Talking Automation

INTRO

On episode 8 of the InsurTech Geek Podcast, talking about Homeowner’s Insurance, Technology, Disruption, Automation, and More with Sean Harper, Co-founder, and CEO of Kin.

The InsurTech Geek 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 with our own research and development team in technology that we see changing the industry. We are taking you on a journey through insurance tech, so enjoy the ride and geek out!

INTERVIEW

JAMES: What a day, what a day, what day. Always a good day to geek out on insurance technology. I am your host, James Benham the InsurTech geek, and we are here back again after a few weeks off, getting our ducks in a row, getting our interviews lined up, researching new technology, reaching out to the industry. There is a lot is going on in InsureTech. So, we are enjoyed being with you for the first 7 episodes and episode 8 will not disappoint. I had a phenomenal discussion with Sean Harper, the co-founder, and CEO of Kin. All about automation, technology, homeowner’s insurance, technology companies becoming insurance companies. There is so much to unpack in this episode. I am here with Sean Harper from Kin, joining us from beautiful, yet cold and windy Chicago. Sean, how are you doing?

SEAN: I am well, how are you?

JAMES: Doing really- great. Excited to have you on, excited to talk about insurance and tech, maybe talk about Chicago a little bit. Are you in Chicago today?

SEAN: I am in Chicago today. It is very cold. There is snow on the ground.

JAMES: Yes, there is snow on the ground. So, I checked the weather report before I talk to you, and I was like, oh yeah, he is having a very different day than I am. I woke up and it was in the mid-60s, of course, you got to love Texas in the wintertime. So, what is new in Chicago, The Cubs did not make the playoffs, so I am deeply saddened. Are you a Cubs fan or a White Sox fan or other?

SEAN: You know I grew up in Milwaukee, so I am a Brewers fan.

JAMES: Ah, ah, oh the nemesis. I went to the Brewer stadium for the first time this year and had a great time. Now, they were not playing the Cups, which is why I had a great time, right? So, I was just there to enjoy baseball. Hell, of a stadium, hell of a city, Milwaukee. There is a lot of fun stuff to do there.

SEAN: There is. It is kind of cool. You know I have not spent a ton of time there since I moved away when I was 18, but it is fun. It is good for a day trip; it is like a kind of like a mini Chicago. They got Summerfest, they have got the Ballpark and yeah, it is cool. It is a good day trip from Chicago.

JAMES: It is like a miniature Chicago. Have you ever been to a safe house in Milwaukee?

SEAN: Oh yeah of course. We have a safe house in Chicago now too.

JAMES: Oh awesome. I have to go to it. I had fun at that place. It is like a, for those of you who are listening and have not heard of it, it is like a spy bar/restaurant. And there is secret stuff all over the bar, and a secret entrance. Its, you have to go into an alleyway, and you go into like an office building entrance and give them the passcode. It is a trip of, went to Milwaukee recently, went to the safe house and had a great time. So that is a cool place. You went to the University of Chicago. What did you study there?

SEAN: I studied ComPsych and E-Com.

JAMES: Oh, that is a good mix of two majors.

SEAN: Yeah it was good. I was a super nerdy kid growing up, and so I learned to program when I was little, and so it was natural that I will do ComPsych in college, but you know the University of Chicago it was like amazing economics pedigree. It is like more Nobel Prize winners and economics than any other institution by like a factor of eight or something. So, I got kind of sucked into that. I just found E-Com a cool way to think about the world. And I got to study with some of the famous professors. Like I had a class with a Gary Becker, a class with Robert Fogal, a couple of classes with Steve Levitt from Freakonomics which was super cool. It was fun. It is like a very-very nerdy school, but I was an early kid, so it worked for me.

JAMES: Yeah absolutely. I as well may have claimed and currently claimed to be super nerdy, I have to ask the question. Star Trek or Star Wars?

SEAN: Star Wars.

JAMES: Ah. Okay. We can move past this.

SEAN: Lucas, my cofounder is definitely on the other side of this argument.

JAMES: Yeah you know my show producer Jim Greenlee is hard chore Star Wars and I am militant Star Trek. You know Star Trek is a science fiction and Star Wars is fantasy, right? It was a long time ago in a galaxy far away so it’s historical fiction, and so come on that’s kind of what my argument is like if you into technology and the future, Star Trek is your jam but the fantasy element of Star Wars is amazing. You know what I like about both series, is they make you dream of a different way of living and doing things. And I think that is pretty important. When you are sitting in the University of Chicago and getting a ComPsych degree in economics. I went to Texas A&M University and got degrees in accounting and information systems management. I was just kind of obsessed with there is got to be a better way to do everything. This has to have pervaded your brain a bit too wanted to jump into insurance and try and shake it up. What led you on a path from a ComPsych economics degree to being in InsureTech or I think you started four companies. So, what were these different companies and what did you do, and what led you here?

SEAN: Yeah so, I started few, and Lucas and I both started as consultants after school. So, I was a BCG at a strategy consulting firm and Lucas was Accenture and it was just an awesome job because you get to see a little bit of everything. So, we both did a bunch of work in insurance because insurance companies are huge consumers of consulting work and I just thought it was interesting. I did a bunch of other stuff in financial services stuff too, a lot of credit cards, some wealth management, some stock trading, some retail banking, and sort of by accident, while I was working as a consultant I started my first company with a friend of mine who I grew up with. And it was random. It had nothing to do with the stuff I was doing during the day. It was online, it was an E–Commerce company in a niche. We were the largest independent dealers of satellite radio accessories and replacers of parts. At the time we had Satellite radio, it was the fastest–growing consumer product”-“

JAMES: Yeah.

SEAN: But the reason I got into it was that my cofounder in that business, Taylor, was I huge Howard Stern fan, and his satellite radio broke and he could not find the power adapter, so we sort of didn’t expect that to go anywhere. It was fun for me to start that first business because I grew up coding, and I had a ComPsych degree and then got sucked into this management consulting. And I looked at myself after a few years and I was like gosh, I always thought I would be working in tech, but here I am spending all day doing spreadsheets and PowerPoints for banks. What is going on? So, doing that first business which was called TSS, I wrote every line of code. And it was the first time I have written code since I graduated from college and it was the first real production code that I had ever written. And that just got me back into it and from there I knew I could never go back. Consulting is a great spot to start your career, it is good for learning, but I just got hooked on making something new. I just love making things.

And so, out of that first business, I started another financial services business. It was a payment processing business and I did that for a few years. And raise some venture capital money, it was on a bigger scale than the first one, and we sold that to Groupon, right after Groupon went public. Then I started a business that did not work. We kind of gave up on it. It was a rental car business. With a pretty cool tech angle. I was sitting around with Lucas and we were trying to figure out what to do next. And one thing we wanted was to do another financial product. And the reason is that techy guys, we love that there are not being a physical thing. With insurance, all the financial services, are all done on a computer. You just moving data around. Generating contracts, and that appeals to us because we are good at computers. So, we just thought given what was going on in some of the other areas of financial services, Lucas’ previous business was a hedge fund software company that’s now part of NASDAQ but that is like for acquisitions later.

JAMES: Oh wow.

SEAN: And yeah, so we just wanted to do, we thought that given all the stuff that had happened in stock trading and payments and online lending that insurance was maybe a little bit behind. And that is what got us thinking about insurance and then we just did the lean startup thing you know. We quit our day jobs and started trying to figure out what the angle was that we wanted to pursue and tried a bunch of things. You know the first thing that we tried was, a little bit of tech–enabled retail brokerage. From there we learned some stuff and we decided that we wanted to go after homeowners and ensuring other buildings. The main reason was that the data that is available about a building has gotten so much better. So, in the old days, you had to have somebody local who knew about it all you would have to rely on the user to enter a lot of data about their home. And now, with the data that we can get out of aerial imagery, you know the street View imagery, government records, there is a ton of weather data that is available now that is was never available before. There is just so much that you could do it differently and rely much less on self-report data and much more on objective third–party data sources, so that got us fired up about home insurance.

JAMES: Yes. Because it is been very person people–intensive business.

SEAN: It is super people–intensive and if you look at expense ratios for homeowner’s insurance over you know the past 30 years, they have stayed the same. And that does not make sense to us. There is so much that can be automated there. It should be getting cheaper every year.

JAMES: Yeah it should be, theoretically. But there is a lot of people involved I mean. We were heavily involved 15 years ago in homeowner inspections. So whenever you underwrite a house you send an inspector out to check the roof out, check the building out and we would say at the time the technologist there, and I would say at the time man, one day there is going to be a robot or machine that replaces a lot of this work, whether it’s software robot or hardware robot and of course, drones have had a huge impact. Aerial imagery has had a huge impact. Photogrammetry areas had a huge impact on that entire business line, right?

SEAN: Oh absolutely. It is a huge factor in all of this.

JAMES: And aggregated public data sources. Back then we did not have, 15 years ago we did not have the sheer volume of aggregated data sources we have now. So, all these indicators kind of lead you to Kin, but Kin was not originally a carrier. How did it originally manifest itself?

SEAN: It was not, yeah so, we sort of started at the bottom and we climbed our way up. So we started as a tech–enabled BTL brokerage, then we started an MGA, we had access to another company’s paper, and on that we built, we built the beginnings of our core processing system of our policy admin system which is at the center of everything we do. It is the software. And we did that for, we were careful about listening to the industry and so the first thing that people told us where you were never going to be able to get customers. And we said like, we do not want to build this if we are not going to be able to get customers, what can we do to de–risk this? So that was why we started as an agency and we ran some market experience experiments and at the end of that, we said okay cool, we can get customers at a reasonable price. And people want a more tech–enabled way to get insurance.

And then what the people in the industry said was okay fine. You can get users, but they are not good users. These are bad users. They are the ones that going to have a lot of claims, they are bad risks, the good risks are all, you know have carrier relationship, have an agency relationship already, they don’t want this so that was when we formed the MGA to test the hypothesis as we went for about a year and a half, and at the end of it, we looked at the results and our loss ratio was much lower than what our peers and our geographies had and that got us into okay cool. We are writing profitable risks. We want to own some of that. There is money to be made there and there are all these other benefits. And that was about a year ago we started to form our first carrier and that went live a couple of months ago. It went to live in July and being a carrier helps us. It gives us a lower cost structure because we no longer have to pay the ransom of somebody’s license, it gives us a lot more control of how the insurance is purchased, it speeds us up a lot because when we were using somebody else’s license we always had to run things past them. And that slows us down. The part that makes us great is we have the tech platform, this analytics platform. You know it makes our decision-making cycles fast. So that got us excited about being a carrier and it is hard to set those things up though. You know we needed to get approval from the state regulator, and we needed to rain raise a bunch of capital that was different from the capital that we had raised so far.

JAMES: Yeah, it is not like tech capital. You are raising actual working capital for a carrier.

SEAN: It is different yeah. And we never could have raised, we had funded the company with like, West Coast like Silicon VC money up until that point. And those guys, they are not interested in putting up regulatory capital that is pretty safe but also earns a pretty low return. You know these guys are interested in rolling the dice in getting big returns.

JAMES: Yeah and again, being an MGA, you got to experience and see how well the risk was performing that you were writing. And you had a lot of indication data that hey, this is going to be a good risk. Your first state was Florida correct?

SEAN: My first state was Florida yeah.

JAMES: And so that is the only state right now that you are licensed as a carrier if I am correct? How is it going so far?

SEAN: Yeah you are correct. So, the carrier is live in Florida. It is a Florida domiciled carrier. It is going great. We love having full control over everything and we like having skin in the game, one thing we found was back in the MGA days, we would have to try so hard to convince a reinsurer for example that what we were doing made sense. And now because we have, our interests are aligned, it is much easier to convince them. Because they can see that we are putting our money where our mouth is, and it just makes things so much smoother to have that alignment of interest. So, we are happy to be a carrier, to control our destiny that way.

JAMES: Yeah and what you are part of is a broader movement amongst computer scientists I mean, you and I both started around the same time. We are only two years apart in age. We started around the same time writing code, going into consulting, building software and this is not the traditional path, right? Most software consultants end up just building code and then licensing that code to other companies. This is a completely different path. This is saying we are going to be a technology–first company, and by the way instead of selling to carriers, were going to be one. I mean that is a big step, right? It is not like you are Duck Creek or Guidewire where you’re building technology or licensing to other traditional insurance carriers, you are saying, you know what, we are going to build a lot of techs, but it is just going to be for us.

SEAN: Yeah that is exactly right. And we thought about that, the other path, of making software to sell is also interesting. The reason why we chose this was, we did not want to be tided. I think one of the big issues, maybe the biggest issue, that insurance companies and banks, these are the financial companies that have been around for a lifetime phase, is there, they have a lot of technical debt, and if you have that much, the process of moving off of the old stuff onto some new software is problematic. Those projects they always seem like they take longer than people expected, they end up being more expensive and therefore those companies think long and hard before embarking on that as they should. But for a startup like us, we did not want to be tied to that adoptions at all. We did not want to have to jump through all the hoops that it would require to get a big insurance company for example to adopt our software.

JAMES: Yeah.

SEAN: It is easier for us just to build it and become an insurance company.

JAMES: Yeah you know the song and dance, to convince a large insurance company to adopt a large enterprise package is a multiyear process.

SEAN: You got it!

JAMES: It is not fast.

SEAN: Yeah and if you look at the cost structure, if you look at the income statement of Guidewire or Salesforce or something, they spend a lot of their money doing sales and marketing, not writing code.

JAMES: Oh yeah. Most of their money. When you dig into it. Tell me, without obviously getting into stuff that is proprietary that you do not want to talk about on a podcast, What’s the secret sauce that you can talk about publicly with Kin? What makes you this much better? You are reporting on your website, that you can save up to 20% over traditional homeowners carriers. That is a pretty big claim. What is the secret sauce that is driving this and how are you doing it?

SEAN: Yeah, it is three parts. The first bit is just having a modern system. If you look at like, industry, if you look at the words benchmark for example for homeowner’s insurance companies, they spent 6% of their premiums on IT. Yet, if you go and hang out at one of those companies, you run into a bunch of really- smart people, actuaries, data scientists, etc. And they are all like pretty frustrated that all their best ideas cannot be implemented very quickly. And usually, the reason is, are these like a CIT system. So, part of it is just having an efficient core processing system that is one, low cost, and two, allows us to be nimble in the market, and respond to things as they are happening. The 2nd is the direct model. You know one of the things that appeal to us about homeowner’s insurance is that it is a relatively simple product, yet it is still 94% sold through retail agencies. And the numbers are amazing. Like if there are more retail agencies in the US then there are fast–food restaurants. Which to me is crazy because I eat fast food twice a day.

JAMES: Yeah, that is a lot of retail. That is incredible. I have never heard that statistic.

SEAN: Yeah, it is amazing. I was shocked when I saw that and how often do people go and visit the retail agency anymore? The reality is if you hang out at one of those places you will see that most of their business is being done over the phone and email and so having, you end up with a high cost, distributed call center which isn’t a good way to run things. So you know 94% of homeowners are sold through retail brokers, and if you look at the guys that use the broker channel, like an old state, for example, they are spending almost 20% of the premium they collect on agents and other marketing stuff vs if you look at the guys who were direct like Geico for example, there are spending more like 6%. So, part of if it is just the business model thing. We are going direct to consumers, and we are great at marketing, and that allows us to have a lower cost structure.

Also, for the lower cost structure from IT. And then the third thing is we are taking advantage of data sources that are not used by a lot of the older competitors. So, because we have more data, no we are not cheaper so that having a lower cost structure makes us on average cheaper, but we are also using more data, so we are more segmented. So, for some users, we will end up being more expensive because we think the market is underpricing but their risk. But for folks, there are also folks who we think the market is overpricing their risk, and we outdated to support that hypothesis, and that allows us to be a great deal for those customers.

JAMES: Yeah. And what about claims?

SEAN: Claims, we have our claims organization. We have a head of claims who is a very experienced guy from the industry who he in his previous geeks, had always been sort of frustrated about how the tech worked, on the claim side, and thought that there was a lot that could be done. So, we have our own claims system, to keep track of the claims. It is nice because it is very tightly integrated with the policy systems, we have all of the data and all of the past communications with the user. It is all in one place.

JAMES: Nice.

SEAN: And then we make a lot of use of sort of load, at the end of the day a lot claims for going to require somebody to go and visit, you know for us insuring homes, they can be complicated claims. But a lot of them can also be triaged out before that. And you can have enough data to adjust the claim just from aerial and satellite imagery and from photos that are taken by the user.

JAMES: The big word. Auto adjudication.

SEAN: You got it. You got it. And for us, it is not even that we are trusting the machine to make the decision, but we are using the machine to gather the data more efficiently.

JAMES: Yeah, some claims are so small you can auto adjudicate. You can truly let the machine make the decision and pay them out. I mean, those do happen, right?

SEAN: Absolutely. And it will happen more and more over time as we collectively get more data and get more experience doing this.

JAMES: Do you have an entire machine learning team?

SEAN: Not really. It is just part of our engineering team.

JAMES: Machine learning, deep learning subset of machine learning, a subset of AI, just for the non-initiated out there. I hate saying AI

SEAN: Sounds like Terminator, right?

JAMES: It does and as a lifelong software developer I just feel like too many marketing people have completely hijacked everything about AI to turn it into something that it’s not and they turned expert systems into if-then statements in what appears to be AI and it’s not. So, I would like to just lay it out truthfully. For the listening public that we are talking about typically about machine learning. This has got to be part of claims and underwriting. In particular when you are aggregating datasets as large as you are. You are pulling in a ton of public data sources and then a ton of licensed private data sources that you have to buy, correct?

SEAN: Yeah absolutely. The other thing is a big part of is marketing.

JAMES: Yeah, yeah.

SEAN: Given how much of the cost structure of insurance is spent on marketing, it is one of the biggest levers. It is also one of the areas where you have the most data. Because if you just think about you know claims, we do not have that many claims, so there is not that much data to crunch and you can afford to have your claims be like somewhat more expensive. Underwriting, we do underwrite a lot more customers then have claims of course, but in marketing, we are thinking about the universe. There is like an infinite amount of data out there about people and homes that can be used to select which customers we want to market to because we think that is a good risk and likely to convert.

JAMES: Sure. I mean you have access to the tax rolls, which alone will tell you where the properties are, how much they are worth, and who owns them. I mean that is, hello.

SEAN: Yeah

JAMES: That’s a phenomenal marketing database to tap into.

SEAN: Absolutely and it is huge. Like you could not make use of it without machine learning. It is just too big.

JAMES: Yeah. And then pairing that up with a bunch of other data sets that are out there around individuals. Their net income, their tax, you know the status, there is a lot of things about the people that own the houses that you can use for marketing as well. So, it’s interesting you bring that up Sean because that’s an angle that not a lot of people that have come onto the show that I have talked to have talked about, they talk about claims, auto adjudication, they talk about streamlining the claim process being much smaller climb teams, they talk about real-time underwriting of houses, you know pull the data set in, give you a price immediately, ask 3 questions instead of 30. I mean, come on. How sick are you of having to fill out 30-page forms to get home insurance? It is insane, right? You having to answer a bunch of questions that they should already know.

SEAN: Oh absolutely. They should know it and if you look at what state of the art in other industries, your credit card is a good example. If Capital–One can send me an offer of credit, tell me how the line is and what the cost is going to be, and all I have to do is click on it once, to get it, that is much riskier transaction then ensuring somebody’s home, yet homeowners insurance still has these long forms you got to fill out. A lot of local inspection you might need to do, there is manual underwriting involved a lot of the times and it just, that is unnecessary, and the users do not like it. People hate filling out forms.

JAMES: I despise it. I refuse to fill out forms for insurance. I think that a lot of brokers do not want to be a broker in this definition of the word, as an agent or broker. They want their clients to do all the work for them by filling out all the forms and they just want to pass the forms on. And that irritates me. And particularly when I am having to repeat the same data entry every single year. Are you kidding me? As an agent, you do not have all the data I entered last year. So, you can just ask me to validate and verify it? And you know so it is getting ridiculous for the end customer. Nobody likes filling forms out. What happens all too often with agents is that they make you fill out the same information year of the year after year. They do not store it. They do not help you fill the forms out they just what they a lot of them want to do, is have you fill the stuff out and then they will submit it. And this is not all agents, this is just, I think it is a material percentage of them. That wants to do as little work as possible. Not shopping around a whole lot and collect some premium. They are also not exactly incentivized to help you save money, right? They are getting a cut of your premiums so if they help you save money, they reducing their revenue, right?

SEAN: That’s true. I think incentive problems with agents or pretty significant. And it is not to say that there are not good agents.

JAMES: Yeah, it does not mean that they are not a good agent, it just means that they have the same incentive problems that the agent business that their realtors have when they are representing a buy–side transaction. They are not incentivized to help you get the price of the house down because it cuts their commission, so why would they try hard to beat that person down on the value of their house when it’s just going to reduce so much money they get paid?

SEAN: Totally.

JAMES: The same problem applies with agents. There are really- good agents out there. And I serve a good purpose but there is also a lot of ones who aren’t going to necessarily get the job done the way the clients wanted to and I, unfortunately, have been represented by a few of those and so I’ve had to continually change who represents me on the agency side, because of that very problem. Now, in your case, you are direct to the market. You do not have that misalignment incentive problem. Your incentive and the customer‘s incentive are fairly aligned, right?

SEAN: They are. We are we think they are much more aligned. So not having the agent in the middle, allows having a lower cost structure. It also, I think, allows us to have a better user experience and one thing that is surprising to a lot of people is that ours is not entirely an online process. Like the majority of our customers do you interact with the person. There is just a very different kind of interaction. If you look at our online reviews you will see people like Kin because it’s affordable, they like Kin because it’s easy to sign up for, and they can fiddle around with the coverages and they think that is neat and they like that but they also say I love talking to Emma, or whoever it was in customer service side because our customer service reps are just here to help. And they are not yet to sell you anything. They are not yet to cross–sell you. There are not here to make money off of business. They are here because they love helping the user and that is how we manage them. So, it is a pretty different customer experience than dealing with a retail agent.

JAMES: Yeah that is awesome. So, let us get back to tech. You have your development teams, your own BA’s, QA’s, developers, DBA’s, you got full stack tech development at Kin and you build your underwriting and claims system. Is that correct?

SEAN: Yip, yeah. We built one system that does everything from marketing through to claims.

JAMES: So, CRM as well? So, you are not using outside CRM?

SEAN: Yeah, CRM is built into our policy system.

JAMES: As it probably should be, yeah.

SEAN: We do not use Stock Flake. We use 59 for telecom stuff. So, we did not build our telecom stack, but the telecom is built into the CRM which is built into the policy system.

JAMES: That’s awesome. So, without, I don’t want to geek out like to hardcore and getting into which program languages and which JavaScript languages you selected because that’s probably not going to be of interest to a lot of people listening, so I will save all my super geeky technical questions for an offline conversation with you. Let us talk about the business model. You have relaunched, you went from being an MGA to a carrier. You relaunched. You have one state active. What is next? What are the plans? What is the world domination set up for Kin?

SEAN: We think that what we do works everywhere, but we also think it works better in places where the weather is worse. So, we focused on this catastrophe exposed places. You know first of all because that is where you need insurance, you are here in Illinois people do not pay that much attention to their insurance because the types of weather that we are exposed to, are not that extreme. But in Florida where a lot of our customers are in California which is a state will be launching soon, you’ve got hurricanes and you’ve got fires it’s just a much bigger part of people’s lives in insurance, so we wanted to solve a problem that people cared about. That is what makes us happy as entrepreneurs. You know there are also a bunch of things about that. We are making use of all this advanced data and it gives us a bigger edge in places where the weather is riskier.

You know you could be good or not so good with the data in Wisconsin and you might not know for a long period. But being good with data versus being bad with data in Florida or California right now, that makes a huge difference and it makes an immediate one. So, we will be launching in a bunch of more catastrophe exposed states over the next year and we will be doing that with our own insurance company which allows us to be a lot more flexibility and gives us better margins and lower cost structure.

JAMES: That’s awesome.

SEAN: We are also launching more products. You know we started with a homeowners insurance products, H03 but a lot of people, they don’t need an HO3 you know they live in a condo or maybe, we have a lot of customers now that live in manufactured homes, which is the big market an underserved market. So, we are having mobile home products, we are launching our flood product, so there is a lot of product expansion within our existing states as well.

JAMES: So, there are a few companies like yours out there. A couple comes to mind. Hippo, Lemonade, that is tech–first companies that also carry risk. Do you think that this is the next generation of all insurance companies the traditional carriers like, are they going to be able to leap or are they going to have to fundamentally transform their organizations to keep up with the next generation of insurance carriers?

SEAN: Yeah so, I always, I am like hesitant to diss on the holding insurance companies because insurance was one of the first industries to start using computers. And that is cool. The problem, I think, is that there has not been enough entry and exit. It is so hard to start an insurance company, that it is easy if you are in this industry to become complacent. And when you are complacent you are not facing those competitive forces to get better every year. You do not necessarily need to be innovative on the tech side. You can just sort of rely on the same tech you have been relying on for 10, 20, 30, or 40 years. Keep things more or less the same and you will still be alright. They are going to have to respond. You know the advantages of starting with a clean sheet of paper are so significant that us and our peers, I think are going to have a healthy influence on the market as a whole like force the existing competitors to up their game. And they are going to have to do a bunch of layers like they are going to have to probably do some acquisitions. They are going to have to, you know maybe start over from scratch, some stuff that instead of just building layer on top of layer, they are going to have to think of a different then they have in the past.

JAMES: Yeah, so it is going to a fundamental rethinking. I too do not even one of diss on existing players, or just assume that they are not going to be able to transform because a lot of these insurance companies have done two things I have seen. They’ve started investment arms, all they are starting to invest in the very companies afraid that might disrupt them so they can have a stake in those companies and then they have also started wholly owned subsidiaries that in some way shape or form, directly compete with their line of business. So, we are seeing some progressive traditional line carriers take bold steps both in investments and spin–offs to cry to try and keep up with us. But I think they are writing on the wall is fairly clear that the way things have been done before and in insurance is just not going to be tenable simply because price points going to drop below a point, they can sustain with a traditional carrier model.

SEAN: I think that is right. You know we looked at stock trading brokerage as an interesting parallel. You saw how quickly the stock trading brokerage model was the same for probably 100 years and then just within the last 15, you have a whole new set of players and now it is free. You can trade stocks for nothing. With Robin Hood and everyone is had to copy them and so I think once you start on this sort of modern tech innovation cycle and you get people competing, it can drive things, it can drive change a lot faster. It is like everything is slow until it hits and then all of a sudden everything speeds up.

JAMES: Yeah, and then, well when customers start adopting it in mass, the floodgates are already open.

SEAN: They will not have a choice.

JAMES: Yeah. It is just not going to be an option. So, what is next? Let us kind of wrap the, let us put a nice bow on the discussion here. What is the next big step? Where are you going? Obviously, state expansion and, that is just business next steps. You are obviously going to go after multiline multi states. Why would you not? If you have the underpinnings to right the business and you get the licenses, why wouldn’t you do that, but technologically, where are you going with the future of the business and the future of Kin?

SEAN: We are always just trying to drive efficiencies. One thing that is kind of funny is, we have the system that we are proud of. We have been in business for three years period we have rewritten the system 3 times from scratch already.

JAMES: Yeah.

SEAN: We are always looking for a better way through do things and yeah, it’s cool to talk about new states and new product lines, because it’s something that everybody understands, but a lot is going on behind the scenes too, in terms of just making parts of the system more efficient, taking advantage of new data sources, doing things in a better way so that we can serve. Because what we want to do is serve many-many more customers. We are a small insurance company now, we expect that we will be a big one within five years, and we want to do that without having to add a lot of staff. And so, our tech, as we as good as we think it is now is going to have to get a lot better between now and then or we will not be able to accomplish that objective.

JAMES: Yeah, innovator’s dilemma. We build a sizable system for betting on tendering that we bought in 2006 and sold it in 2018. And in those 12 years, we had to rewrite the entire thing soup to nuts three full times. And even then, if you get a certain number of years under your belt, and a certain number of users, you end up with the same burdens of the legacy that the traditional carriers have right now. And so it’s interesting when you are young and smaller in a startup-land in technology, it’s much easier to adapt and change, and to be innovative and to move forward with your customer base but once you get a big enough customer base, big enough employee base, all of a sudden it gets much more challenging. People becoming a little more intractable about change, right?

SEAN: You got it.

JAMES: You’ve got to guard against the very inertia of doing nothing that traditional carriers do right?

SEAN: Absolutely. That is very true.

JAMES: So, how do you do it? How do you keep all of your people on their toes and how do you keep your company moving forward for the next 10 years?

SEAN: I do not know. You know it is not a problem we have right now. Right now, we are still young and hungry and operating from more or less a blank sheet of paper, you know this is a problem that we are going to have to face in 10 years. We will see, you know. I do think part of it is tech has just got better, it is easier with, the way that modern tech works, with automated testing and it’s in the cloud and there’s really good version control and use leveraging a lot of open source stuff and it just makes it easier to not accumulate a ton of technical debt. But you do still have to watch out for it.

JAMES: Hey, you and I both got started, we graduated from college within two years of each other so, you will understand this point of reference. From 2001 we started driving JBKnowledge to now, we write approximately 70% less lines of code. It is “-“

SEAN: It does not surprise me. It is pretty cool though.

JAMES: Yeah, it is staggering when you consider how much less code, we write than when we used to. Just to get the same feature functionality, because of intrinsic functionality, all the intrinsic functions that are baked in now, all the frameworks you are setting on top of, all the automation and testing period. I would say that even software companies’ bespoke solution providers that are doing customer development. They are a pretty massive pending disruption in the area of automated software development. The simple fact is that it is getting easier and easier and easier to write less and less and less code and get more and more and more output. I mean productivity, software development productivity is going through the roof because there is so much that we have to write. You know when I started writing software in 1991, I had to code my dropdown menus. I had to code my cursor selection. I had to code user interface elements that come with a signal line of code now.

SEAN: Yeah, you were drawing pixels on a screen back then.

JAMES: Yes. We were drawing pixels on a screen, I was defining my loops and procedures, I had to build my own data storage. We studied different sort algorithms like the bubble sort, remember this?

SEAN: Yeah, of course.

JAMES: Yeah, I mean, you had to define which search algorithm you are going to define after your designated a data storage format and then you parch that data storage and brought it into software and then you designated a memory storage format that kind of rare link list you are going to put it into, and by the way, pause, to me blockchain is just an encrypted link list right? When I looked at it the first time, I am like oh yeah, it is like a link list for public–key encryption. You know it is brilliant, but it is not like the first time, it is just the first time for people that took all these technologies and put them together.

SEAN: Which is cool, which is cool.

JAMES: Oh, it is super cool. I mean block chain is amazing. And you got to admit. What I want is a certificate of insurance blockchain so we can all just write COI’s, and everybody knows what everybody has, and then it all gets updated in real–time and everybody has a syndicated copy. I mean, I do not know if it is ever going to happen because of the misaligned interest on knowing who has what insurance and largely because of trial lawyers using that to figure out who to sue. But I mean, there is so much less code that we write, but you still will inevitably hit a technical debt wall at some point. I just hope it is not nearly as severe as it used to be right. So exciting times over at Kin. Thank you for taking the time to talk to us about your background and history too, I want to point out, let us go back to the beginning, I like to finish where we start. This little TSS radio company that you all started in 2004 that you cofound, ended up being number 94 on the INK 500 in 2009 and this turned into a real thing and by the way, I used to love Series radio. I still listen to satellite radio and I remember the days when you had to buy third party equipment to put it in your car. I think it is so cool that you were that involved, in this little radio company that ended up being kind of a big deal, right?

SEAN: Yeah. Yeah, it was cool. You know sometimes you start something, and it just takes on a life of its own. And that was a fun business. Because we were providing started simple and we were providing something people needed and we just sort of followed that.

JAMES: Which kind of brings you do the whole point of Kin. You are trying to solve pain, right, and that’s what unfortunately in software, we don’t spend enough time in school focusing on discovering problems, you know because we spent our entire time in the business college in computer science spent on developing the solution and what excites me about Kin is that you have studied the problem. And the problem is there are too much friction and too much overhead in home insurance and you are trying to tackle it. And so, kudos to you for that.

SEAN: Thank you.

JAMES: So, any closing comments for our listeners? Where can I go to get in more information and what do you want to leave them with?

SEAN: Yeah absolutely. The best place to get information is at kin.com and we are available in an increasing number of catastrophe exposed areas.

JAMES: So, you are going to be all over the Gulf Coast, and the Atlantic seaboard then?

SEAN: And California.

JAMES: Yeah and California. I mean my gosh. They have been wrecked by a bunch of natural disasters, haven’t they?

SEAN: Those fires yeah.

JAMES: Yeah, it is significant. It seems like it is either a fire or a mudslide or an earthquake over there and then, of course, I grew up in south Louisiana so for us, we did not even think about it when another hurricane came through. It was just a good excuse for a party. And if you’ve never been to a hurricane party Sean, I want to encourage you, when you open a business in Louisiana, when you have your first hurricane, I want you to go down to your new coverage area in advance of the hurricane and go party with some south Louisianans in advance or large storms because they know how to get ready for a storm. That is all I am saying.

SEAN: I believe it.

JAMES: Yeah, they do. They empty the fridge of all the food they now are going to go bad because they are going to lose power for four days. They get all the booze out, and I have blowouts before this hurricanes come through and if you didn’t know that, trust me you want to go to Louisiana before a hurricane and go have some hurricane parties with people because they are truly epic and it also teaches you how to make the best of a tough situation. Those people are truly resilient in their ability to respond to storms. If you have not heard of the Cajun Navy, you will hear about it if you go down to Louisiana for the first time, when you guys decide to open up a business in that state. It is a group of volunteer Cajuns that takes the flatboats out of the Hurricanes and go rescue people and get them out of their houses.

SEAN: That is incredible.

JAMES: They are incredible. They are awesome, they take care of their people and there is no place like it so good luck to you, I hope it goes good with Kin, and thanks for taking time to talk with us today on the insured take podcast.

SEAN: Thank you.

JAMES: And that is all for our episode of InsurTech Geek Podcast powered by JBKnowledge. We are all about technology that is transforming and disrupting the Insurance world. I have been your host, James Benham jamesbenham.com.

Thanks for joining us this week. I look forward to talking to you soon.