RHS 064 - Dax Craig on How Pie Insurance Turns Analytics into a Competitive Advantage

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Speaker 6 in a crude laboratory in the basement of his home

Speaker 8 and welcome back to the show today we have a dynamic episode for you with Dax Craig, the co-founder and president of Pi Insurance, an InsurTech startup that launched three and a half years ago, began selling insurance two and a half years ago, and from day one has had a foot in both the direct bucket and the independent bucket.

Speaker 8 And it's why I'm so interested in this company. And so you guys know I've written a few policies with Pi, a few workers' workers' compensation policies through Pi myself.

Speaker 8 I like their product. They have some incredible pricing for certain classes.

Speaker 8 They're easy to work with. I've had clients who've gotten some certificates directly from Pi

Speaker 8 who have given tremendous feedback in terms of the customer service.

Speaker 8 And when you listen to how Dax approaches the business and why, one, Pi chose workers' compensation to focus on, why they've stayed in only workers' compensation for this long, what he sees coming down the road.

Speaker 8 This is an episode that's gonna get you thinking about the business and hopefully get you thinking about the markets that you place business with, why you place business with them,

Speaker 8 and what potentially is out there in terms of opportunities to partner with companies that aren't necessarily of a traditional ilk, but could be incredibly valuable to your agency.

Speaker 8 I think you're gonna love this conversation. Dax is a great guy, and it was a real pleasure to have him on the show.
Before we get there, I want to talk about a brand new sponsor to the show.

Speaker 8 That's right. That's right.
Everybody, wake up. Brand new sponsor of the Ryan Hanley show, and that is Agency VA.
VAs are talked about all the time. We had, I had

Speaker 8 Wes on the show, one of the co-founders of Agency VA.

Speaker 8 And I know that episode got a tremendous number of downloads, listens. A lot of you actually consume that episode.

Speaker 8 And then the feedback, the number of DMs I was getting on Instagram and Facebook and Twitter about virtual assistants after that episode.

Speaker 8 And really all I was doing is directing people over to talk to Wes. But, you know, Wes and Ben are doing things at Agency VA that I don't know that the industry has seen before.

Speaker 8 Their technology is second to none and is really becoming a gold standard for remote work and working with virtual assistants. And, you know, I, I, about three weeks ago, I got my first VA.

Speaker 8 I started to get to the point where things like accounting and data management and onboarding and follow-ups and, you know, first touch on inbound service requests, these are things that I just wasn't getting to fast enough while doing the sales and marketing and closing that needs to happen in order to continue to grow Rogue Risk.

Speaker 8 So I reached out to Wes and

Speaker 8 got my first VA, and I'm loving it. I mean, it really is.
I mean, it's like any other employee. I mean, a virtual assistant is like any other employee.
Like, you have to train them, but

Speaker 8 they really do a great job of positioning your agency with the talents of the individual. And what you're forming is a partnership with that person.
I mean, they become a vital part of your business.

Speaker 8 And I just couldn't be any happier to have Agency VA as a sponsor of this show.

Speaker 8 I mean, the portfolio of companies that are sponsors of this show, I think is a testament to the types of individuals that are building supportive businesses for our industry.

Speaker 8 And I just couldn't be happier to have Agency VA as a partner of this show. So go to agencyva.com, go to agency, the letters va.com, agencyva.com, reach out, connect, have the conversations.

Speaker 8 Like I say with all our sponsor partners, you don't have to use Agency VA, you don't have to have a VA, but know what they're about.

Speaker 8 Get the demo, have the ammunition in your mind so that if you need them, you can pull the trigger because you don't want to wait until you have the need to start doing the research.

Speaker 8 Do the research now so when the need presents itself, you're ready, you can move forward. And I just could not think of a better partner to do that with you than Agency VA.

Speaker 8 So go to agencyva.com today. Now on to Dax Craig.

Speaker 10 I didn't know that you founded or were part of founding Val and Analytics.

Speaker 7 I was. Yeah.

Speaker 7 That was my first foray into insurance and

Speaker 7 insurance technology and analytics.

Speaker 10 How did you find yourself there?

Speaker 7 Well,

Speaker 7 I had sold a prior startup

Speaker 7 in the wireless space

Speaker 7 in 2000, which turned out to be

Speaker 7 a pretty good time to

Speaker 7 sell a business,

Speaker 7 and was doing my obligatory couple years with the acquiring company.

Speaker 7 And a good friend of mine was a data scientist. And it's like, hey, we should start something together.

Speaker 7 We took two years trying to figure out what business would be appropriate for the use of analytics,

Speaker 7 whereas much more of a greenfield opportunity. Settled on P ⁇ C Insurance.

Speaker 7 I didn't know how greenfield it was. Yeah.

Speaker 10 It's funny. It still doesn't feel like we figured it out.

Speaker 7 It's still greenfield.

Speaker 7 Spent,

Speaker 7 geez, spent a long time,

Speaker 7 you know, 14 years basically building that business.

Speaker 7 Ups and downs, fits and starts, trying to convince insurance professionals that analytics could help them make better business decisions was a super big challenge

Speaker 7 to spend a lot of time in boardrooms and when executive rooms working with companies to do you know their analytic strategy and

Speaker 7 out of that saw

Speaker 7 a super good opportunity in the small commercial area

Speaker 7 thought it was a a really good opportunity to drive the use of analytics to help small businesses.

Speaker 10 What do you think? Now, it seems like today,

Speaker 10 even five years ago, the idea of using analytics outside of maybe this kind of ethereal, you know, I'm sure a traveler's or a Hartford uses analytics, but it feels like that has started to leak down into some of the super regionals and even

Speaker 10 smaller carriers.

Speaker 10 And then, certainly, there are plenty of vendors that are using different analytical tools, and even some of the agencies, you know, some as small as maybe my agency but some of these middle market focused agencies have started to really dig into um

Speaker 10 you know what what's going on inside their agency how can they use the data they have bet to better serve or find other

Speaker 10 what do you

Speaker 10 knowing that yes it's still very much a greenfield it does feel like there is a transition

Speaker 10 one do you agree with that that that it seems like we now have momentum rolling towards people having a better understanding of what's going on in data and their in their business in general.

Speaker 10 And do you think there was like a trigger point or a pivot point of any sort?

Speaker 7 So I don't think there was a trigger.

Speaker 7 I think this has been slowly building over the last 15 to 20 years. Yeah.
They started with progressive

Speaker 7 and using credit score for personal auto. That's where it all started.
And I thought there'd be a wave after that and why I founded Valen,

Speaker 7 but there wasn't, especially in commercial.

Speaker 7 It's an, you know, commercial is

Speaker 7 sort of old-line underwriting, right? It's,

Speaker 7 I've been doing this 30 years and I know a good, you know, plumber when I see one.

Speaker 7 And that's still pretty pervasive, except for the large national players and some of the super regionals, I think you're right. And there are a few pockets.

Speaker 7 where we're seeing the use of analytics

Speaker 7 take up in smaller companies, but I wouldn't call it broad-based at all.

Speaker 7 First of all, analytics are very expensive.

Speaker 7 They're counterintuitive, right? And so they fly in the face of everything you've ever learned about underwriting.

Speaker 7 And so that's really hard for companies to grapple with and to grasp and to sort of change their mindset on.

Speaker 7 And then lastly, which is probably the biggest problem,

Speaker 7 the systems that are out there today, the core policy admin, claims admin systems

Speaker 7 are really difficult to deal with and they're very difficult to get data out of and they're very difficult

Speaker 7 to leverage to drive appropriate use of analytics. And I think that's maybe even a bigger problem than mindset is today.
I think

Speaker 7 mindset is something that the

Speaker 7 carriers are slowly starting to come around to, even

Speaker 7 some of the smaller ones, but they don't have systems. Yeah.
They don't have the money.

Speaker 10 I heard somewhere, and this could have been tongue-in-cheek, but like 50% of all the COBOL programmers left in the world live in Hartford. Someone told me,

Speaker 7 it was like, I wouldn't doubt it.

Speaker 7 I don't know what the statistics are, but I think banking and insurance are keeping them going.

Speaker 7 Nice cottage business.

Speaker 10 Yeah, that was,

Speaker 10 I don't know, that could have been completely made up or, you know, or someone was joking or whatever, but I had the same reaction to it I was like

Speaker 10 if you told me it was actually true I might believe you it's a believable statistic for sure

Speaker 10 so

Speaker 10 you know one of the things that that that really turned me on to to you guys

Speaker 10 and one of the reasons why I wanted to have you on the show in general was my so I'm startup I've been in the industry for 15 years I don't know how much you know about my background yeah I read your background yeah yeah so so I I kind of was an agent then I went to kind of, I've always been a marketer, has been my background, but kind of went into the technology world for a little bit, learned a ton there, and now have started my own agency.

Speaker 10 And my expertise is comp,

Speaker 10 and I've always known about you since you launched, following the space. And then I actually got access and have written, I think, a couple of accounts with you guys through a wholesaler.
And

Speaker 10 I was interested, you know, just some of the markets that you attacked and the way that you priced it and then i started digging in and and uh you know the the common belief or the common perception of independent agents of a company like pie is these guys are full of shit you know what i mean like that's that's just like your first reaction that's what you know what i mean that's just what it is you know you can't help too good to be true or whatever yeah yeah like we've you know how you know we've How have we not figured this out in 400 years that they're going to come in and put punch some numbers into a keyboard and figure something out that we haven't figured out?

Speaker 10 That's kind of the classic take. And then,

Speaker 10 so

Speaker 10 I had a really interesting experience. I, you know, placed this policy with you guys.
Everything went smooth.

Speaker 10 My client has dealt with your team or, you know, your company a couple of times in some certificate requests and stuff like that. And everything was super positive.

Speaker 10 And not that I wouldn't expect it to be, but, you know, as a brand new carrier, essentially, you just don't know what you're going to get. And I came out of it and I was like, you know,

Speaker 10 this this is a pretty there's something here like this is meatier than just a fly-by-night kind of insure tech company that that frankly we're kind of used to from and from an independent space you know i mean we

Speaker 10 so i i i'm just i'm really interested and want to dig into some of the core concepts as much as you can share without giving away all your your secrets um you know the core concepts where you see you're taking it because i guess my my whole goal for this show show in particular this show like talking to you is I want to start to open up agents and carriers eyes to finding partners in that look more like you guys that can help them in their business and and and opening their mind up a little bit to what's possible and what you guys have going on I guess that's maybe like my overarching goal to this conversation so you know what was it about small commercial and in particular workers comp You said that you saw something.

Speaker 10 What was it that really you were like, bang, that's the next thing? That's where we're going?

Speaker 7 Well, I mean, it comes from a lot of

Speaker 7 struggles trying to sell analytics to insurance carriers.

Speaker 7 And if anybody has paid attention to any...

Speaker 7 blog posts I've written, articles I've written, speeches I've given over the last 10 years in particular, they would know that this shouldn't be a surprise because I tried to get insurance companies to do exactly what Pi is doing.

Speaker 7 And it,

Speaker 7 although most people will think it starts with the technology, it actually doesn't. It starts with the customer, like the real customer, who is buying this insurance policy.

Speaker 7 The person writing the check. God bless agents and the distribution partners we have.

Speaker 7 They're amazing and we love them, but we start backwards from the customer. And what does the customer need? What does the customer want?

Speaker 7 The customer wants the best price they can get with the least amount of friction possible, right?

Speaker 7 And that's true of an agency relationship and or a direct relationship. And that's why

Speaker 7 we do both. We're multi-channel.

Speaker 7 There are a class of business owners that are shopping for work comp insurance 10.30 at night in their underwear, right? You got to be there for those people too. They're generally fairly, very small.

Speaker 7 And then your agent needs,

Speaker 7 they need to be so fast that it pays to write small commercial.

Speaker 7 So we started with that backwards look, right?

Speaker 7 Let's not start with a regulatory environment. Let's not start with E-Mod.
Let's start with what the customer needs and build technology that allows the customer to get that.

Speaker 7 So, that was the first step. That was the first thing that I tried to get companies to do for years and years and years.

Speaker 7 And then the layered-on analytics. So, at Vowen,

Speaker 7 we had a contributory database where we had,

Speaker 7 I don't know the exact numbers they are today because I'm not involved with the company, but you know, it's five, six, seven million

Speaker 7 detailed work comp policies with claims, history, everything. I mean, this is a lot of data,

Speaker 7 bigger than Hartford and Travelers combined.

Speaker 7 And we could see in the data where the pockets of opportunity were.

Speaker 7 And we kept telling people, oh my gosh,

Speaker 7 these small businesses are underserved, right? Most agents don't want to deal with them because they're too small. It's just too much of a headache dealing with the carriers.

Speaker 7 It's too big of a headache to deal with this $2,000 policy. It's not worth it.
So that they were underserved and they were systematically overcharged, you know, 30% in many cases.

Speaker 7 And so you see that kind of

Speaker 7 problem in the marketplace. And it's like, well, we can solve that with technology.
If you make it super easy for the agent to do business with you, they can actually serve that small business, right?

Speaker 7 So no longer are they ignored. And if you use analytics, you can actually drive pricing down where your pricing across the spectrum is much more competitive.
Right.

Speaker 7 There are a lot of players that'll write restaurants, right? Write a clean restaurant. Well, so what? Everyone will do that.
That's no shakes. Who cares?

Speaker 7 Tell me how many people will write a trucker or a landscaper

Speaker 7 or a painter or some of these harder to place trades that are small.

Speaker 7 And so we kept trying to get people to pay attention to this and nobody would and finally i was like you know what

Speaker 10 let's go see if we can do it ourselves uh and that's how that's how pie was born yeah you know one of the things that um i was talking to a buddy of mine the other day and

Speaker 10 we were talking just in general well we'll call it we were bitching we were just kind of

Speaker 10 catharsizing um about different things and i said to i said to him you know you know one of the things that I'm kind of relearning lessons about the business.

Speaker 10 For eight years, I lived this life every day.

Speaker 10 And now I'm kind of reliving it again. And I forgot about some things.

Speaker 10 And one of the things that I forgot about is how everybody writes everything until it's not in this nice, pretty box, and then no one wants it.

Speaker 10 And I, you know, I was saying to him, I said, you know, it's, it's, it's funny. I'll have marketing reps and carriers banging on my door, emailing me, calling me, saying, hey, well, we write this now.

Speaker 10 And it's like, that's great, except how many bakeries with no delivery, with

Speaker 10 no deep fryer, who don't do table service, who don't do any kind of whatever,

Speaker 10 how many of these perfect boxed risks actually exist in the world?

Speaker 10 You know, how many of them are there? Because the moment that there's anything outside of the box, it goes from super fast to incredibly slow and

Speaker 10 follow up questions and the premium goes start skyrocketing. And,

Speaker 10 you know,

Speaker 10 it becomes very difficult. And people have been dealing with this forever.
I'm not the first person to deal with it. I just feel like, you know,

Speaker 10 I feel like these are some of the problems that companies like yours are starting to chip away at. And I wonder, you know, when some of the

Speaker 10 when some of the legacy carriers start to pick up. I think some are, but I think there's a lot that still haven't picked up on this idea of

Speaker 10 how do we do the things in an expedient way that aren't the perfect packaged box.

Speaker 7 Well, I think it starts with understanding your underwriting appetite and why you have that appetite. A lot of carriers have an underwriting appetite.

Speaker 7 And if you ask them why, they actually can't articulate it.

Speaker 7 It's not data-driven. It's, you know, somebody got burned on a plumber in the 80s.
And so we don't write commercial plumbers. It's like, really, that's the most ridiculous thing in the world.

Speaker 7 But it's true across the board.

Speaker 7 And so you see a lot of that. You also see companies come in and go out of different classes or different states or different types of business.
You know, they've got a premium

Speaker 7 target they want to hit. And they're like, well, if we write a bunch of this, we can hit our premium target.

Speaker 7 Then we'll come out of it so they don't provide consistency so you never know if they're going to decline it accept the risk or not we hear that all the time and so

Speaker 7 we don't have that

Speaker 7 we use data and so we're in the classes we're in

Speaker 7 because we believe

Speaker 7 they're good business in each of those classes. There's also bad business in each of those classes.

Speaker 7 Think about how most underwriters, underwriting companies work. They look at an individual piece of business and they say,

Speaker 7 I don't like this business or I do like this business. Instead of thinking about it as a portfolio, if you think about it as a portfolio,

Speaker 7 you can actually do a lot of different things and a lot of different pricing mechanisms because that's what actuaries do, right? I mean, and they're quite good at it on a broad portfolio.

Speaker 7 Problem is when you take that portfolio and you make it narrow,

Speaker 7 their science starts to break down. Underwriting know-how starts to take over, and it's just very difficult.
And so

Speaker 7 I can't stress enough how important the data and the data science behind it is. And that's where the other carriers have got to catch up.

Speaker 10 Yeah.

Speaker 10 Where do you see,

Speaker 10 you know, you guys have, you guys are multi-channel.

Speaker 10 You know, one, why go multi-channel? Why involve agents at all?

Speaker 10 Or, you know, and the opposite is true too. Why spend pay-per-click dollars on direct business? Like when you make, when you look at that, is it something you're still evaluating?

Speaker 10 Are you still in the testing stage for distribution? Or do you feel very comfortable about being in multiple channels and how that works?

Speaker 7 We're super comfortable multi-channel. We were always multi-channel from the very beginning.
Even though people like to put us in the direct box, never been direct only

Speaker 7 and never thought thought that we were going to be direct only we want to meet the the customer wherever they are right and and there are some customers that do want to buy direct that just right um they might be younger they might be gen xers you know millennials or gen y

Speaker 7 they want to buy direct because that's how they're comfortable um

Speaker 7 But, you know, what, 98, 99% of all comp is bought through an agent. You'd be pretty stupid just from a business standpoint not to work with agency partners.

Speaker 7 And agents provide a huge value to their customers, right?

Speaker 7 They have knowledge that the customer doesn't have. And that's incredibly hard to replicate in a direct environment.
So

Speaker 7 I think that that direct will always be there. I think agencies will always be there.
They'll live in you know in a symbiotic world.

Speaker 7 And I think your smaller and smaller smaller risk will go more and more direct.

Speaker 7 And your larger risk, and I don't mean big, I mean like 5,000 in premium and above,

Speaker 7 they'll continue to stay with agents.

Speaker 10 And it almost feels like,

Speaker 10 and I think this is just starting to happen. So I do not think this is a trend,

Speaker 10 like a widespread trend, but I do think,

Speaker 10 at least in some of the circles that I run in, it's very much taking place.

Speaker 10 That what was maybe a very clear five to 10 years ago delineation between the people who took business direct offline and really tried to automate and then agencies, those were two very different business.

Speaker 10 They are every day mashing and

Speaker 10 merging more. And this hybrid agent, you know, I refer sometimes as like a human optimized agency.

Speaker 10 Like, you know, you're doing everything you can with automation up until the point that you need a human, and then you're bringing them in to really provide that additional value where you know when i learned the business i mean they're one we were still writing things in pen on on well actually pencil erase it when you made a mistake i mean like this is how far we've come just in in not a short amount of time and um you know where where do you see some of that going like do you see more um

Speaker 10 you know if i were to google workers comp right now I'd probably get two independent agents that are trying to drive business in.

Speaker 10 I'd get maybe you guys and By Burke or, you know, Hartford runs some paper click. And there's this mashup of agencies.
And

Speaker 10 how do you see that continuing to evolve? Or, you know, and do you?

Speaker 7 I mean, I think it's going to continue to evolve as more and more,

Speaker 7 let's call it the buying process, the insurance buying process moves online. Yeah.

Speaker 7 There's got to be a blend.

Speaker 7 I think it's challenging and it's expensive for a carrier and an agent to acquire customers.

Speaker 7 It just is, right? And whether that's a human being dialing the phone or it's pay-for-click or something of that nature, some kind of oddball partnership, it's expensive to acquire customers. And so

Speaker 7 the companies that are going to win are going to figure out how to acquire customers in a cost-effective manner, whether that's direct or through agency partners. Up until now,

Speaker 7 it's always been a lot cheaper

Speaker 7 to acquire customers through an agency force for a carrier.

Speaker 7 Now, as more of that moves online,

Speaker 7 is it cheaper for the agent to acquire

Speaker 7 customers?

Speaker 7 I don't know. It's a pretty competitive world.
So it'd be interesting to see how these things come together symbiotically.

Speaker 7 I i think they will i think they have to because there's there there's an element of trust and

Speaker 7 you know the the insurance knowledge that the consumer just doesn't have yeah right and whether it's comp or it's bop or it's it's some complex package thing the agent knows how to do that and the consumer doesn't Yeah, the trust piece is still, for me,

Speaker 10 what we actually operate in.

Speaker 10 Like that, that to me is whether you're whether you're direct captive you know some crazy version of that whether you're doing cold call emailing or you know knocking on doors it's really just how

Speaker 10 how much trust can you drive into a client to to to break whatever their threshold is right and everyone's got a different threshold for how much trust they need and that's really what the game we're playing and if it feels to me like the cost of acquisition on the agent side is going up it does not feel like digital has brought it down.

Speaker 10 It just doesn't feel that way.

Speaker 7 It's too competitive.

Speaker 10 Yeah, it just today to get in front of someone, to get the time that they need to build that small amount of trust.

Speaker 10 You, you know, like what you guys are doing, you know, I see you guys running Facebook ads, you're running ads all over the place, and you're doing that to build trust.

Speaker 10 You know, some of those, I mean, I see the playbook.

Speaker 10 I mean, some of them are branding, some of them are trust building, some of them are storytelling, some of them are direct, you know, driving in hardcore CTAs.

Speaker 10 And you're doing that because that's what you have to do.

Speaker 10 Agents have to do the same thing. They have to brand either locally or nationally or in their niche.
That costs money, cold email.

Speaker 10 So I think what's interesting is, and I actually had this conversation with one of my carrier partners the other day.

Speaker 10 They said to me, you know, hey, it's been five weeks and we haven't had an account with us. And I said, that's because it's really hard to call business with you.

Speaker 7 And they said, what do you mean?

Speaker 10 I said,

Speaker 10 I have six direct appointments for this line of business, this line of business that I attack. You are the hardest one to do business with.

Speaker 10 You are the, you are, unless I can, unless I see that you are an obviously lower than any of the rest, you literally aren't even getting options.

Speaker 10 You're not even getting shots because you're tough to do business with. So that, because that drives my cost up.
That time cost, I think, is a big part. of the equation.

Speaker 7 Especially for small accounts.

Speaker 10 Especially for small accounts and especially for smaller agencies or agencies that haven't adopted any kind of automation.

Speaker 10 If you're trying to,

Speaker 10 that piece, I feel like, is a big part of what, as

Speaker 10 analytics start to permeate deeper into our business and we can start to see where we're spending time and how much that time is costing us, I feel like there's an enormous opportunity for

Speaker 10 be it a carrier or a technologist or whatever, who can start to find that time and then find ways to chop it out of the process because that's where you spend, you know, that's where you lose or the, that's where so much of the cost of acquisition is being driven up is just in time.

Speaker 10 It's just in ticks of the clock.

Speaker 7 Well, I think that's right. I think most people that have been in the business for a while don't appreciate how much their time cost.

Speaker 7 Right. Because it's always been the way they've done it.
They've, you know, taken people to lunch, they've gone to seminars or whatever it is, how they acquire customers.

Speaker 7 and it's worked, right? And then it becomes an annuity. So

Speaker 7 it's a great life if you can build that up. I think it's painful to get started.

Speaker 7 But most people aren't thinking about scale,

Speaker 7 right? And so like a pie, all we think about is scale.

Speaker 7 I'll give you a very good example.

Speaker 7 you probably have marketing reps that call on you right and i constantly right and incessantly we could even say and pre-covered that was likely in person

Speaker 7 right or they wanted to right donut dropping and whatever else they wanted to do you think about the the amount of windshield time those marketing reps have yeah

Speaker 7 that's just totally wasted

Speaker 7 wasted time

Speaker 7 you know instead of having 12 meetings in a week what if you said i'm not going to get in my car and i'm going to have zoom meetings and i'm actually going to provide value to the agent, not just pester them to give me more binds.

Speaker 7 Oh, now all of a sudden you think about scale. And instead of 12, you can have 60 or 100 meetings that provide value to the agent, not just pester them and want something from them.

Speaker 7 I mean, that's the kind of mindset Pi has, right? We're not going to bug you unless we have something to say.

Speaker 7 And we

Speaker 7 want the proof to be in the pudding, right? You're not going to send us business if you don't get something back quickly and

Speaker 7 it's going to be priced well. You're not going to do it.
So, like, that's our part. I'm not going to badge you to send us submissions when

Speaker 7 everything that you send us, we decline. That's not a good experience.
Yeah.

Speaker 10 You know, I think I was actually talking to one of my marketing reps and I give them a hard time. Many of them, I mean, they're all great people.
They're trying to do their best.

Speaker 10 COVID, for all its awfulness, has actually, I think, drastically improved the marketing rep agency experience for the reason that you just defined. It has forced them to go to Zoom,

Speaker 10 which saves them time, which means you can have a 15-minute meeting or a five-minute meeting because they didn't drive an hour to get to your office. Exactly.

Speaker 10 And, you know, that really amps, because I'll talk. If you're going to say, I need seven minutes.
I can give you seven minutes. That's no problem.
Let's, you know, tell me what you need to tell me.

Speaker 10 I'll hear about the new service line coverage endorsement for seven minutes, but you want to come over for an hour. Well, that doesn't work.

Speaker 10 And I really think that a lot of marketing reps have taken it to the next level. And, but one of the, I want to talk about scale for a second because this is this is a

Speaker 10 so I've been doing digital marketing and growth keynotes in our industry for for literally a decade. My first one was in August of 2010.
And

Speaker 10 one of the very first things that I would say at the beginning, partially because I like aggravating people, was,

Speaker 10 you know, if you aren't dedicated to growth, then you need to get out right now, because this is going to be awful. You're going to hate everything that I have to say.

Speaker 10 And what would be interesting is I would see people kind of look around and you could tell they. They actually were not interested so much in growth.
They had reached their number.

Speaker 10 And

Speaker 10 I guess my question is like with

Speaker 10 companies coming in, and I say coming in because what Pi has been around for three and a half years, right? So still relatively new in the spectrum of

Speaker 7 two and a half years.

Speaker 10 So

Speaker 10 when new entrants are coming in who have a very legitimate product, who have history in the industry, who understand what's going on and are growth focused, you know,

Speaker 10 where do you see, I mean, how long can

Speaker 10 entities that are not growth focused, how long can they stick around? And is the last thing I'll say before you respond, because I know I'm on a diatribe now.

Speaker 10 The good news is my show, so I can't get in trouble.

Speaker 10 So is I had a carrier say to me the other day,

Speaker 10 we have 40%

Speaker 10 of our agencies are losing so slowly that they believe they're winning.

Speaker 10 And I thought that that was one of the the most profound ideas that I had heard in a very long time. And it made me

Speaker 10 nervous for those agencies because a lot of good people, but very excited because that means 40% of agencies are going away. And how can we capitalize on it as organizations that want to stick around?

Speaker 7 Well, I mean,

Speaker 7 I don't know the answer to your question about

Speaker 7 how long they can live. I think that depends on the size.

Speaker 7 If they're big enough, they can live for a long time.

Speaker 7 If they're smart, they'll sell, right? There are lots of people trying to aggregate agencies to do exactly what we're talking about here is to get scale.

Speaker 7 And a lot of private equity money has come in

Speaker 7 to do just that.

Speaker 7 I have a philosophy, right? If you're not growing, you're dying. And if you're dying, you'll be dead.

Speaker 7 So I'm I'm all about growth, like and how you get growth and how you continue to grow your business. If you're not growing, how do you attract top talent?

Speaker 7 They're not going to come to work for you if you're not growing. Hey, come and work for my dying agency doesn't sound very appealing.
Yeah.

Speaker 7 And I do think that

Speaker 7 I don't know what the average age of insurance agent principal. Okay, so it's,

Speaker 7 and that's probably generous.

Speaker 7 It's a it's a

Speaker 7 you know generation that's that's closer to retire retirement. Maybe they don't need to do anything.

Speaker 7 I look at it

Speaker 7 along the lines of innovator dilemma. I don't know if you've ever read Clayton Christensen stuff, but

Speaker 7 I mean, this is exactly what's going on. It's that, you know, small upstarts are finding little pockets, little niches to be successful in, and building and growing from there.

Speaker 7 And pretty soon, those little bitty niche players are now big players because they've taken market share from everybody else that was not paying attention.

Speaker 7 I think there's so much focus on InsurTech that I think people are paying attention.

Speaker 7 But I wonder.

Speaker 10 Yeah. So one of my favorite books in the technology space is Crossing the Chasm by Gregory Moore.

Speaker 10 How, you know, you guys, I are, do you, one, which side of the chasm do you think you're currently on if you were being, you know, as honest as you're willing to be?

Speaker 10 And

Speaker 10 so then, my, depending on what your answer is,

Speaker 10 how do you either get across it or how did you get across making that jump?

Speaker 7 What's interesting, Crossing a Chasm,

Speaker 7 I mean, is a seminal book, right? It's, it's, like, it's that, it's a technology Bible piece. Yes.

Speaker 7 And I think very,

Speaker 7 very appropriate for most markets. I think the difference in insurance is that it already exists, right? I mean, work comp, you have to have it, right? There's not a there's not a product market fit.

Speaker 7 that we have to deal with. And that's usually what you're trying to cross a chasm is to get that product market fit right.

Speaker 7 And, you know, once you get the product market fit right, then you start to scale the business. Well, part of the reason we chose comp is because it's mandatory in most states.

Speaker 7 So, the business, we don't have to convince anybody to buy it.

Speaker 7 So, from that perspective, we've not really crossed a chasm.

Speaker 7 I think we started on the other side of the chasm.

Speaker 7 And we're growing like crazy to answer that part of your question.

Speaker 7 You know, we started two and a half years ago.

Speaker 7 We'll,

Speaker 7 I mean, you know, we'll get ready to publish some numbers coming up.

Speaker 7 Let's just say that

Speaker 7 we finished year around 40 million last year, and we're going to far exceed that this year.

Speaker 7 So we're growing like crazy.

Speaker 7 And you can,

Speaker 7 of course, in comp, you can grow. all you want if you don't care about the loss ratio.

Speaker 7 And I think that's an attack that's that's sort of the next question is, oh, yeah, you can grow, but if your loss ratio is 140%, who cares? Well, that's not how we operate.

Speaker 7 You know, we're at a 30-point loss ratio.

Speaker 7 So we're really watching our P's and Q's.

Speaker 7 So growing that fast with a low loss ratio is

Speaker 7 all about the analytics.

Speaker 10 So I want to take it back then because that's super interesting to me. Because the experiences that I've had with you guys so far is

Speaker 10 even on just a straight LCM level,

Speaker 10 you know, I wrote an account with you guys.

Speaker 10 It was a HVC contractor, not terribly large, but, you know, decent size. And,

Speaker 10 you know, they had a good, good market currently and they were getting poor service. So instead of just straight BORing it, I said, you know, let's see what else is out there.
And you guys were

Speaker 10 competitive underneath that, underneath that number. And to see those kind of competitive rates and to still be at, you know, a 30% loss ratio is

Speaker 10 pretty impressive. So kind of going back to something you said earlier, so I can better understand this, because I think I glossed it a little bit and I apologize.
You had made the comment that

Speaker 10 where a lot of underwriting is done is they focus on a singular risk, this specific, you know, X risk. And what you guys are doing is looking at the risks as a pool.

Speaker 10 And that's helping you better price and better understand that even if this particular risk isn't you know the cream of the crop risk it fits this pool that we're looking at is that is that giving me is that a better way of a little bit so let me let me try and and help you um

Speaker 7 sorry if you look at a um

Speaker 7 a bureau price okay

Speaker 7 so you get a bureau price say ten thousand dollars on a risk

Speaker 7 So let's just say that's the average price that the market's going to going to charge, $10,000. Some carriers are going to say, you know, that's a little riskier than $10,000.
So

Speaker 7 I'm going to surcharge them. And some are going to say, ah, it's pretty good.
And we like this agent. So

Speaker 7 we're going to discount this.

Speaker 7 Right. And that's kind of the job of the underwriter to understand the market and deal with the agent and stuff.

Speaker 7 Well, that's not how we think about things. So what we think about is, okay,

Speaker 7 that particular risk

Speaker 7 are they

Speaker 7 below average risk are they an above average risk analytically

Speaker 7 not

Speaker 7 you know

Speaker 7 do i feel like they're a better risk it's like analytically can i can i tell you emphatically they're better than average risk and if they are right, that fits into the pool of better than average risk.

Speaker 7 And that group of better than average risk is going to perform

Speaker 7 much better than your average risk. Likewise, but if you if you plot that same kind of thinking from an underwriter's perspective,

Speaker 7 might as well throw darts. It's it's random.

Speaker 7 So

Speaker 7 that's how we're using the analytics. It's really to, is this

Speaker 7 risk better than average or not? And if it's better than average, we're going to price it accordingly.

Speaker 7 So we don't write everything, right?

Speaker 7 But we can't,

Speaker 7 it was very difficult for agents to understand about Pi.

Speaker 7 They want class-based business. They're like, okay, will you write landscapers? Yeah.

Speaker 7 Then they sent us a landscaper. And we're like, well, you said you wrote landscapers.
We're like, well, we don't write them all. Yeah.

Speaker 7 We write the ones that are better than average, that we can analytically show are better than average. Oh, well, this one's only had two claims.
It's like, yeah,

Speaker 7 but a two-claim landscaper in Queens is a hell of a lot more risky than a zero-claim landscaper in Macon, Georgia.

Speaker 7 As, you know, that's a super simple example. Yeah.

Speaker 7 So we price them differently. Yeah.

Speaker 10 No, that makes a lot of sense to me. I do think that,

Speaker 10 so, so do you see a place for, because sometimes the other way is true too, right?

Speaker 10 Sometimes the

Speaker 10 all the

Speaker 10 numbers may show or the system shows or the computers show

Speaker 10 this thing is outside of what we want. But as an agent, knowing the business owner, walking the building, knowing the employees, seeing the operation, you're going, look,

Speaker 10 they had a bad day. But in general, this is a profitable risk long term.

Speaker 10 And what I've found is there are carriers who will come back and go,

Speaker 10 if you think, if you're willing to sit on this and you think that this is good, I'm listening to you, and you sent me pictures, and we've, you know, and

Speaker 10 then I'm willing to give it a shot. And then there's carriers that are just like, nope, computer, you know, I got a big X on my underwriting screen here.
So no, thank you. Have a nice day.

Speaker 10 You know, do you see? the side for some human stuff do you have that as part of it or you know is it kind of cut and dry the the analytics of the game no i i

Speaker 7 and and and we've studied this for years

Speaker 7 uh at valon trying to understand

Speaker 7 right the analytics only human being underwriters only some blend of the two yep uh

Speaker 7 and what we saw uh emphatically was that the combination of the two actually gets the best outcome now that doesn't mean that

Speaker 7 you should believe every story an agent tells you.

Speaker 7 You shouldn't.

Speaker 10 No, you definitely should not.

Speaker 10 No.

Speaker 7 Especially because they have a different motivation than you do. Yeah.

Speaker 10 It's called bending the submission.

Speaker 10 You massage and bend the submission to.

Speaker 7 Yeah, because your interests aren't necessarily aligned, right?

Speaker 7 The agent wants a commission, and the underwriter wants

Speaker 7 a good portfolio of business.

Speaker 7 So what we do, the analytics obviously

Speaker 7 come first.

Speaker 7 And when there is a compelling argument um that the analytics are wrong and they can be wrong they are wrong

Speaker 7 um

Speaker 7 analytics don't know that there was a discontinued operation as an example yep analytics doesn't know that you sold off that piece of the business that had all the claims analytics doesn't know that new management came in right or they moved to a new facility or whatever they put in a lockout tag out program who knows what they've done the analytics doesn't know that and so

Speaker 7 as an agent with a carrier that uses analytics,

Speaker 7 you know, my quest or request is for you to tell us that, right? Not just Pi, anybody else that does this too.

Speaker 7 Tell us that those kinds of things are important and smart carriers will listen.

Speaker 10 Yeah, I agree. I wholeheartedly agree to you.
I agree with you. I think.
you know,

Speaker 10 I'm yet to run into a system, a process in our business where

Speaker 10 all tech or all human is the answer. I just have not run into that yet.

Speaker 10 I, I, and then the more I get into running this agency, the more accounts that I've written, the more people I've talked to, the more experience that I've had, it just keeps coming back to there's some middle area.

Speaker 10 And for every process and organization, it'll be maybe skewed a little more human or a little more, we'll call it, you know, computers or whatever, even though it sounds like,

Speaker 10 I sound like I'm like seven years old when I say that.

Speaker 10 You know,

Speaker 10 that magic box with the pictures.

Speaker 10 The, you know, that to me is where we all need to be going is

Speaker 10 how do we continue to mash up all the access to data that we have and the insights we can drive out of them and then use,

Speaker 10 you know, some sort of rational thinking, some sort of logical thinking. matched with just some a little bit of intuition to come out with what feels like a very good answer.
And

Speaker 10 it seems like everyone wants to push, I shouldn't say everyone, seems like a lot of people who are who are struggling in this new environment have continued to either push all digital, they just want everything to be streamlined, no humans, you know, complete self-service.

Speaker 10 And then and then the other side is, you know, screw the computers, you know, we don't want Terminator 3, you know, you know, Judgment Day coming.

Speaker 10 So, you know, that, it feels like that middle ground is the answer here.

Speaker 7 i think it is and but i also think it depends on on the size of the policy right minimum premium you know 700 deal

Speaker 7 it's pretty hard to go to these arguments all the time because it's just it's just there's not enough money in it yeah um

Speaker 7 but larger policies you should always you know try and get that human element in yeah uh because it does matter so um

Speaker 10 you know i want to be respectful of your time and and i really appreciate this conversation. I think a lot of people are going to take a lot out of this.

Speaker 10 Where is Pi going? What's the next, you know, you're two and a half years into selling, three and a half years into the business, you know, we're staring at what feels like, what feels like

Speaker 10 a lot of open ground for you guys. You guys are out ahead, you know, in terms of maybe your positioning and your technology.
And as you're building relationships, you know, you have a lot of steam.

Speaker 10 Like, where are you going? What are you excited about coming down the

Speaker 10 here?

Speaker 7 Well, let me answer the first question,

Speaker 7 sort of the longer-term question.

Speaker 7 I want to create the largest small commercial insurance company on the planet.

Speaker 7 I want to stick to our knitting and keep it small. Love small business.
My great-grandfather was a small business owner. My grandfather was a small business owner.

Speaker 7 My dad was a small business owner, right? It's like kind of family blood. So I love small business owners.

Speaker 7 I think there's a lot of hay to make there across the planet.

Speaker 7 I can't predict exactly what's going to happen,

Speaker 7 but I can tell you that's our goal. And I love, you know, 20, 30 years from now for my grandkids to say, my grandfather created that, you know, signs on the door kind of stuff.
Yeah.

Speaker 7 When we get there, I don't know, but we're sure going to try.

Speaker 10 Okay, one follow-up question to that. You keep saying small business.
Does that mean you're going to come out with a bot product or you stay in comp?

Speaker 7 Great question.

Speaker 7 So we're sticking to our knitting today in comp

Speaker 7 because we have a competitive advantage.

Speaker 7 Our data pricing, our data analytics give us a pricing ability that I think is second to none.

Speaker 7 For us to go into other lines of business, we have to figure out some kind of similar competitive advantage. And that's challenging today to see the path there.

Speaker 7 I do believe that our customers

Speaker 7 want to buy other small business insurance products from us. Certainly our agency partners want us to sell other stuff.

Speaker 7 So to the extent we can figure that out and figure out a competitive advantage.

Speaker 7 We will.

Speaker 7 So I do see that in our future. Is it six months from now, six years from now, 16 years from now? I'm not sure.

Speaker 10 Yeah. No, that seems that that's a fair answer.
You know, I think,

Speaker 10 you know, the tough part about, you know,

Speaker 10 you definitely, I can see what you're talking about with the competitive advantage on comp,

Speaker 10 you know, with the, with so many companies already having $500 minimum premium bops available, like what, what, what's the differentiator when so many when every company is basically willing to write a million dollars in liability with all the things that come in a

Speaker 10 package of a bop for 500 bucks, you know, there's, that's a tough one.

Speaker 10 Commercial auto would be one, I mean, the mark, I mean, and the market's getting slaughtered, but man, if you could figure out a way to

Speaker 10 clean up commercial auto a little bit, there's so much opportunity there. That, that, that is

Speaker 7 an auto, you know, wheels are, are something most of our clients have, right? Because we do a lot of stuff in the construction trades, right? They've got trucks and vans and whatnot. um

Speaker 7 right now we're we don't think we can beat progressive commercial auto uh so we're we're happy to to sell it um

Speaker 7 i don't know we'll we'll see it's it's got to be something we we can sink our teeth into and get some advantage

Speaker 10 i think that's fair well uh dax i i i appreciate it man i appreciate you coming in having this conversation i know you're a busy guy i know you got a lot going on and um i just love exposing the audience here the independent agency ecosystem to, you know, I think companies that sometimes are misunderstood in general.

Speaker 10 And I think that's the case with you guys. I know I probably, I didn't really know what to expect.
And then my experience was so positive. You know, I didn't necessarily have negative feelings.

Speaker 10 I just didn't. And then my experience was so positive.
And I just said, you know, this is more agents need to understand that here's a resource for them and a market for them. And then I

Speaker 10 operate with a lot of other agents that focus on workers' comp. And it seemed like a natural fit.
So I just appreciate you sharing your expertise, how you guys operate.

Speaker 10 I think it'll be very interesting for a lot of our listeners. And I just appreciate the time.

Speaker 7 Awesome. Well, I appreciate the opportunity to come aboard and

Speaker 7 talk to you about it. And appreciate the opportunity to work with you as a producer as well.
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