Integrated Specialty Coverages with Matt Roselle from ISC

James BenhamOn episode 45 of the InsurTech Geek podcast, talking about integrated specialty coverages with Matt Roselle from ISC. The InsurTech E podcast powered by Jibby Knowledge is all about technology that's transforming and disrupting the insurance world. We'll be interviewing guests and doing deep dives into specific tech we see changing the industry. We're taking you on a journey through insurance tech. So enjoy the ride and geek out. Alright. Last show of the year. Last show of the year. Oh, man. It is, as we record this Friday, the December the eighteenth two thousand and twenty.

It's the last show of the dumpster fire year that has been 2020, and hopefully, we'll have all kinds of fun things that that happened next year that are positive and great and amazing. But alas, this year was a bit of a crazy one, and I am, like many, eagerly anticipating a a better 2021 where we can go out and hang out with our friends and not and not deal with all the all the stuff that we've been dealing with this year. But I'm really excited to close the year out with Matt Roselle from ISC that's integrated specialty coverages.

Matt's joining us from Carlsbad California. I just got to spend some time out in Carlsbad on the beach doing surf lessons living the SoCal lifestyle eating eating shrimp and french fries wrapped in a tortilla which evidently is a very Southern California thing to do. Matt, how are you doing today? Oh, doing great. Thanks for having me. Yeah. I love Southern California. I can see why you're probably so chilled out because you know, two and sunny every day will do that for you plus beautiful beaches and mountains and all kinds of, fun stuff to do outside the house.

I know I know even with COVID crazy, there's still a lot of fun stuff to do down there. Oh, absolutely. Yeah. We're just so fortunate to live here. It's amazing.

Matt RoselleYeah. So are you into surfing? I'm not because I actually grew up back east and spent a lot of my time in Colorado, fairly landlocked. But what's interesting is, you know, after I got settled in out here, just how many people are and grew up, you know, with surfboard strapped to their feet basically and, a lot of our staff. You know, I I it's funny. If I see folks arriving late, obviously, when we're back to work in normal times, I can tell that the surf's up and, you know, must be a good day on the waves for the for the team.

Yeah.

James BenhamRight? I mean, it's pretty much every day that I was out there. There were a lot of people out surfing, and I went I went about every other day. Mean, I agree. Yeah. Had a I had a great time. I was it was it was really spectacular. Great food. Great friends. It was awesome. So let's talk before we jump into talking about all things Insurtech, let's talk about you for a second. Sure. Tell me where were you born and raised? You said you were born and raised out east.

What'd you dream of doing when you were a kid and then what'd you end up studying?

Matt RoselleNo, great question. You know, was born actually in Southern New Jersey, spent a lot of time in Colorado and you know, I actually grew up in the industry. My dad's been a broker for about fifty years. He'd probably not be real pleased at me aging him like that, but you know, grew up in the industry, relocated as he kind of went through his career as an executive with a few different insurance companies. And, you know, ultimately, you know, I went to school at both Arizona State and University of Denver.

You know, my concentration was business, but ultimately I kind of went to college initially to play baseball. And in growing up, that's that was kinda my priority and focal point. Never totally envisioned that insurance would kinda be the calling, but obviously after, you know, unfortunately, the baseball days burned themselves out, It just seemed like a, you know, very, you know, stable industry, one with a lot of growth, really your own effort and energy truly dictates your future outcome. And, you know, it's treated me well for the last twenty years.

Yeah, it's funny. I really

James Benhamknew nothing about insurance. Like many people I got, I got, two degrees in business and never, never had a single class on insurance or anything about it or it's astounding because of all the other skills they teach you in college and business school. I have an underground accounting masters in MIS and they run you through accounting, finance, marketing management. They really do a pretty good job at major business schools of giving you a feel of what you need to know. Insurance is a huge part of business and, and there's really no coverage pun intended about insurance in business school.

And you got, you got a management degree from university of Denver. You went to Arizona state, but then you, you know, pretty soon after, well, immediately after your your, your management degree from Denver, you jumped straight straight into being an agent and reserve district manager over at farmers. We are farmers. And that was before the farmer, that was before they had that. But man, what a great, what a great branding campaign by the way for farmers. So what what'd you learn at farmers and, and, you know, because you were, you were there for a decade and then you went to a surety life and national agents and then Atlas.

And then for the last five years you've been at ISC. So, you know, walk me through what you learned at all those different companies about insurance and its role with technology.

Matt RoselleYeah, no, that, you know, my time at Farmers was amazing. I mean, my dad had been at Farmers, outstanding company, you know, really learned the basic blocking and tackling of property and casualty insurance is kind of my time went on there. You know, I got more active and involved in the small commercial segment and, you know, even from early days, I tried to find different methodologies to employ, you know, sort of pushing the parameters of technology and using, you know, automated lead services and, you know, using the internet to do the bulk of the recruiting that I did is I kind of evolved and started managing agents and recruiting and attracting agents into the business.

So, you know, even from those early days, I've always tried to incorporate, you know, whatever could be perceived as the cutting edge on the tech side, you know, and how it would translate into the insurance world. And, you know, again, very fortunate to get to relocate to Southern California and become part of what at the time was SIS, it's subsequently been acquired by ISC. You know, SIS had always had a proprietary platform that it delivered general liability insurance through. And in a similar time span to my arrival, a gentleman who's now one of our partners, his name's Eric Holcomb, became the Chief Technology Officer and he actually re architected our platform and it sits at the center of all the business that we do across the different segments.

And, you know, that has, you know, just put you know, sort of kerosene on the fire to our business and has really helped us to continue to grow. As times, you know, continued, we've obviously scaled the platform, brought in ancillary lines of business, a variety of different programs. And, you know, now we're evolving into using, you know, significantly more third party data sets in AI really throughout our entire underwriting process. And so, you know, obviously continuing to try to evolve and keep ahead of the curve using TAC in the insurance space.

James BenhamYeah. And that certainly the proliferation of readily available public data sets has been a revolution for insurance. If you if you really look at because it's not just there were a lot of things that had to collide to make this happen. Right? I mean, you had first off, you had to have the cloud. Talking about the very first company that used the phrase cloud was, I think it was called Fire Cloud back in 2000. So twenty years ago, this concept of shared infrastructure comes out, and then you have to get APIs, then you have to get then you have to get people just aggregating data, and you had to have non structured data storage too, because, like, not everything fits in a relational database when you're storing, like, exabytes of data.

And so there's there's like all this foundational technology that has to get established before you can actually get to the point where all of us can tap tap into multi exabyte data on on all these different industries. I mean, just the the the data on addresses is incredible. And then the data on every VIN on a car is available. And, you know, you just think about all the stuff people can own that they're gonna ensure. Now you have these massive databases. I'm a pilot. So the database of every airplane and who owns it and the specs on that airplane and what's involved and the, you know, integration with VREF, the valuation system.

There's all these data sets now that you can pull in. So when you when you run through underwriting now, you're seeing it's only contacting data sources and it's like 28 of them. It was like, oh my gosh. I mean, it's really a revolution. I feel like we kind of jumped the shark a little bit. I mean, what's the elevator pitch on ISC? Like if you had to sum it up in a sentence in an elevator for somebody, what is it? You know,

Matt RoselleISC is truly an InsurTech company, you know, program administrator in the small commercial line space focused on currently, you know, small contractors, long haul trucking,

James Benhamhospitality and property. You know, that I would say is the best, you know, kind of snapshot and, you know, delivering all of that through, you know, first in class or best in class technology. That's awesome. And some of your clients are getting pummeled right now. Some are not. Some are actually really, really, really busy. Truckers are really busy. Oh, yeah. Because they're hauling a lot of packages now. Delivery services are really busy. You know, it's it's interesting how it's like, you know, the economy's balloon squeeze one in and pushes out another.

Right? So have you have you had the have you had to do work this year to to rethink your business model or the data sources you tap into

Matt Rosellethe metrics that you use because COVID has so exacerbated certain parts of the economy? You know, we we certainly have. I mean, obviously we've continued to add a variety of different data sources and, you know, somewhat contemplative and dependent upon which segment of the, you know, different programs that we have. So looking at it, you know, trucking space, we've added a couple of few different other third party data validation points. And again, we've been fortunate to be availed additional capacity this year. And like you mentioned, it's we've seen significant growth in that vertical, but when that growth comes, regardless of the industry segment, you know, you often have to be, you know, overly concerned about what potential losses, you know, could arise.

So obviously, that third party data accumulation, validation, you know, better in articulating that to the underwriting team more effectively have been a lot of the, you know, elements that have centered around that particular segment that we're in. You know, we've launched a couple property programs this year. Again, you talked about the, you know, readily accessible amounts of public data. Granted for the most part, that's sort of consumer oriented. So in the small business segment, it can sometimes be a little bit more difficult to obtain. But, know, nowadays, if you just put an address in, you get about 900 different data points that you can use to both underwrite and rate a risk.

You know, our small contractor segment kind of remains our sort of largest segment that we ensure. And while, you know, there was some disruption early on from COVID, you know, that is coming back and we're seeing steady growth in the back half of the year. But again, too, with growth, you obviously have all of the profit control and the different underwriting mechanisms that you need to employ. So we've, you know, really rolled up our sleeves on our own internal data science to really study and model and predict, you know, various loss outcomes.

And we utilize an AI bot that, you know, obviously decisions the business and are, you know, in that ultimately is helping us drive, you know, loss ratios that outperform the industry. I mean, is it AI or is it AI? Like, it's

James Benhamnot it's just a giant if then conditional statement. Right?

Matt RoselleYou know, we've evolved it from that into more true AI. So initially, it started off as very rules based decisioning engine, you know, if this, then that, you know, and and obviously, we started to prove and get more creative data and validation of the bot in sort of the decisioning capabilities, what the outcomes would be. And and obviously, in certain lines of business, you don't really see the loss development until a longer period of time, especially general liability, you know, casualty business, but you can follow predictive indicators to start to see changes in submission flows and volumes.

And so we've, you know, done a huge undertaking and investment within our data science group and team and, you know, have launched some different AI modules and bots that, you know, again are allowing us from a underwriting selection in sort of pricing, you know, segmentation capability to really continue to evolve. And we've, you know, we're in early days of employing true machine learning so that we can have, you know, more, you know, more price optimization across the entire portfolio.

James BenhamYeah. That's and that's really what you're trying to do is like optimize price for the actual risk. Right? I mean, for the last let's see, since the coffee shop in London. Right? And really, since the bottom of your contracts with the ancient Babylonians, let's go super old school. Insurance has really been about just pooling risk and making your best assessment at assigning a value to a potential insured. But knowing that you're really, it's hard to measure the the individual risk at the individual insured level. You're just looking at your pool.

Right? And we're really getting into a kind of a different kind of insurance now. We can track so much information that we're we're we're really tapping in like an like an auto, you know, when when we're getting into driving patterns and habits and OnStar has a partnership with Progressive. And so you don't even have to install anything. You just connect your two accounts and now Progressive knows everywhere you drive and how you drive, how you brake, and how you start and stop, and they give you a score, and then they change your rating.

It's it's really a total totally different type of underwriting. And the same thing if you can track in work comp, and I I'm I'm very, very, very involved in the construction industries. So we can we can speak about, you know, work comp for construction and let's say you you know, you've got some really nice machine learning systems like smart vid that are tracking smart vid IO that actually tracks worker activity and movement and can measure PPE compliance rates on the job site. That changes how you rate a work comp policy, right?

If no one's wearing PPE, then all of a sudden you gotta change the rating. And we've never really had access to that before. Absolutely.

Matt RoselleAbsolutely. It's quite remarkable. And you know, you kind of went down the path of workers' comp and, you know, you think about what are the appropriate job movements that one could be following and kind of what falls within and outside of the parameters. And obviously, most typically from what our experience has been in the small contractor segment is, you know, it's when folks push the envelope a little too much and are working at a height or depth that they shouldn't be or taking an inappropriate angle when performing a certain type of work that obviously again too, if you can incorporate pricing or some sort of warning system about that as early as possible, obviously you're gonna curtail or mitigate what the potential for loss would be.

Hopefully. Let's talk about the insurance market this year because it's a wacky year. Markets have hardened up. Reinsurance is like,

James Benhamin particular around property or hurricane. Oh, you have, you, you, we got through halfway through the Greek alphabet on our hurricanes and the reinsurance market is totally hardened up. What do you see happening in insurance right now in the markets? What do you see happening in '21 and how can tech play a role in mitigating some of this? You know, I would concur a 100%. I mean, a significant hardening is what we're experiencing. We're also seeing that, you know, the reinsurance community and we're fortunate that, you know, we've built long term viable partnerships with,

Matt Roselleyou know, in the neighborhood of about 30 different reinsurers, but, know, many of them obviously, whether it's casualty focused or property focused, have just, you know, had battles with overall profitability. And, you know, we're seeing that the terms that are being put forth are, you know, little bit more restrictive or limited, or they're, you know, looking at caps to be in place, you know, for loss and limits to ECO and XPL cover. You know, a lot of folks are constrained by the amount of capacity that they're able to come up with for the upcoming year.

So, you know, certainly seeing that that sort of reinsurance pressure is obviously, you know, passing itself down through the entire value chain. And, you know, looking at it from a pricing perspective too, you know, you're getting a significantly higher, you know, premium per exposure, whether it's in a construction space or per power unit in the trucking segment, a lot pricing pressure. And I think obviously those who have data in the most broad perspective of the market with the, you know, correlations that should be seen and drawn from a variety of different data sets and data sources to most appropriately price themselves and optimize their pricing and obviously be most responsive to various changes that are necessary throughout the course of the year are going to be the ones that win.

So, you know, it's really that data becoming more and more king. Also too, when you're working with your reinsurance partners or carrier partners on renewals, you know, gone are the days unfortunately where you could just kind of, you know, go out, have a couple pints and slap each other on the back, shake hands and fly home, so to speak. You know, one, unfortunately, can't have that sort of face to face interaction, but, know, more and more the, you know, sheer volumes of data and how they're looking at their business as a partner who's obviously on the risk taking side and how you need to be looking at the business and then presenting them with the data, you know, it's only getting, you know, more and more complex and obviously having, you know, that sort of insight and visibility across, you know, your entire portfolio of products or programs is just absolutely paramount and very much a reason why we've invested so significantly in our data science team and kind of having the AI at the heart of our proprietary tech platform.

So let's let's talk about that. What does the investment actually look like? I mean, real really, have you brought all this in house? Are you working with some key tech partners? I mean, what does this look like? You know, great question. You know, we've actually had on-site talent from day one. I mean, we've now built an internal technology group that has about 27 different professionals on it. Everything from the actual development to data science to, you know, even the front end, obviously UI UX sort of work.

We do contract with some offshore partners to, you know, do some aspects of development, but, you know, really we use about 46 different third party data providers to incorporate into our underwriting and pricing models. We have a couple other, you know, partnerships affiliated for sort of the AI and ML until obviously we start to, you know, build that core competency within ourselves. But all of our own, you know, platform development has been done 100% from day one organically. And then we have, you know, our our CTO, Eric Holcomb, who he came to us from Sony having built the Pravia streaming television platform.

So, you know, he's kind of built out his team to give, you know, to give us a unique advantage and sort of a better, you know, responsive capability of deploying, you know, tech resources when we're launching products, programs, or even making small enhancements or feature set changes.

James BenhamDid it take a did it take a massive change in budgeting for IT? Or did you did you have to redirect the existing resources? A lot of a lot of insurance executives wonder exactly what it takes. Like, do I have to double my IT budget? Or do you have to redirect your IT budget? Or do you, you and know, there's a lot of insurance companies who just outsource everything. They don't do anything. I mean I mean, by outsource everything, I mean, they don't have servers. They just they just use vendors and they don't even have like a professional services partner.

They just they don't wanna touch it. That that's obviously not the case. You're obviously very, very hands on. You know, what what kind of commitment did it take to actually get that done? You know, it it's been fairly significant, but really it's come down to just just human capital and obviously significant investment into, you know, finding the right leadership,

Matt Rosellethat leader or leaders, you know, attracting talent. And unfortunately, you know, you inferred to the fact that it does take a significant investment. And I think it's often, you know, lost that it's not a one to one correlation and there's also a significant ramp up time that it takes from a development perspective and it's not really a linear sort of progression where adding one person gets so much more output is there's significant amount of ramp up time. But ultimately by virtue of, you know, doing a lot of that work in house, one, you have very tight coupling of the business requirements to the tech resources and deployment that again allows us to be very fluid and responsive and you know, bring things to life more crisply, intelligently and responsibly.

You know, again, as you're, you know, having changes in market conditions that may necessitate that or you see various feedback. Now, again, the better job we do of understanding our data science and engaging with MI and ML and so forth, you know, prospectively, that's going to give us more real time responsiveness. But again, if you're using sort of a stitched together consortium of outsourced providers, your ticket number 964 in their queue and, you know, your spend somewhat dictates when you're going to get worked on. And, you know, again, if you want to do, you know, cutting edge things or, you know, you need to be very responsive if it's an M and A sort of activity or, you know, the capability of spinning up an underwriting team with the product portfolio very quickly.

You know, again, having that sort of in house resource, it's been, it's, you know, I can't speak enough to the investment that's been made in us in us having that. Part of the I think a lot of I think a lot of insurance companies, Insurtechs and traditional insurance companies.

James BenhamAnd I define Insurtech as a insurance related organization that is that is actually selling product to the to the incoming let's let's like kinda more narrowly define it. That's actually has a digital process Yep. That encourages an all digital process that that is that is leveraging public data sets. I mean, we I feel like you have to qualify because everybody wants to say they're an InsurTech and they need to qualify it down a little bit. Let's just go through the functions here that are involved. Policy management, you guys have policy management.

Right? Yep. Full life cycle. And claims management. Full life cycle. Yep. Okay. So did you pick an out did you did you pick a third party product or did you completely home grow it in house?

Matt RoselleYou know, so we initially started with the, you know, full life cycle policy management platform. So again, in early days of SIS, it was first sort of a rating and indication tool that ultimately got to an underwriting and decisioning tool that, you know, again, became full life cycle policy management, inclusive of post buying endorsement cancellation. We coupled a premium audit capability because again, the platform was sort of grown around having, you know, a general liability construction portfolio at the core initially. Again, as times evolved, you know, we've built out modules so that there's full cross selling capability, you know, companion lines offered very seamlessly and fluidly within any of the rating experiences, the ability to add, you know, lines of business post buying, you know, and then again, it's it's the decision.

You know, we we made a conscious decision to couple the platform to other external tools, you know, from an accounting perspective, but we automate the invoicing process so that feeds directly into an accounting platform. So rather than home growing an accounting capability, we decided to deploy the resources most effectively in delivery systems to the broker world to again, encourage them to not only bring their submissions our way, but also to really partner with them and help provide them with better resources and capabilities for them to manage their own clients' experience.

So things like, you know, customized proposals and, you know, branded apps, branded paperwork, you know, you know, coupled premium finance partner integrations, you know, all of that, that they can, you know, look and feel like they're the ones who've built these proprietary sort of technologies and then can, you know, deliver, you know, the products to their own consumer. We're just trying to enable that as seamlessly as possible through the tech. Alright. So why do you call yourself an InsurTech?

James BenhamIs that because you have heavily leveraged machine learning and artificial intelligence and you're delivering a completely digital life cycle for your policy and and your claims process? I mean, what what how do you feel that really on You that

Matt Rosellehit a very valid point earlier is that the word InsurTech's getting thrown around a little too much. And you know, I see that even with carriers who just have sort of a back end portal that you can enter business into and amazingly get policy, you know, mailed to you, you know, two weeks later. Yeah. You know, with us, it's it is that full, you know, quote bind issuance capability delivered seamlessly, real time pricing flexing. I got it. You know, immediate responsiveness based upon what the brokers, you know, entering for risk characteristics.

And again, that, you know, coupling with the variety of different public and third party data sets that we utilize in the underwriting process, it one helps articulate the rate most seamlessly and effectively and two, it gives us the best visibility from an underwriting perspective. You know, the auto approval and auto binding, again, looking at the micro segment of business, let's face it, at the end of the day, the micro space is about speed and ease of use and really the accuracy of the pricing model and algorithm that you deploy.

So for us, of having that seamless integration capability and delivery of a price that, again, we're capturing all the appropriate information to underwrite the account, you know, we auto approve north of 50% of all the accounts using our AI. And that in turn, you know, gives us, you know, at worst, a better insight into the underwriting perspective so that, you know, for those that don't fall within the auto approval appetite, we queue the underwriter in specifically as to what they need to review and look for so that they can be as responsive and as fast as humanly possible, which has really, again, helped us scale, you know, our operation without having to add a, you know, sort of a, you know, linear amount of headcount as the programs have grown and expanded.

And with, you know, integrated tools for digital signatures and or, you know, we want a live app in the 2021 timeframe that again, all of those can be delivered seamlessly. And again, I would say that kind of fits that InsurTech definition is who is your end client? Our end client happens to be brokers today

James Benhamand we're making delivery systems that enables them to more effectively run their business and issue policies in a matter of minutes. So that that I would say is is kind of where my definition of calling ourselves an InsurTech would fall. Yeah. And I and as you as you were saying that, I was I was actually just hitting some bullet points. I I need to write a I need to write a LinkedIn blog now on on on like, here's your qual here's your criteria for qualification, real time quote buying cover claim, public data sources, paperless and digital, scalable infrastructure, nonlinear headcount with premium.

And I'd also say, you know, the creative use of machine learning and artificial intelligence. And that that's I mean, as I've interviewed what for this is my forty fifth, episode of this podcast, we've gotten to do a lot over the last year that I I keep kinda circling back and circling back on that, but I think that's the you've gotta really kinda narrow the definition and make sure that you're not lying to yourself. There's a lot of insurance companies out there I think are lying to themselves because they they alright.

Let's be honest. They want insure tech valuations. I mean, let's look at the Seeking Alpha. Seeking Alpha wrote an article two days ago on lemonade. And they pointed out some really interesting things. They if you look at this, Lemonade is a $6,000,000,000 valuation company that has booked 10,500,000 of net earned premium. That would put their annualized price to premium multiple at 143 x for and and they say for reference, progressive trades at 1.4 x annualized annualized q three net earned premiums. So Unbelievable. So one of these things is called an Insurtech, and it has a 100 times the annualized price to premium multiple of a mainline solid carrier.

And I think you would have to call Progressive, very Progressive. I mean, is the firm that's pioneering the use of real time data for automate or for automotive. Right? I mean, they're Absolutely. They're way out on bleeding edge with with with using data. Right? Absolutely. Best in class. And then I've always been ahead of the curve. But they have a 1.4 x of price to premium multiple. Yeah. And lemonade lemonade has a 143

Matt Rosellex. Yeah. And and it just goes to show, you know, some of the varying, you know, appetites in the market space as well from, you know, sort of the asset heavy balance sheet risk taking entities versus those that, you know, like an MGA program administrator that really is built to deliver and distribute and, you know, where those values are just going off the charts is, you know, carrier to MGA, MGA to Insurtech. And, you know, obviously we kind of fall more on the Insurtech side of the chain.

But, you know, unfortunately, I know from just talking with a lot of bankers and investors, and we're backed by a private equity firm that, you know, again, the more you look and smell like an insurance carrier, the, you know, the more controlled that multiple is gonna be in the business, you know? Yeah, exactly.

James BenhamAnd it just makes me wonder, you know, as a lifelong software guy, as a I'm I've been a decade and a half in insurance tech. It's it's fascinating because I know great companies like you that are doing really super amazing pioneering work and and technology. And so you you have to ask yourself at the end of the day, like, what is an InsurTech? What is what are the what are the the hallmarks of it? And, of course, I'm I'm a bootstrap guy. I I like profitable companies.

And and and so I always look at in particular underwriting profit. And I've been amazed at at in some companies in the industry at their lack of focus on underwriting profit. Right? Like it's just it's they they subsidize it with investment returns, which now is getting pummeled one of the reasons the market's hardening. Right? Yeah. Well, and it's it's again sort of in just the thesis that doesn't add up is,

Matt Roselleyou know, only are you not generating a whole lot of premium volume, but what premium volume you're generating is leading to unprofitable business results. So, you know, that sort of divergence or intersection at worst where, you know, profitability from a risk takers perspective is coupled with profitability from an investment return perspective, you know, in again, these valuations where you see, again, you mentioned the sort of the ratio being 160. It's just unbelievable that, you know, a lot of longer term carriers now have market cap significantly below,

James Benhamyou know, where some of these InsurTech valuations are headed. Yeah. And so we're gonna have there there's gonna at some point, there's gonna have to be a reckoning of some sort. Right? Either the Insurtechs are gonna have to deliver rampant profit and revenue growth to justify because, you know, large valuations are really centered around growth expectations. Right? All day long. Yes. If you're not growing, you don't have a lot of value in the private equity or the public markets. And if you are growing rapidly, but that growth hinges on an expectation that one day you'll be profitable.

And so if your business model is contingent upon never achieving profitability, then you have a problem. We saw that in those s ones that were released by by some companies earlier in the year that, you know and again, I'm in both the construction and insurance spaces. So I've been in construction tech for just as long as insurance tech. I built and operated and sold a software company there called SmartBid and and, you know, learned learned a lot through that process about valuations and companies and profitability and also the beautiful intersection of insurance and construction.

People always ask why I only work in in two industries. I've got 200 and, you know, 30 employees dedicated solely to insurance and construction. That's it. So only two industries that we that we work in. And it's because the two industries are so heavily reliant upon each other. Yeah. Construction does not work without insurance. Just what would just wouldn't function. It's it's too high risk to not to not have some well capitalized carriers there. And and so I I am I am convinced that at some point, the the day of reckoning always has to come in all cases for all businesses in all circumstances, you know.

Absolutely. I'm I'm old enough to have written out the the .com boom and bust and the nine eleven bust and then the o eight bust and the to remember the SNL saving the SNL crisis of eighty seven and you know, it's like my favorite my second favorite sci fi show Battlestar Galactica. The the famous phrase from BSG, this has all happened before and this will all happen again, you know. Absolutely. So so since since we're in a a cyclical, you know, life and cyclical business cycle, what do you think is next?

Because you're already doing everything we talk about on this show. You're doing all of it. So what do you think now is actually cutting edge? Because machine learning is no longer cutting edge. It's now normal. You know, that's a great question. I I think that, you know, again, because the curve's been so,

Matt Roselleyou know, long and or, you know, drawn out for a lot of carriers or ranchers to try to adopt any sort of technology, you know, it's allowed a lot of fast movers and people who are from, you know, more the tech world to enter the industry. And unfortunately, I don't think that they've yet proven themselves from a risk taking perspective that ultimately, like you said, the day of reckoning will come. And unfortunately, I think that that's gonna perhaps inhibit some of the capacity providers willingness to throw as much investment into some of the InsurTechs unless they've proven themselves or have sort of a deep amount of bench strength from the insurance world.

Now with that said, again, the capability of delivering product effectively and doing that through the technology is at the end of the day paramount. So I think you're going to find that, you know, an MGA like, you know, model or a program administrator model where you're kind of sitting in the middle of the ecosystem where you're working through brokers, I think, you know, those who can invest appropriately there and not just engage sort of that direct to consumer capability, because again, commercial lines is a little bit more complicated or sophisticated, or at least, you know, when you start going up market, you know, broader amounts of underwriting or value, you know, or significantly greater amounts of data are necessary to appropriately underwrite exposures.

But again, someone who can bring that, you know, underwriting acumen and recipe by utilizing third party data sets and validation and have the most responsive pricing and capability and predictive analytics and predictive modeling, that's ultimately going to be the one that sort of steps ahead. So somebody being able to deliver to the, you know, commercial line segment, a variety of different industry, you know, targeted programs in a seamless manner, whether it's, you know, quasi direct to consumer or broker enabled delivery is going to be the one that wins.

You know, folks are somewhat perfecting it on the personal line side of the house, but really there aren't a lot of, you know, folks getting into the small commercial space and that's really where, you know, our focus, you know, resides. Sure. That's awesome. So what what do you see going on in construction right now and how do you think tech can help it? It can help it immensely. I mean, you know, at the end of the day, it depends on sort of the the piece of the construction, you know, industry that you're focused upon.

But at the, you know, the net net is contractors need appropriate coverage to perform work and they need to be able to get a certificate of insurance effectively to whoever they're working for, right? So, you know, one thing that we've prided ourselves on is sort of, you know, obviously quick quote bind issue, get the policy and the certificate as fast as humanly possible so that the contractor can go perform his work and do what he's best at doing. I think additional enablement is going to be, you know, at the forefront of, you know, helping these contractors manage their insurance requirements more effectively and certificates.

I think that, you know, the overall, you know, we've actually invented an app, a mobile, you know, sort of wallet card that, again, it's tech that doesn't really exist today and, you know, you would have to have sort of a capability from a GC level to, you know, read the QR code and be able to, you know, see in real time whether or not the insurance is enforced. But I think technologies like that, that take sort of this manual paper process that's delayed by days and days and days from, you know, getting folks out in the job and working, you know, anything that can be done to better facilitate that entire exchange of certificate of insurance and proof of cover.

And then obviously closing the loop on that is, you know, from a claims perspective is, you know, those who run TPAs or those who have programs that are, you know, managing sort of the claims processes is again, you know, understanding taking in the claim triaging the claim appropriately understanding if there's coverage, you know, getting the appropriate policy years tag, you know, that sort of enablement on the back end from the loss perspective inappropriate reserving, you know, all of those are things that still haven't even really been contemplated in this InsurTech space.

You know, everybody's so worried about front end acquisition and obviously reaching out to the consumer and that whole distribution and acquisition element is important, but you know, the post bind part of the work is really where the rubber meets the road. And any enablement on the back end that facilitates endorsement behaviors, certificate delivery, you know, and certainly claims management and effective, you know, loss ratio management on the back. Those are going be the folks who I think start to shoot past those who are really novel at building front end delivery systems.

James BenhamYeah. So I've been in the certificate of insurance collection tracking and issuance business for a decade Yeah. With my product smart compliance. Yep. And I I keep just saying, this is insane. This is insane. We're we're using static documents to define a dynamic variable. Right? Whether or not you have insurance enforces dynamic that changes every day. By the minute. By the minute. And people bind, get COIs and cancel all the time, man. I mean, it's Absolutely. And it's a really big challenge. It's something that we've really have been fighting through, you know, certainly we have a very active compliance team that gets after people with their certificates and they gets updates.

And then we, you know, you do additional party. I mean, you get names so you get notified. I mean, there's a lot of there's a lot of things that you can do to make sure that you're you're maintaining compliance, but it's a little frustrating at some level because they've already figured this out in auto. Right? I mean, there's there's there's central databases you push and pull and so you have one giant massive policy feed. And what technology would be best suited to a giant open distributed immutable ledger that could possibly store what insurance everybody has and if it's an effect or not.

Oh, blockchain. Right? Blockchain. Exactly. Like, blockchain. Like like, why don't we have a national blockchain for insurance? Of course, there's all kinds of issues. Like, how many lawyers are trying to get their hands on that so they know who they can sue for how much. Right? Absolutely. Because that's that's something else. Right? You have to worry about this. But I mean, when you get stopped by a cop for speeding state, they don't ask you for insurance. They look it up. Yeah. Oh, yeah. Because they know they know you can fake that auto auto insurance ID card.

They can just print a new one out. I mean, they they look it up in their database. When you go to register your car and get inspected, they don't they don't ask you for it. They just look it up.

Matt RoselleAbsolutely.

James BenhamYeah. And so it's it's it's really it's really amazing to me that we haven't made that leap with any of the other major lines. Right?

Matt RoselleYeah. Well, and contractors are just prime for the picking. And I mean, we also look at it in a similar lens for the trucking, you know, segment is, you know, these guys are still pulling in and out of way stations and this, that and the other and presenting a lot of paper documents. And, you know, again, there are tools that obviously enable that and there's, you know, tracking for all of that through different, you know, data sources. But, know, at the end of the day, the entire universe, especially on the back end of the insurance transaction, you know, and I'm thinking through even, you know, surplus lines filing, license management, you know, stat reporting, things like that, that again, some of these processes are just, you know, still kind of archaic.

And I think, again, responsiveness and tech investment into some of these, you know, it's not the sexy customer acquisition bitch in front end of a platform It's really the risk management and, you know, the overall, full life cycle of an account or a broker relationship or, you know, a book of business or a program that's really going to step to the forefront. And I think that's where, again, you know, those can be amazing at the customer acquisition and I think they're seeing significant valuations due to the fact that they do have nice, you know, front end delivery, but how they're fulfilling the rest of the promise and where that loss experience is going to be, you know, four, five, ten years down the road, especially in commercial lines, especially, you know, contractor trades, you know, there's a lot still yet to be seen on on these other quote unquote insure tech companies.

James BenhamYeah. It's it's a it's a crazy world, man. It's a crazy world for sure. Well, we've had a great discussion and I I really like it. Where can people find out more information about your company? What website they can go to? Yeah, absolutely. They can go to iscmga.com.

Matt RoselleSo just like in integrated specialty coverages, isc and then mga.com.

James BenhamThat's awesome. Well, I appreciate you being with us today. Thanks for joining us. This was a great commentary. Enjoy the beautiful city of Carlsbad and enjoy enjoy your perfect weather every day and go go to the beach for me and go for a walk on those beautiful sandy cliffs they got there. Well, thanks so much for having me and, you know, I hope everybody has a happy holiday and then let's make 2021 even better than 2020. Yeah. I think I think I think there's a good shot.

It's gonna be better and I'm I'm I'm an eternal optimist. I I had a lot actually had a lot of fun this year. Of course, it was a pretty intimidating year. I wanna thank all of our listeners out there for listening to the show. Wish you a Merry Christmas, Happy New Year, Happy Holidays. Enjoy the time with your family. We're gonna take a couple of weeks off from the podcast. We'll be back after New Year's with our next set of interviews and episodes of the InsurTech Geek podcast.

Appreciate y'all listening to us. And certainly it's been a hell of a lot of fun. This has been the InsurTech Geek podcast powered by Jimmy Knowledge. It's jimmyknowledge.com. It's all about technology that's transforming and disrupting the insurance world. I've been your host, James Benham, jamesbenham.com. A big thanks to Jim Greenlee, our podcast producer, Cara Daltonaro, creative producer. And thank you for joining us today. We're taking you on a journey through insurance tech. So enjoy the ride and geek out.