole, a classic car and climate change combination. What could be the next thing, but it would be solution and it will go on because sometimes it is also good if the things are changing, so you have to pivot. 

JAMES: Okay. Yeah. I am with you. It is going to be a rapidly changing market either way. I mean, auto appears to be really under undergoing a more rapid change than homeowners insurance, or renters or other policies. Rob, final question. 

ROB: Yeah, Desiree, I am just curious, to extend on James’s question. What do you think the future of InsureTech is going to be? I know, you sat down with Sir Nicholas of Costco. You also recorded a podcast with the Denise Garth at Majesco as well on the Future of Insurance. I know you support InsureTech’s and startups and look to incorporate them and their offerings that OCC. I have talked to some founders that said that business has never been better, and others are struggling and some that have been closed up shop. So just kind of curious what your thoughts are on, InsureTech going forward.  

DESIREE: I am quite in a personal way. I am happy that this whole InsureTech industry was raising, and it brings a change in the whole industry. I think that is quite the right way because the customer focus is now on and big companies have to rethink a lot of things. But I think it always needs both way. You have to have the old companies. The old insurance industry with all the knowing of knowledge and the H Aisle angel-tech and together, it will be formed the future. It is not that, or that. That is what I believe, but I love it if people are trying something new and they believe that at some point insurance will be sexy. And then it is like easy for everyone in a digital way, and I am excited about that. And so, I am also supporting the whole InsureTech industry because I am also a part of that, so yeah.  

JAMES: Yeah. Rob, any final comments before we jump into a couple of quick news articles?  

ROB: Yeah. No, just so great to have you on. I appreciate your time and your perspective. And, it is very, very inspiring. I am embarrassed to be the oldest person on this podcast. I am 45, but it is wonderful. I think we all have a passion about what is ahead in the future. So yeah, quickly let us, you already kind of touched on, I think the big news item of the week, James, which is the Allstate layoffs. I guess my question to you is, is that the first of many announcements that we are going to see from some of the big auto and motor insurers? 

JAMES: Yeah, this feels, gosh, it feels a little premature. It feels a little bit like a snap reaction. There were auto credits were going out because people were not driving. So, you enter this phase where people just stopped driving and I think, they probably stopped paying their premiums. I think that is my, I mean, cause I just do not feel like the carriers just reacted instantly. Other people are not driving. We will just sort of, I think that there was, there started to be some pressure on payments and delayed payments and defer, and so, they started rolling out these 25%, 20, 25% credits that they were issuing out to their members, in the way of premium credits. And, it kind of set off a price war. When you saw one carrier did it, then another carrier did it and another carrier did it, but the reality is that when you look at it, and this was a fascinating article, Rob, from a couple of 3 or 4 days ago, severity has increased. The size of the claims as larger. People are being more reckless right now. 

Now whether it is because they are saying I am going to die anyway from Coronavirus, so I am going to drive like a fool, or, and you got to combo this with the fact that police are really under scrutiny right now. Maybe there is a bit of a sense of lawlessness and, I have noticed this when I am driving around that people are, they are speeding a lot more right now. I mean, they are going a lot faster. There were less cars on the road. And so, the accidents, when I am looking at their total incurred per accident, it is higher. I mean, it is a higher severity accident, higher total incurred. So, the unfortunate reality is if they are given a 25% credit, severity is going up, the number of claims might be lower, but their total incurred across all claims is either the same or higher.  

Someone has got to give. They are in deep trouble if they are engaging in this crazy price war on premiums. That is a lot of speculation cause they made these moves fast before we could collect a lot of data on what was going on with severity and occurrences and all this stuff that we like to look at. And so that was a bit of a surprising move. So, it is not at a price war. There is a race to bottom, which is kind of strange because the rest of the insurance market has gotten super hard. So, like commercial PNC has gotten super-duper hard, premiums are going up. Aviation is up 20 to 30% right now. I only know cause I am in the middle of renewal. So, aviation is super hard, PNC is super hard. And then like the auto industry turned into jello, like crazy Rob. I mean, what do you think is driving this?  

ROB: Oh, I think some of the short-term things that you mentioned are true. I think less traffic is causing people to speed more. The roads are clearer than they have ever been. I have been saying this for a while, and even at my time at USAA that the auto insurer market was very stagnant. Growing at 1 to 2% a year. And most of the costs, when you are talking about it, like a 30, 25 to 30% expense ratio, once the costs are fixed, they are in IT systems, they are in your employees. So, the marginal cost of adding 1 more car is not that great. You do not need 30% expenses to add 1 more car year to your book. So, if that 1 to 2% growth turns to 1 to 2% negative growth, and particularly if you have said mid-single digits, negative growth, all of a sudden trimming expenses is going to be the most important.  

So, I do wonder if this will last beyond the pandemic and some of these short-term trends. It is something that when I was at USAA, I know I was advocating that, hey, we need to be looking at other lines of business, like motorcycle insurance, right. People are not going to automate their motorcycle. They are not going to get an Uber for motorcycles. Boats, aviation, flood insurance, like other product lines to help offset the shrinking revenue. I think at the time I was at USAA, 60% of the insurance revenue was from auto, 40% was property. And so how are you going to replace, if that 60% goes down to 30% of your revenue so Desiree I am curious. So, things are opening up more in Europe than they are here in the States, it is very a kind of patchwork here, but I know you will be able to start traveling across country borders here in the next week or so. How have you seen motor insurance trends and more people back on the roads, if things kind of recovering or do you think the industry is fundamentally changed? 

DESIREE: All the things is going well quite well. And there are much, much more people back on the road, again with the cars so it was at the beginning of the lockdown. So, we were alone on the streets and that is over. So, you are like in a normal situation. And, and also, we did not feel like the business is going down and stuff like that. In the beginning, there was 2 weeks shock, and everything went, so what happened, but then, everything was quite going well. And we are like, we gone up. So, it is yeah, but it is still, I mean, it is, I think the industry, the people, everyone is like in this, what happened next and how it is also the economics, how everything is rebuilding and I think that the impact right now is not that big because it is a new situation. And now it is revealed a little bit further to impact long term. That will be a big thing. And the only thing that we have also, at OCC. So, the claims for thief. So, cars that disappear are increased. 

JAMES: Really? 

DESIREE: Yes. And that is for me also like a signal, okay. Some people needs money.  

JAMES: I was wondering when we were going to start seeing Larceny cases. I was wondering when grand theft auto and all this was going to start up ticking because at some point you got to wonder when home break-ins are going to start increasing and auto theft, of course, auto theft is a good but easier thefts than a home break in.  

DESIREE: Yeah, and do you have a lot of cars? They were like a dog in a garage and stuff like that. That is something that we have to watch out and rebuild the situation. 

JAMES: Sure. Yeah. We have seen an uptick in cases of just quick smash and grabs. What shall we call them? Smash and grab. Break the window, take the stuff out. And certainly people, a lot of people leave their cars unlocked in their driveways and people are just walking up and opening the door and taking stuff out of the vehicles. And, so I am an adamant militant garage parker. So, all vehicles will be in the garage with the doors closed every night, always have been, the garage is used for cars, not for storage. But that is not the typical US American. I do not know if it is a typical German.  

DESIREE: It is about attitude. 

JAMES: Yeah, protect the asset. Sunlight does more to damage machines than anything else. You know, then of course, wind rain, ice hail, they are all terrible. We had some big hailstorms. We had a bunch of auto claims for hail 2 weeks ago. I am sure that hail is a nightmare for you because of the frequency. 

DESIREE: Yes. It is better down in a carport or garage hat you have locked space. And also, a lot of people are jealous of cars like that. They go and take a key and make damage. 

JAMES: Yeah, there is a lot of that for sure. And it can be tough. So that was the big news out there. Of course, we talked last week about the Lemonade IPO, which is going to be making its way through. There will be a pretty steady stream of news around this, just to see how the market reacts. The stock market is either in freefall or on a rocket ship, depending on the day. We are talking about 800-1000 point–swings daily. Today retail sales were up in the United States and there is a new steroid treatment being pioneered in the UK that, evidently has a big impact on severe coronavirus cases. I want to remind everybody just to look at the data on Coronavirus.  

19 out of 20 people that get coronavirus never even go to the hospital that is recover at home by themselves. It is a pretty substantial number. And then of the people who do go to the hospital, they are only a very small percentage end up in the ICU and then have them a very, and what they are doing is they are treating the cases that get severe. And so, you still have Remdesivir, which is that experimental treatment that has been expanding its trials. It is proven to be pretty effective. There is a new antibody treatment coming out and there is also this very commonly, widely available steroid treatment in the UK that proved pretty effective at reducing by a third severe cases. So that is having a big impact on markets. Of course, that impacts insurance because it impacts the insurance carriers investment returns. I only can imagine what an insurance carriers, and chief investment officers having to deal with daily basis, seeing assets swing this much. I, myself am completely out of the market. I exited before all this stuff collapsed and, I am staying out. No, there is no way shape or form I am equipped to deal with a 1000-point swings in the market. So, your home cheese here is staying out of the game.  

So, Desiree, thank you so much for a great discussion about a line of business that we do not think about a lot but is important. And, you know, all insurance lines are important, and I do not think insurance is boring. I think it is pretty awesome. I think it is pretty awesome every time I get in my plane, because if I did not have insurance, I would not be able to fly. It is not a federal requirement. I simply would not put myself at that much risk. If I did not have one, someone sharing the burden with me. And I pay a premium for that privilege. And so, I think insurance is pretty awesome because it allows us to buy classic cars and share the risk. It allows us to go buy a plane and fly, even if it is in an old one, like I have. It allows us to do these things. And so, life insurance is awesome, and your company is enabling a really important, part of the market. So, thanks for, leading the company and everything that you are doing, in insurance. And, and as a mother of twins, I always wanted twins. I have two girls, but I always wanted twin girls. And so, congratulations on getting the opportunity. I know that sounds crazy, but I thought it would be fun to have twins. 

DESIREE: It is.  

JAMES: Scarily, right? 

DESIREE: Yeah, thanks for the invitation. I was happy to be here and it nice to be on. 

JAMES: Awesome. Awesome. Awesome. And Rob, thank you so much for joining today as always to cohost. I appreciate you, brother. 

ROB: Absolutely. Great episode. Thanks James, thanks Desiree. Great to meet you. Thanks so much for sharing.  

JAMES: Yeah. So, with that “-“ 

DESIREE: In the future, we connect in reality. 

JAMES: Yes. 

ROB: Yes. In person at some point somewhere in the world. 

JAMES: Yeah. We will do a live video show where we can, we will all wear these sports caster headphones, and then we will talk on the mikes and we will hang out at InsureTech Connect or Dig in or at something fun somewhere other than a house. We are good to go there. And then we are going to have a drink without worrying about a virus. Oh, my goodness. I cannot wait for that moment. It will be fun.  

So, thank you again for joining us today for this episode of the InsurTech Geek Podcast, powered by JBKnowledge is all about technologies transforming and disrupting the insurance world. I have been your host, James Benham. This has been my cohost, Rob Galbraith, endofinsurance.com. A big thanks to Jim Greenly, a podcast producer & Kara Dalton-Arro, our creative producer. And thank you for joining us today.

We are taking you on a journey through insurance tech. So, enjoy the ride. Keep geeking out. Talk to you next time.