Building Infrastructure For The Future Of Insurance, One API At A Time

INTERVIEW

JBKnowledge podcast network. On episode 39 of the InsurTech Geek podcast, talking about building infrastructure for the insurance industry, one API at a time with Louw Hopley from Root. 

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 into the technology we see changing the industry. We are taking you on a journey through insurance tech, so enjoy the ride, and geek out! 

JAMES: Happy Halloween! As we record this, it is Friday, October the 30th. It is time for a little Halloween action. Got the decorations up. The kids decorated themselves. Ready for some Candy Palooza. I do not know what it is going to be like, you know COVID Halloween. I have no idea what this is going to look like, Rob but we are going to give it a shot. Everybody has already got masks on anyway. We will just roll with it, right? 

ROB: It would be very easy to dress up as a burglar or cowboy or whatever. That would be easy.  

JAMES: Bring it on, right? Louw is in Cape Town, South Africa. Louw, does South Africa do Halloween? Is this a thing? 

LOUW: Yeah, some of it. I also have no clue what is going to happen this year. People are claiming they are going to lock themselves in, but I am sure some of them will sneak out to get some sweets. It is a mix.  

JAMES: We are going to be handing candy out, but we are going to do it distanced. We are going to have the bowls out in the front and people can come and just take their candy and that kind of stuff. We are going to have some fun. It will all be good. With us today, we have our esteemed guest. I am so excited to have him, Louw Hopley from Root, live from Cape Town, South Africa. Again, he is a co-founder and CEO of Root. Before we talk to Louw, I just want to remind everybody that you can subscribe to the InsurTech Geek podcast. If you are watching this on video, on LinkedIn, or Facebook Live, Twitter, Periscope Live, you can text GeekOut to 66866 and make sure you never miss an episode. We will email you the show notes and the links and the articles and everything that we talk about right there. Just make sure you text that. Now back to Louw Hopley from Root. Louw again, thank you for being on the show. I want to start by talking about you and then we will talk about your company. You got a degree in electrical engineering, from Stellenbosch University. What made you want to go into EE as a field of study and then what led you into InsureTech?  

LOUW: That is a deep question. It started quite a bit before studying for my electronic engineering degree. I started at a young age, somewhere in high school building apps. That was roughly when the app store opened up. The iOS app store. I got this knack to start realizing I can put apps out there that people can use, and it was quite interesting. I started building anything I could find that might solve a problem out there. The first app was some mic recording thing where you plug your phone into the audio, you plug your iPhone into this audio speaker, any equipment like that and it will just act as a mic. From there, it kind of built up. When I finished school, I got to the position of, do I go out there and build things, or do I first go study and learn, like get to meet more people network and then learn more skills to build stuff at a higher grade? I was battling between building robotics versus building software versus like, where should I go. Electronic engineering with computer science was the middle way because you get a fair bit of electronic experience, a fair bit of robotics, but deep dive into the software itself and how that works. That is essentially why I went to study. But it is always for me in a way like a means to an end, to obtain the skills so I can just build more things that help people out there. Where I went to study, I have been building products and company things, attempting my hand at making money out of software since that young age.  

Insurance came much later. I have always had this thing of saying I will never go into banking or insurance. As an engineer, as a developer, I will just never touch financial services. It is this complex world. I do not want to go there. I want to build cool things that people understand and it is easy to use. What happened was I started building apps, iPhone apps, at scale, started building a company out that does that. We identified this nice arbitrage where talent in South Africa, as the engineering talent, is pretty much the same grade or quality that you get in the states. People who study computer science or engineering here are just as skilled and competent as people studying at some of the top tier universities abroad. But what we can do from here is we can build apps and sell them into the US market. That is where my first proper venture went. I started this app agency, started getting clients on board, and started building them apps and whatnot, but very quickly realized that building consumer apps for someone else by the hour is not a fun business to be in, because you are just building someone else’s dream. Getting paid by the hour. You make a lot of money because of this albatross, but essentially you are not getting anywhere. You are not adding much value to the world other than just your time.  

That is when I pivoted my thinking into, I need to be building a product or a platform or a solution or something that can scale by itself. Ultimately an ideally empowers other people to add even more value such as you have got this exponential factor where if you are building something, you can enable many more people to build things which adds a lot more value to the world. That is how it progressed. I moved back to South Africa after building this company that I have scaled up. It was based in New York and San Francisco, but I have lost most of my American accent, after five years that I have been back in South Africa now. But I met up with an old friend of mine who has been building startups in South Africa. They have been building a few companies here specifically in FinTech, both in security and payments also one of the emerging markets, biggest crypto exchanges that just exited as well. We started talking about like, what problem is there to solve? What problem can I tackle that I can take on with the skill and experience I have got now, that will make this world better? 

Because of this deep financial experience that he has got, and all these insights already had massive partnerships with banks and insurance companies, because of all these other companies, that was just the clear thing. We just thought, cool, software’s hitting the world, developers are building the future, and this industry is boring. I did not want to go there as a developer because it was scary. Can I not fix that? Can I not make it better and easier for other developers to go in there and to enable them to do things? That is essentially how I got into insurance. Not because I am interested in insurance. Now I am completely interested because it is like a complex industry that I think can be solved, or so many things can be solved in there, but essentially it came down to making this more accessible to other people. That is how I got into insurance. I do not want to go too deep into the company now, but that is roughly my history.  

JAMES: And you bring up an interesting comment and that is about talent. Certainly, I feel the same way. There is a lot of amazing engineering talent all over the world. Then you do not have to be in Silicon Valley, to get access to it. I have an office in South Africa and two in Argentina and enjoy working in those countries. Enjoy the talent and the people, and I have continually been amazed and pleasantly surprised at the quality of talent we have been able to recruit in places of the world that, let us just say many Americans said I would not be able to find great talent. Many people told me I would not be able to have high-quality sales and marketing people, selling into the US market from there and they were wrong. We have just absolutely amazing people that help us with that. Same thing with engineering and design. We have US staff and we love them; and they do a great job at what their job is, but it is truly a global labor market now in every way, shape, and form. I am excited to hear that you have found that, and I would love to let Rob kind of deep dive now that you have told us about yourself and how you got into this. Let Rob deep dive on Root. Rob? 

ROB: Thanks, James. You are right. Some of the folks I have met from South Africa, both on the insurer side and the InsureTech side, I think it kind of is under the radar? It is a bit of a hidden gem out there that a lot of people do not know about the thriving community in South Africa is maybe not as big as some other parts, but a lot of passion and a lot of great innovation that is going on. Tell us about Root, and I have to be clear. This is the week that Root as the auto insurer here in the United States had its big IPO. We are going to talk about that in our news section later. But we are talking about a different Root just to clarify for all of our watchers and listeners. How did you come up with a name? What does Root do? Tell us about your company.  

LOUW: I will start with the name, just to clarify that part. It is a bit of a tricky challenge that we are facing. The name Root started from the technical term. If you are on your computer and you are on your command line, busy editing, you get root access. Which means you get admin privilege through the machine. And that is how we got to the name of the company. We are giving people, developers this admin access to the court, the crux of this insurance industry. Which is a bit different from the Root insurance that just IPO’D or planning to IPO. Their name is around “route,” like traffic roads essentially. It is a bit of a different take. Same name. We will figure that one out over the next wall. What we are building is essentially like a low code, end to end insurance platform that enables innovators, these developers that have been talking about to build, sell, and manage their insurance products out there. We package all the complexities of insurance. The insurance value chain, all the parts you need from the premium collection, all the way through to claims management and pretty much administration. Everything that you find in the value chain, we package that and have a very sleek, easy to use API on top of that.  

And with that, we enable companies, especially large enterprises, companies that already have customers or large customer bases that are not insurance companies themselves. We essentially enable them to become insurance companies. We enable them to sell very customer–centric products that are tailored for the consumer in the market, as opposed to these general one size fits all type of products that are out there. Our view is essential that the world will shift quite a lot from just being incumbent insurers that are powering insurance to these big brands that already have customer affinity and customer relationships, offering insurance, and being able to enhance their experience and tie them in with subscription products and stuff that. But ultimately, we are building the infrastructure. We see it as we are building the tools that are powering the future of insurance.  

ROB: That is fascinating, Louw. How did you guys come up with this concept or what was it where you saw that this was an opportunity just because it has been a stagnant market that has been dominated by insurers that has been around for decades, if not centuries? Is this something that you heard? Tell us how did you decide upon this opportunity? What was the market opening you saw?  

LOUW: We did not see it as clearly as, hey, there is a problem, let us target that specific problem. We had it as this is a very monolithic environment, which is very hard for innovators to participate in this ecosystem. That was like a high-level thesis, and I mean to go practical into that, is very hard. South Africa has a very mature insurance market. The regulatory system is very mature, very advanced. One of the insurers in South Africa that are their majority of the market, where they power other brands, they sell insurance, their name is Guardrisk. We essentially built a strong relationship with them early on in our company’s life. Almost when we were, call it market discovery to some extent. We took this first–principles approach to understanding insurance. This was me, an engineer, no insurance experience, other than the odd policy I have got a short-term policy. I did not know how stuff works. I know the basic mechanics. I do not know what actuaries do. Times have changed now, but back then. 

Guardrisk gave us access to their client base. The power by far, the majority of these retailers and banks, and other organizations selling insurance in the country. We could deep dive to understand exactly what these companies are doing. How does it work practically? Who is answering the phone when you are phoning on your policy? Where do you issue the policy? Where does my money go when I am paying my premium? In whose bank account does it land? Who is the actuary that prices this product? What do they do when they price it? Where does the pricing model go? What happens if they want to update the pricing model? What happens with all these premiums? Who pays the claim? All those questions we could explore and try and understand. We have had the privilege to have access to all this information in production. We could just go in and interrogate people on the ground in call centers, in the operations teams, everything just to learn as much as possible. That was our first–principles approach to just try and understand as much as possible of what on earth insurance actually is.  

And to try and identify what matters versus what are all the things that people claim matters. If you walk into insurance companies, everybody has ideas and opinions on how stuff should work. But my view on that is that it is problematic in the sense that it is because of everybody in insurance, that insurance is looking the way it is. It is kind of the machine has got all this momentum. It is just moving in the same direction. Our view was something is wrong. We need to take a different approach to this. Anyway, we spent that time, learned a lot. With this thesis of enabling innovators with developers, we tried to then launch a short-term device cover insurance product. We chose a very crappy name, put together a very crappy logo just to the insurer thought it was real. Then we tried to push it through all their processes to launch this new, call it innovative startup that just sold a very boring device cover product. We went through all their compliance processes. They tuned us on all the things and all our processes and everything. That was purely just to learn what does it take for any other startup to launch?  

And honestly, it is very painful. I would just advise almost any person who takes on that journey to brace for it because it is not an easy one if you want to launch a new product. If you are looking at Lemonade and these companies, kudos to them, for pushing through. We went through all the processes to launch that, but actually what we did was building out this very basic device covered product, was building out the platform that can power this product. Building out essentially an API layer, so always have this thing on your front end to split from your back end. Your API powers everything, and then your front end is just a very thin middle layer. Because ideally in the future, our clients need to build their front ends and their customer engagement interfaces and whatnot. That is the journey. We iterate that rapidly weekly for three years. With all that incremental improvement and changes and learnings, we added to the platform. That is how we built into what we are now.  

With that being said and all that exploring all these customers and companies also was essentially finding that common denominator across how insurance products work. Also, the common denominator around what do people want to do and insurance that they currently cannot. A lot of those learnings are both into and packaged into how the platform today works, which is positioned around making it easier to launch products, but it is essentially easier to launch the type of products that people want in the industry, as opposed to just the existing products that you see on the shelf today.  

JAMES: Let us get a little more specific. Your target customer, is it a mainline mainstay insurance carrier who is looking to have a digital direct to consumer offering? They are trapped in their existing walls of working through broker channels and offering their traditional projects through traditional distribution. You are there to enable them, they still carry the risk right, so they are still going to carry the paper, but you are going to enable them to write, bind, manage claims, et cetera. You are enabling these existing companies to make the digital transformation by outsourcing. You are almost like middleware for them to get out to direct to consumer? 

LOUW: That is true. But our go-to–market strategy is more focused on the companies that are not insurance companies. That we typically partner with insurance companies, but the reason I am saying that it is true, is insurance companies are the tree running into that problem. They are tied to their broker networks. Like 98% of the products are still sold through these legacy channels, whether it is a call center doing outbound sales or it is brokers on the ground, or third party intermediaries selling their products. They are stuck in that world. Our mission is actually to help these other large organizations. But with that, we just helping the large insurers as well. In South Africa with are empowering quite a few retailers, which are these companies selling anything from a t-shirt or clothing through to kitchenware and homeware, but we are also empowering quite a few insurance companies and their digital arms, or divisions, that are not pushing hard to deploy new, interesting products to market when they are going direct to consumer. 

Essentially, it is also not completely tide to just direct consumer. Can also tie to sell it through the other channels that you want, but that is the primary focus is building the products that are quite interesting and dynamic in a way that your consumers would want. Whether that is embedding it into their workflows or if you are a retailer embedding it into your online experience, your e-commerce experience. Whether you are if you are a car dealership, embedding it into your whole maintenance process, and everything like that. It is quite a full gambit. We also have clients that are small startups that I have been struggling just to get to market because they have got some insight. Sometimes they have got a partnership with someone of great distribution. They have got this, some actuaries coming from a big insurance company and they want to launch a new interesting product to market, that caters to a very specific need. But for them to do that, they need to find a system that would cater for their product. The nuances in it are too bespoke, and they need to find an insurer that they can partner with, and then they need to solve all the other processes.  

What we do is we have got quite a few insurers now that we are partnered with that we connect them to, that they then work with to price the products, put it onto Root, and the platform. Then they can get to market a lot faster. I used to use this analogy of this 80/20 rule. Seemed like the current market people are spending maybe 80% of the mind share on keeping the lights on and solving the existing problems that they have just to get to market and 20% on the actual consumer and customer and the product they are giving to the customer. We are flipping that around. We are allowing them to now spend 80% of the time on their customer and how they get to the customer and how they package their product and the other 20% on all the other complexities. If that makes sense. 

JAMES: You do not have to give us specific customers, but who is already buying this from you and what are they doing with it? I understand. You are giving me the big picture. Let us get nitty-gritty like, who is spending money with you and how are they deploying it?  

LOUW: I will give you a few interesting examples. We have got from our enterprise clients; we have got someone Mr. Price who is a national retailer in South Africa. They have got everything from clothing stores, to homeware and a bunch of other things, and they are quite a big lifestyle brand. Pretty much everybody here in this country knows them quite well. They sell a whole broad range of products. They essentially started with credit. Giving crystal credit to customers, which they would then, due to regulations, or forced essentially to sell credit life insurance, if you swipe your store card in the branch, there is just insurance tide to that. Then very quickly learned that they can start selling a whole range of other products. They have got their financial service provider licensed. They have partnered with an insurer. They are selling a range of about 11 or 12 products to their customers that are running on Root. That is that includes term life cover, credit life cover, accident cover, hospital cash cover, device cover, multiple versions of device cover. Some upfront, some not. They cannot collect the money in the stores versus on their credit system versus, bank collections. That is only an example of an enterprise client. 

The products they are selling are, what I find interesting, is because they already have this customer relationship there, the customer is already walking the store to buy a t-shirt as an example. They do not need to spend much on marketing or any of the other distribution costs that an insurance company needs to spend. Their insurance products a lot less loaded so they can offer the same cover. Like funeral cover, which is big in South Africa, or this life cover, they can sell it for a lot less than what the typical insurer can. Because they did not have to load it with all that commission and marketing expenses that pretty much anybody else needs to do. They do not have to pay a broker on the front that 20% commission to get this product sold. That is one example. 

Another example is a subsidiary of this Guardrisk partner of ours. CarSure and they sell a very simplistic product, which is super useful. It is called CarSure. What that does is if you are traveling and you get to the airport and you rent a car, let us say you go to Avis, for example, and you are renting a car, then there is always this excess amount that you are liable for. That might be the first, let us say $200 or so that if you get into an accident, you are liable for that. They provide insurance that covers that excess amount. The way they used to sell this product is through a call center. When you rent a car from Avis, they would phone you and say, hey, you have just rented a car. Would you be keen to buy this cover? And if you say yes, then you need to read your credit card number over the phone, which is a bit odd in South Africa. It is not a normal thing to do. But when they move their product over to Root and configure it and set it up, they could change some of the rules and they could make it so that customers could buy it online on a website, which they could deploy very quickly.  

And while they were running this, we had someone who played with WhatsApp bots. They just played with Twilio’s APIs and it was quite cool to see how you can build a bot quite easily these days. Someone just spotted them and went, hey, you have got this product, your product has an API in front of it now, why do not you just embed that into a WhatsApp bot? And from this first idea to bring life in the market with a WhatsApp bot selling this insurance cover, that was two weeks. It was a record–breaking time. Then after that launch, we realized it is the only WhatsApp bot selling insurance in South Africa, that is automated that does not go to some agent and takes 24 hours to complete. It is real–time. Right there. That is another example of rapid innovation that gets unlocked when you have got your product on a platform like this with an API that powers it. There are a few other examples like that. That is just to give you an idea. It is innovation, both on the product complexity, but it is also innovation on just how you reach your customers and how you make it easier for them to buy and to find your product. 

JAMES: And sometimes there is implicit trust depending on the channel that you are having them sign up through. They do not like people calling them and asking for a credit card number, but they are okay with a WhatsApp bot. It is wild, but they are like, well, this is normal, and this feels normal and this feels trusted. There are a lot of scam artists out there. My gosh, there is a plethora of scam artists. You have do have to be careful, but it is fascinating. But who is the paper behind all this product? When you have someone like Mr. Price come in and they are offering all this insurance, who is carrying all the risk? 

JAMES: That would be someone like Guardrisk. The insurance company. They essentially white label the license if I can call it that. They are essentially like an analog platform to some extent. Very good at powering other companies to sell insurance, but just from the compliance and regulatory and actuarial point of view. There are a few others as well that are running on our platform. How that would work is Mr. Price would be selling those products. That policy wording would have a big Mr. Price logo on it, but in the fine script, you will just read it is underwritten by Guardrisk. Clause and claims will be handled by Mr. Price. But ultimately the risks sit with Guardrisk. Now, what is interesting in South Africa though is, this model is called a cell captive insurance model. What that means is essentially you could, when you are renting their license, you could take part in the risk yourself. It is almost a profit share agreement that you have. But just too much larger extent.  

These companies can be acting like insurance companies to a large extent. They put in their capital. Guardrisk underwrites the risk, you see their name on the policy wording at the bottom, but behind Guardrisk, someone like Mr. Price could still be playing there or any of the other players with the clients that they have. This enables someone, a big company to almost act as an insurance company. End to end, even risk included. But that is not the only client we deal with. That is just a good example here in South Africa. There are also some of the other large insurers that will just purely writing their products, pushing their products and their brand. Then there is no weird nuance to that. 

JAMES: Certainly, a lot of lines are being blurred right now about who is an insurance company and who is selling it and who is taking the risk. Then who is the middleware on technology between the people that are buying, people who are offloading risk, and people who are buying risk. The lines are getting fuzzier for sure for me. Rob?  

ROB: I think it is fascinating. There is this disintermediation; and you are chopping up all the different parts of the value chain. Then, depending on what parts they want to play or not play, you can fill in the gaps. One of the things that you talked about, on your LinkedIn pages, there are the compliance requirements, regulatory requirements, reporting requirements. You guys are cloud–based, so you do not have to have an on-prem installation so that you can stand up pretty quickly. Maybe you can just kind of, for our listeners, what things does Root do and what things do you not do? Like, they would have to arrange on their own, just so people have some clarity on if they were thinking about partnering with you, what are the products and services you offer? What would you potentially take care of? Or what gaps would they have to fill on their own?  

LOUW: We are a peer technology player. What we do about technology is we embed or integrate third-party services across the industry that matters. Whether it is someone that does premium collection. Got quite a few payment processors, plugged into the platform already. A few insurers that are running, powered by the platform. What we bring to the table is essentially the interconnectedness of all these services. If you want to launch a product, let us say you are a big brand out there and you want to launch a new product, we essentially help you solve all the missing dots. You come with the idea, but you might also come with the pricing, but if you do not come with the pricing, we will connect you with the right people who can help you with that. Whether that is the insurance company or a re-insurance partner that we have, or just an outsourced actuarial consultancy.  

Then what happens is you build up product onto Root. We help you with that. Once that product is on the platform, we also make sure that the platforms reporting requirements to the insurance company behind it are there. We plug into the insurance company’s data warehousing, with the underwriters data warehousing, we plug into their claims operations teams where that is needed. If a reinsurer is involved, we plug into the reinsures claims operations as well. If you have got big claims that need to be paid out, that can escalate on Root directly to the reinsurer, they can process it on Root, directly. The only thing you need to bring to the table is ideally customers that you can sell to because half the insurance companies are not interested to play. Sometimes they would, but I think they have burned their fingers quite a lot, generally what we see across the market. Access to distribution, to customers, and the ability to serve those customers. To build that front end or to build that go to market strategy.  

I think that is truly the only things you need if you want to be using Root. From a regulatory point of view, in our early experiments in exploration, we went down the path of fully taking on the regulatory risk as well. We have got our financial service provider licensed. We thought we can power brands to just start selling without being regulated. I think we could probably legally pull it off, but from a business risk and just a maintenance point of view, it is just not worth our while. We pulled back on that and decided if you are selling and you need to be a financial service provider, you are ultimately dealing with the customers and the consumers on the ground, and there are regulations for that for a reason. The insurer has their bespoke compliance requirements. What we do is we familiarize with that and we package it to super easy for you to get used to it and to build your products and your customer experiences compliantly. But we cannot ultimately take responsibility for that. Because either yourself or the insurer are the regulated parties involved. But we do try to break down the barriers to get out to market. A lot of that just manifest literally in cheat sheets and stuff on how to, if you are building a product, here is a cheat sheet on all this stuff you should cater for. As soon as we learned somethings are incorrect, we add it to the list and then we evolved the list. 

ROB: I love the fact that anybody that has access to customers is looking for a way to improve that customer experience or have a deeper relationship with them. They think an insurance offering might be something that their customers would value and provide. They can partner with you in consultation, you can figure out the rest is what I am hearing. Is that is that accurate?  

LOUW: That is pretty accurate. What we are finding is also is, the market is very heterogeneous. But it is essential that everybody comes with their expertise or parts . Someone might pitch up and say, they have got pricing and they have got a payment provider. Or they come with pricing and they do not have a payment provider and they have got claims processing capability. Then we say, let us connect you to an insurer that can do credit card processing, for example. We were not opinionated on what building blocks you should be using, but we make sure we have got an inventory of building blocks available for you to use almost out of the box as far as we can help.  

ROB: Super helpful. Very insightful. James? 

JAMES: Let us talk about the difference between the US and South Africa. Then when I talk about what is next because you have operated in both. What is the difference between trying to execute the model you are trying to execute and South Africa or the United States?  

LOUW: I have not executed or done insurance in the United States. Just a full disclaimer there, but I have spent quite a lot of time trying to understand what on earth is going on there? And the biggest learning I have got so far is that it is every state is essentially its own country when you are talking jurisdiction or regulations.  

JAMES: Yes, it is. 

LOUW: The United States is a bit from our point of view a complex thing. The nice thing, however, the way we are now today in our operation is that we are outside of that regulation layer. Like I just mentioned last week, it operates across the States. The only real regulations applying are, essentially around data compliance, but that is just, it will be building any SAS software and you are going to be regulated on that front. So far that is our experience. I do think the United States market has quite a lot of opportunity there. Also, because it is scattered like that, you have a lot of inefficiency in the system. The inefficiencies where we play it is like automating and optimizing stuff and making it more streamlined. There is a lot of opportunities there. It is just about finding the right partners, who we can partner with, and help and enable on that side. I do not think the actual regulations are that different as a whole. The market is a very seminar on a lot of fronts. 

JAMES: But the US is a market of 50 markets. 

LOUW: It is also a massive market. If you look at total premium growth and premium in the States versus the rest of the world, it is gigantic.  

JAMES: The state of Texas alone has a $1.6 trillion GDP. Then you look at how much insurance they buy. Just Texas, California, and New York. If you just only go to three States, then you are going to dwarf most of Europe. It is pretty wild, but the regulatory picture is confusing at best. It can be quite a hurdle for many companies to get past. All right. What does the future look like for you? Because I am a software guy. You are a software guy. I have been writing software since 1991. Written a lot of code in my day. What technologically speaking are you doing better or different? And what does the future look like for your technology? 

LOUW: That is a good question. Also wish I have been writing more code recently. That comes with building a company as you build less code. What we are doing differently to pretty much most companies I have seen out there, there is a lot of companies popping up now enabling companies to sell insurance or making it easier, across the world. There are a few in the US, a few in Europe as well. But the one thing that we do differently is that we are not opinionated on how the products should look or work. Our platform, for example, is not tied to short term or long-term insurance. A lot of these platforms can only do long term insurance, or they can only do short term insurance. It is agnostic to that. It is also agnostic to how you structure your products.  

The layperson way to explain this to people often is, insurance products are almost like a database table, or like an Excel table. You have got these columns, and the software says these columns need to exist. You need to build whatever product you are selling needs to fit into those columns. You need those fields captured. However, the way Root works are, if I can go a bit technical on this, it is unstructured. You can store any data on a policy. It is not limited to certain ways that benefits need to work or certain nesting of benefits on the product. If you want to build a product with 50 benefits that are leveled or tiered 10 levels deep, you can do that. The platform will allow you to do that. If you want your product to have benefits that can turn on and off at any point in time and be tied to the person driving their car, the platform can speak out and do that as well. We have got this little low code coding environment that fires code on many hooks in the policies‘ life cycle. You can use that to build in pretty much any insurance product that you can imagine. We have done that exercise, that thought experiment of playing with like, what are the most innovative insurance products in the world and what can they run on Root? And so far, we have been able to replicate all of them. 

The reason I am saying this is that is what the platform allows you to do. It does not limit you from deploying what you think is an innovative solution to the market. That is what we try and enable is not constraining it too much. That being said, everything else needs to be standardized. We limit everybody on everything else so that they have got nice guide rails to innovate within because also just the open canvas becomes too wide open and, ultimately limits people. What is next with that is, I think we are doing some pretty great stuff in South Africa. For us, it is a little Petri dish. We have proved the model here. It is now a matter of scaling the team, scaling execution. The amount of clients we launching on the enterprise in South Africa is pretty great. Pretty great companies out there. But I think if we just keep on doing what you are doing, we are on a pretty great trajectory to just become dominant in this market. But South Africa is a very small market. It is like, I think Germany is bigger than South Africa in insurance DWP. That is not to say the entire Europe is much bigger. For us, the next step now is it is twofold. One is to scale up South Africa, scale up our team, but then use that base and use that arbitrage.  

Like I mentioned earlier, the talent arbitrage, to kind of deploy into Europe and to go help companies in Europe launch. Our mission now is, and we reaching that, this is like our early next year plan is to actually go plant our flag on that side is to kind of find partners there, find reinsurers partners or software development partners. Those are typically the companies that we partner with a lot, is dev agencies that are building solutions for companies that when they need an insurance platform, we become the preferred one. We are looking for those types of companies to work with to help them also solve their customer needs. That is pretty much what is next.  

JAMES: That is awesome.  

LOUW: And it is short to medium term.  

JAMES: Yeah, exactly. Who knows, three or four years from now, but it is hard to peer around the corner sometimes technologically speaking. When I started writing code, we only had a new software version of programming languages once every three or four years, because they had to go through the book publishing cycle. Now we have got new frameworks of technology every few weeks. Dockers revisioning every few weeks, and Kubernetes is revisioning, Azure’s revisioning, .NET is a structured, unstructured data sources. They are all moving very quickly, which makes it a challenge to keep up with. But it also means that a few years from now, your platform could be sitting on fundamentally different architecture. I will tell you what, if you would have said to somebody a few years ago that we are going to de–structure all the data storage for insurance policies, they would have flipped their lid and start talking about first, second, and third form normalization of SQL data structures and, you are like, no. We just need to store this in unstructured so it can be flexible and move quickly. Of course, now unstructured data storage is a much more commonly accepted thing at the enterprise level. It is exciting. Rob, bring us home, wrap us up.  

ROB: I am just excited about what you guys are doing at Root and, there is a lot of companies out there to your point, Louw that may have an interest in being an insurance company, but they do not want to have to build their policy admin system, or claims system and set up their payments provider. That is the reason that there has been that barrier to entry and you guys help folks overcome that. Europe is a great place to start. A lot of strong reinsurers there. I think that makes a lot of sense. I just wish you the best of luck. How can folks find you if they are interested in learning more and exploring possible partnerships with Root? 

LOUW: Thanks, Rob. They can find us on our website, Root.co.za. You can contact us there. You can also just email me directly, that is louw@root.co.za. I did not go into detail on this, but a big part of our model is just building great partnerships with companies out there across the value system. If anybody is in that space, especially in Europe for now, I would be interested to talk just to learn from you and to see if there are any opportunities to work together or to evolve and advance insurance, in that space.  

ROB: Fantastic. James, you want to talk a little bit of news this week? 

JAMES: Yeah. I would love to hear your good stories. Let us start out talking about the other Root. What have you got Rob?  

ROB: As I mentioned, obviously we are thrilled to have Louw on talking about Root, but there is that small other company called Root Insurance that does auto insurance, auto telematics that listed their IPO this week, raised $724 million, I have got the story about that. Then there is also another story from Tech Crunch that talks about 3 lessons from Root’s IPO pricing. If you are in the InsureTech space, if you are a founder or an investor and looking about, InsureTechs, this is a great article and basically, insurance is still hot. That is the bottom line. There used to be some thought that, you had to be in the tech space, and you did not want to be a carrier, you did not want to carry the risks that were going to get poor valuations. But as we have seen with Lemonade, now with Root, that is not necessarily the case. Not sure if this is going to continue, but a lot of people have been, old man, yelling on the lawn about some of these InsureTech valuations, and they continue to be strong. 

Then the other thing, and I think this ties with our conversation, with Louw this week is Tesla, has become an insurance company this year. Elon Musk said in a recent quarterly earnings call that, he thinks, insurance could take up a big portion of the car business and estimated, possibly 30 to 40%. Do a quick back of the napkin math, 30%, of our current market cap of $391 billion for Tesla, that would easily, be larger than state farm’s market cap, which has only $42 million. Just a fascinating thing to think about.  

JAMES: Let us deal with one at a time. Roots IPO while they are getting decent prices, this is not exactly stock you want to buy. I want to point out for those of you who are our retail investors, or you have to wait until it IPO’s to buy it. You might want to hold off on buying stock as these things IPO. Root is down to 16% since the IPO. Just keep in mind that they hit these pretty big bumps. Remember that you can either do direct listing or you can get underwritten, and there is a lot of things. They raised a ton of money, but if you bought it right at IPO right now, you are sitting down 16%. And so just be careful with buying IPO stock, because some people who have a low basis in the $2 or $3 or $4 a share range did really well. But they did really well on your back if you bought it on IPO because it took a hit pretty quickly. Just a friendly reminder, and Lemonade, again, they raised a lot of money, but they are sitting at $49 a share right now. Their peak at IPO, remember they IPO’D over at IPO over at $81, they peaked at $84 and they are at $49. Just be careful with IPO investing in a big way, because it can be a scary dark world if you put a $100,000 or $200,000 or a $1, 000,000 in on an IPO and you lose $160,000 or $200,000 or $250,000 in the first few days.  

Those are uncomfortable joy rides unless you are just a steel stomach long-term investor. Be careful about these IPO’s and also shows you that, this market is going to be highly analytical on these when it comes to them posting financial results. Anyway, it is great for them. It is great that they can IPO. It is great that they get underwritten. It is great that they raise a lot of money. If you are looking to invest, I feel I a regulatory warning label, just be cautious because your investment may lose value and particular on IPO’s.  

The other one on Tesla. This is so interesting. I was looking at Volvo’s car subscription model the other day because they have been doing a lot of ads on Facebook and Twitter, and I saw like, subscribe to your Volvo. I was like, I got to check this out. They are bundling insurance in, right? And they are partnering for that insurance bundle, but you have got to think that they are going to see the amount of money that is going to flow through their company. They are just making a little referral hit and they are going to go, oh no! If cars do go subscription where you just subscribe to a car and the insurance is a bundle, which is entirely possible because that model is being floated and experimented with by major auto manufacturers, there is a chance that the auto companies become the biggest insurers on the planet. That is where they make their real money. To the extent that they might even start discounting their cars more because that is where they make their money. I will tell you what, the other one that Tesla’s is really messing your fellow…  

It is hard to call him a South African because he is actually a Canadian who was raised in South Africa and then went to the United States to finish school and run his business. I do not know if I just call him a Ca-South–Africa–American. I do not know what to call him, but Elon Musk; everybody’s favorite South African, is doing amazing things where he is trying to tie insurance and auto manufacturing and then ultimately, Rideshare. Because he said Rideshare is part of this into one company. Louw, you guys got to be proud of your man, Mr. Musk.  

LOUW: Definitely are. We are claiming him. 

JAMES: You are reclaiming him. You are not going to let Canada claim him and you are not going to let the United States claim him.  

LOUW: Yeah.  

JAMES: Because he is disrupting the entire space industry. It is almost he is ancillary businesses are bigger than the primary businesses, Louw. Starlink just launched another whole bevy of satellites. They are launching 40,000 satellites in the announced pricing this week at $99 a month for up to a hundred megs down, anywhere in the world. They are going to start with Canada and the Northern US, but then they are going global quickly. It almost is like, I have got this company that launches rockets, but the real value is over here in Starlink. I have got this company that manufactures cars, but the real value is going to be auto insurance. Right Louw, that is the big trick here, is it not? 

LOUW: I think all of the values are going to shift to being embedded. That is our view and insurance as well, insurance will become a big, embedded play, also auto insurance and pretty much all other industries that you are looking at. It is a matter of time. 

JAMES: Insurance and financing.  

LOUW: Essentially the whole FinTech suite. Financing credit, all the things that you are looking at.  

JAMES: Which means they will probably get into payments eventually, too. Why not? Apple partnered with Goldman Sachs, why would not Apple just buy Goldman at some level? You almost think that Apple should just buy Goldman and then go buy an insurer and then be done with it. Then Apple and Tesla should merge into the world’s largest consumer product company ever created. Whatever. What do I know? Rob, what else you got this week?  

ROB: Just, the fourth quarter, man, going into November. It is hard to believe that 2021 is almost here. By the time folks listen to this, the US election will be over. I do not know if we will know who the winner is or not. 

JAMES: We are not going to know.  

ROB: But just hang in there everyone. Appreciate everyone listening. We are staggering to the finish line of 2020.  

JAMES: It is like that picture with the cat that is hanging on and it says, hang in there. I feel that is what it is for 2020. It is a weird year. Now South Africans had some nutty quarantine procedures. For a while, you could not even go on a walk. 

LOUW: It was fun. It felt like a prison, but like, solitary confinement vibes, where you in your house, I cannot remember. You were allowed to only leave your house between 6:00 AM and 9:00 AM or something, which was quite ridiculous. Then you could only do essential stuff. You could go to the shops, to doctor the grocery shop, to buy food. You have to stand in your queue with your mask on, which I guess is normal across the world at this stage, and for the last 12 months. It was quite rough, and they banned alcohol. That they did from the start. They brought that back. This constantly this alcohol scare of like, hey, the liquor shops are going to stop again. Then everybody rushes through the stores, empties every single liquor store in the country, and then they do not close down. Two weeks later, they would reimplement the ban. It is amazing, everybody complains.  

But I think the country’s handling it pretty well because something that is different than the States is, people are kind of lenient on the law generally. If you are walking across the road, it is fine. In the state, someone will stop you if you walk across the road. They will literally put their hand in front of you and say like, whoa, there is a road. You are not at the zebra stripes or whatever you call it dude. Across the road. In South Africa, it is like, man, these laws, and I am allowed to do these things. I will just phone the wine farmer and go buy wine directly there and hide it in the booth or something. Not that I did any of that at all. Honestly.  

JAMES: It is an interesting deal. They did ban alcohol. That was the one I did not understand. We closed bars down here. But we did not ban the sale of alcohol. In fact, in Texas, Louw, just to show you how different the response was, in Texas, they opened up and allowed all restaurants to deliver drinks. Before you could not do that, you could not do drink delivery. Then the governor said, this is so popular. We are going to probably make it permanent that restaurants can sell their margarita’s through delivery services. The sale and delivery of alcohol went through the roof and they loosened all the restrictions on alcohol sales because they closed all the bars. I heard about that. It was such a strange thing to close.  

LOUW: The interesting effect of that was, it was very positive, I think. Might be a contrarian view in this country, but the hospital capacity or what would you call it? Essentially the hospitals emptied overnight. The number of people landing up in the hospital due to alcohol and drinking and overconsumption was so intense that when they started the ban it is as if the hospitals just got empty instantly. That is great for COVID when you are having ICU bed count problems and stuff that. Ultimately it was actually to lower the strain on the medical system.  

JAMES: I heard that was one of the reasons that was given. 

LOUW: It was true. My family’s in medicine and we saw the numbers. It was quite ridiculous. In the back of my head, I am getting like, maybe they should just continue this to some extent.  

JAMES: We tried going dry as a country here in the United States in the twenties. It did not go well. Illegal alcohol sales went through the roof. It just did not go well, but it has been interesting. Did y’all have a toilet paper running out in South Africa?  

LOUW: Totally. When I got to the store, the toilet paper was out. I bought these paper towels, the ones you keep in your kitchen. I have stocked up on that. Bought like 10 packs.  

JAMES: That is the most bizarre aspect of the human psyche that no one on any pandemic plan could have possibly predicted is that toilet paper would be the number one shortage item. On that note, we are going to wrap up this show. It has been great talking with you. I certainly enjoyed our conversation. I am excited about the future of Root. That is Root.co.za. Go check them out. Named after the root commands and a former Linux, CIS admin, I appreciate, you giving reference to root access. Super excited to have you on, and thanks for joining the show today. 

LOUW: Thank you, everybody. Thanks for your time.  

JAMES: Mr. Galbraith, most interesting man in insurance, no speaking engagements coming up, or do you have anything coming up where people can find you online? Any webinars, virtual engagements, what is going on?  

ROB: I have got a couple. I have got the Underwriting Innovation USA event for my intelligent insurer. I am the chairman of day one. It is a three-day event from November 10th through 12th. Check that out. Then also at the Reuters events, Future of Insurance USA, which is November 16th through 18th, I will be on a panel on the 17th. Check those out.  

JAMES: Awesome. And thanks for joining us today and thank you out there to everyone for joining us today for the InsurTech Geek podcast powered by JBKnowledge. It is all about technology that is transforming and disrupting the insurance world. I have been your host, James Benham, JamesBenham.com with co-host Rob Galbraith, endofinsurance.com. Big thanks to Jim Greenlee, our Podcast Producer, Kara Dalton-Arro, our Creative Producer, and Adéle Waldeck, our Transcriptionist. 

Thank you for joining us today.

We are taking you on a journey through insurance tech, so enjoy the ride and geek out.

See you next time!