RHS 096 - Kyle Nakatsuji Explains Why Clearcover is Positioned to Win

In a crude laboratory in the basement of his home.

Well, everyone, and welcome back to the show. Today, we have a tremendous guest for you, Kyle Nakasugi, the co-founder and CEO of ClearCover, a company that I've been following for a long time.
And I actually started following Kyle's career when he was still in their venture arm or the venture arm of AmFam, American Family. And they were doing some really interesting things.
And he had some very interesting comments on the industry that I thought were very intuitive and thoughtful considering, you know, I think what I would assume someone in his position would believe, right? And they were very much inclusive of independent agents and very realistic on the industry while still taking a very forward-thinking perspective. So I've always kind of been a fan and watching what he's doing.
This is actually the first time we've had a chance to really chat for an extended period of time. And I just found Kyle to be absolutely tremendous.
I think what he's doing at Clear Cover is another example of a company that is leading us into the future of where, in particular, a product like Auto, Personal Auto, is going. And while, you know, I guess it goes without saying that I'm an enormous believer in the independent agent, I do think that if we don't digitize, we're going to die.
And I've been saying that for a long time. I think we have to digitize the soul of the independent agent and bring it online in a way that allows us to be the true relationship agents that we are while providing a much more digitized product.
It just fits into our lives in a much more cohesive way. You know, the paper applications and how hard it is for us to do business, that is just going away.
And if Rogue Risk has anything to do with it, we'll continue to make that go away because we don't get to be the outlier. I can't see a world in which everyone else, everything that everyone does in every other aspect of their business is digitized, but in insurance, no, no, we still, you don't understand, Ryan, this is a relationship business.
No, you can take those relationships and digitize them in a way that makes you still a value provider. And what Kyle is doing at ClearCover is an example of how that is possible.
So I was very excited to chat with him. I think you're going to love this episode and I'm glad to share it with you.
Before we get there though, I want to give a shout out to a brand new sponsor to the show. Someone or a company I'm incredibly excited to share my experience that I'm having with you and that's Podium.
And I know you've probably heard of Podium and some people have tried it. I am leveraging Podium for the kind of text capture feature that they have on their site.
So if you go to Rogue Risk, you'll see a little symbol down in the bottom right-hand corner with like a message that I put out, which is basically like, how can we help? And that allows people to basically do a chat, except the chat is via text, text message, and I can text them back and it I've gotten I've had podium on my site for a week and I got six people you know who were basically prospects not all of them were the right fit for our agency but two of them were and two of them I passed off to other agents and the other two were were kind of not great opportunities, but geez, I mean, that's the way it's always going to be, and to get six opportunities like that by adding this widget to the site, you know, to me, early signs are that Podium is going to be a very good resource for our agency, and I've just started using it. I mean, I won't say that I'm an expert in any regard.
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If you're doing digital work, if you're bringing inbound into your website, so far have great things. I've had great results with Podium and happy to share them with you and there'll be more to come as I start to learn the tool better, to learn how to use it better um you'll be hearing more about podium so podium.com if you don't know how to spell podium that's p-o-d-i-u-m.com but frankly you should know how to spell podium so podium.com podium.com podium.com all right let's get on to kyle ryan what's up dude what's up man How are you? Uh, you know, doing, doing the agency, the agency owner life thing, you know, and then mixing in a podcast here or there.
Um, I want to, I want to hear the story. I've kind of followed from afar, but, uh, but I haven't heard the story directly from you about the agency, about all of it.
Cause you were, you were in the insurance game and then you were the CEO of like fitness company for a little while. And then you came back to the insurance game, like the whole journey.
Oh dude. So, um, so my, I started, well, this would be, this would be 16 years in insurance.
Uh, I, my wife's father owns an agency. Still, my wife actually works there with her twin sister and her brother-in-law or my brother-in-law, her brother did work there.
So I did that for eight years, boots on the ground, dude, 50,000 miles on the car, driving to strip malls, dropping my business card off. Every single person I bumped into, I'm hawking in them insurance.
And I just played that game for a long time. And, um, and about eight years in kind of realized there was a ceiling on that as the son-in-law, uh, probably would have in hindsight, I'd probably make a lot more money than I am than I actually am at this moment.
But, uh, but you know, um, it was really good experience. I learned my father-in-law is one of the most professional, you know, takes care of his clients, does the right thing.
He's got a really solid. So I kind of felt like I learned, I got a really good foundation.
Parlayed that in the chief marketing officer, trusted choice, built agency nation, went to bold penguin, was a CMO there for a while. I had to leave that because my, my brother-in-law who worked at the agency, he got sick terminally, unfortunately.
And when that happened, my wife had to step up and take a bigger role in the agency. So I couldn't travel anymore, which is, you know, in the insure tech life is a big part of the game.
So I became I took like the best thing you could find here. The best thing I could find was this gym that I had been going to for five years.
When the owner, the founder found out that I was looking for work locally, he basically came to me and he said, you know, I'm a fitness guy. I've kind of taken this as far as I feel like I can take it business wise.
I want to keep working on the workouts and the gym environment. Would you be interested in coming on as a CEO and growing the business? And I hated leaving insurance because I really do love this industry, but it felt like I can do this.
I love to work out. I've, I know this gym, good people.
It was, it was a very sellable product that was a really good product. Um, so I said, yes.
And I grew it from 2000 to 3000 members in nine months and showed up one day to our standing 830 meeting. I'm in my blue lemon leisure wear or whatever, you know, what do you think, what do you call the athleisure stuff? Yes.
Athleisure. I'm all athleisure out.
Um, and he showed up in a suit with his attorney and handed me a termination letter that said, um, we are terminating you without cause. Thank you for your service.
You've done a good job. That's all I'm willing to say.
Have a nice day. Wow.
And I said, well, I said, what am I supposed to do now? And his attorney said, well, I'm going to speak for Mr. You know, whatever, Mr.
Phelps. And he said, you have a severance.
So let's hope that that works for you. That was it.
Haven't spoken to him again. Walked out at 8.36 in the morning on a Monday without a job.
And I was shell-shocked to a certain extent. But I then also said, I have been mapping out this agency in my head of what I think is possible.
A market segment, a process, a methodology. And it's time to try it.
And that's where Rogue came from. That's what a story, man.
Good thing it was like a CrossFit gym and not like a boxing gym or something like that, right? That meeting was cool. It was, it was called the name of it was Metabolic Meltdown.
And it was all about, you know, it kind of was, if you've ever done P90X, it was P90X with more weights and bands, and there was more resistance than body weight. And it was in a classroom setting.
So you would move through stations. It was very timed.
It was very, very difficult. I mean, you could, you could burn 1500 calories in an hour.
Wow. Yeah.
It was intense. I mean, I was freaking cut up, man.
It was the best shape I'd ever been in my life. I mean, you're working out for a job six days a week surrounded by, you know, yeah, I don't know how old you are, but I just turned 40.
So at the time I'm in, I'm like 38, 37, 38, 39. And I'm surrounded by 22 year olds who are just yoked.
And, you know, you can't help but move in that direction, you know? So, you know, it was an interesting time. Let's just say that.
Okay. So, but it provided the opportunity then to say, look, I've been trying to start this agency for a while.
Now, now's the time. Yeah.
So that's where it came from. Yeah.
So I, walking in the parking lot, literally the walk from the door to my car, I called my wife. I told her what happened.
was shocked and then I said this is the sign you

know this is it's time to it's time to make a run at this you know for whether it works or not we'll see but um it's time to make a run so that's we start ever since that day I've been building Rogue and here we are one we celebrate a one-year anniversary on the 9th so really okay yeah so so you like literally you started it like March 9th of 2020. So that's a whole nother story.
Yeah. Yeah.
I mean like so many businesses, it would have been nice to know that COVID is coming. I don't know what I would have done differently, but you know, that was interesting.
So yeah, I'd say I really didn't start operating the way i wanted to until like october or november really yeah yeah so that's and we've been at like four and a half years i'm not certain we're operating the way i want to yet either so i don't you know that's yeah i don't know you ever get there i i agree with that completely but it let's just say let's just say those first few months were um i can imagine desperate let desperate. That's probably a good way to put it.
Yeah, yeah. But dude, I first came into your ego, or you first came into my vantage point when you were at AmFam doing all the stuff with the venture fund or whatever the framework was of that.
And then, you know, I've always been intrigued in your move from AmFam to ClearCover, to founding ClearCover. Like you obviously, through the companies that you were researching and investing in and all that kind of stuff, you obviously saw something and were willing to make that leap because you had to be doing well at Amphim.
I mean, that's a big position. You were, it was public.
It wasn't like you were in some back office. I mean, you were someone that people wrote articles about and talked about.
You had a very visible position. So I've just been, I've always wanted to, as much as you can or are willing, I'd love to know what you saw.
Like what was that moment when you were like, you know what, there's opportunity here. Let's, let's, there's time to make a move.
Yeah. I mean, it's, it won't be, I think, dissimilar to, to your own story and to a lot of founder stories in that there was like a ton of serendipity and I got a ton of help.
And then there was like this catalyzing moment where I was like, okay, look now, now's the time. So like, for example, we started the venture funded AmFam at like the end of 2012.
And there were plenty of people in insurance and there were plenty of people using technology and insurance, but like insure tech was not around. And so we were fortunate.
We were just lucky that we started this. I mean, I was lucky.
Peter Gunder, who actually was the, you know, this was his brainchild was pressing it. I think Peter saw it coming, but, you know, come 2014, when everybody cared about insure tech, right place, right time.
We just got to, middle of it because suddenly everybody cared about insurance and technology. And ostensibly, that's what we did.
So we were just lucky to be focused on the right thing at the right time. Got to meet with a ton of really smart people who were pitching their ideas.
And as a venture investor, you really get paid to do two things. You get paid to be intellectually curious and you get paid to sell money, which is a weird thing.
It's like a weird phrasing, but that's kind of what you do because the most competitive deals, like you're selling, right? So you get paid to be intellectually curious and learn and build ideas and theses and then sell money. And so we were building ideas and like coming up with theses we wanted to invest in around the insurtech space.
And some of it was around distribution and some of it was like, you know, all these new next gen carriers were coming out. We're trying to figure out how those might be successful or what might be successful.
And like in the middle of all of that, there was this is I won't tell the whole story. It's kind of long, but I was living in San Francisco Francisco I was going to open an office for AmFam out in San Francisco I moved back to Madison so my wife and I could sell our condo and then move out to SF full-time and when I got back I heard there was a project going on at AmFam around an idea that we had worked on which we had called incidental insurance but essentially like how would you sort of plug insurance into these moments where consumers are going to find it relevant? And so I asked Dan Reed, who runs the venture fund over there and who was my boss, like, Hey, can I work on that on the side? Like can I spend 20% of my time working with this team? And I did in like two weeks in the guy I was working with on it, who is now my co-founder.
And I kind of looked at each other and said, this can probably work, but it's going to have to be a separate company. And that began like a six month process of convincing American family, who's very forward thinking and super innovative, that they should allow us to go and start a separate organization to pursue this idea that they theoretically had been come up with there.
But we did, it went all the way to the highest levels of the org. And, and, and they eventually said said like, go ahead, start it.
They gave us a couple million bucks to get started when we walked out the door and, um, and here we are now. But I mean, again, it was just this like conflation of serendipity, bunch of thinking.
And then this like moment in time where it was like, look, this is it. This is the thing that, you know, it's, it's not going to happen if you don't go and do it.
And as I'm sure you felt, you know, perhaps on the walk to your car from the gym was Jeff Bezos calls it his regret minimization framework. Yeah.
But like, I just hit that moment where I knew I would regret not trying more than I would regret leaving to try despite how great my current role was. And as soon as I got to that point in my head, it was done.
The decision was made. There was, there was no, there was no crossing back over that line.
Yeah. I I've had, um, I've had a lot of people, a lot of people were, um, I don't want to say shock.
It's not the right word. Um, I think it didn't make sense when I started my own agency to a lot of people.
And it's exactly what you just said. I could have gone and gotten a job for a lot of people.
Then it would have been much more comfortable. But the idea of watching other people do it, and it's almost like you want to see how good you can be.
And if you don't put yourself in those kinds of positions, you don't know, like it's, you, you just, you're going to, you're going to wake up one day and be like, I never really figured out how good I could actually be at this. And that regret is absolutely something that I don't want to live with, which is, which is why I'm sitting in my frigging basement hawking $1,300 carpentry policies right now because that's part of getting up off the ground.
It's not my end game by any stretch, but I think you said something and I'm interested in this topic. The episode that came out, it's not gonna be concurrent with our conversation, but the episode that came out the same day that we're recording is an episode I did with James Altucher.
And I don't know if you're familiar with him, but it was a big time goal of mine to interview him because I've been following him since his first episode. I think very highly of him as a thinker.

And he used the word curiosity no less than seven times during his episode about different things. And you just used it again.
What do you think it is about the idea of curiosity that makes it such an important part of successful journeys? And as much as you can, how does someone build more curiosity into their life? Because you were professionally curious. If you're not still, you were for a long period of time.
So it's a fascinating question. I'm sure James knows much more about this than me too.
James is fantastic. But so I'll give you my, my, my sort of high level thoughts.
So one is I do think some of it is innate, right? I think some people are, it's sort of back like Dweck's growth mindset versus fixed mindset. So like, I do think some people just innately are curious and have this drive and want to do more.
So that's certainly part of it. But something that I've observed, I experienced as a VC, I've experienced as an operator, I see the people who work at my company experience, is sort of this climb and descent of the Dunning-Kruger curve.
You know the Dunning-Kruger curve? Yeah, I know the concept, yeah. So it's like, it's essentially the high level for everyone else, when there's, there's like this relationship between how much you think you know about a topic and how much you actually know about a topic over time.
And so what happens is like, when you start learning about something, you rapidly climb up and you think, you know, a ton about it. And then the more time you actually spend with a topic, you kind of fall off this cliff of stupidity.
And these are like, Oh wait, I know so so little about this thing. And then you sort of gradually make your way back up.
But oftentimes, you never actually reach that level of confidence or belief in what you know about a thing that you had at the beginning. And what I've found is the people who can remain curious over long periods of time get over that hill.
And they get to the bottom, they get to the trough, where they realize how little they actually know about this thing that they care about. And then you have to spend a substantial amount of time trying to reclimb that hill.
You're the kind of person that like rests at the top and believes that you know everything there is to know about a thing after very little time. And you have very little reason to be curious.
And so I think, I think like being persistent in seeking the ways in which you are wrong or stupid or are less informed than you might know is one of these things that drives you to be curious almost by default. Because once you fall off that cliff, if you want to maintain any sort of relationship with that topic, you have to keep being curious and keep learning to keep to move back up that curve.
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I'm out of here. Peace.
Let's get back to the episode. Yeah.
I love that explanation. And I mean, obviously, that curve has been around and the concept is solidified.
So me agreeing with it doesn't mean anything. But, you know, it has been it has absolutely been the experience that I've had as well.
And in the moments of my life where I feel like I've made the biggest mistakes are often because I'm sitting at the top of that curve. Maybe even I'm, I don't even re you know, you don't realize that you're there.
Like you don't realize that you don't actually know nothing, which is probably the worst place to be is, is, is not even realizing that there is more to learn. Like you think you've, you've got it.
And yeah, I, I see that so often. There was a really, this is, I don't mean to make this about James Altshire, but he did a podcast with a guy by the name of Cal Fussman, who was a very good friend with Larry King.
And they were discussing, what was it about Larry King's interview style that made him successful for 40 years? And he did something like 60,000 interviews, more than, you know, anyone else in history and, you know, this long running programs. And he would interview people for eight hours a day.
I mean, people didn't realize that even when he was on CNN, he had two other shows that would go overnight that he would be interviewing. And you'd think to yourself, man, nobody does that.
You know, you get the CNN show and then you go home and you get drunk, right? I mean, or whatever, you know, whatever your thing is, you know, you don't, you don't then go onto the, onto a radio program program and then go do something else. And, you know, what they came back, what this Cal Fussman came back with was, you know, for all his positives and negatives, the through line of his life was curiosity.
And that's what made him a success. And, you know, I look at that and I wonder sometimes if the individuals in our industry, if there aren't a lot of people who are at the top of that first ascent that have no intention or desire of dealing with the descent into really becoming in the work that it takes to becoming an expert.
And I think that's where a lot of the stagnation that the companies that emerged that InsureTech Revolution in 2016, I feel like what they were doing was putting a big, shiny spotlight on all these people standing on top of that first hump going, you don't actually know as much as you think, you know, like you think you do, but you don't. And, um, you know, that's, that's, that's really, man, you got my brain going.
That's a really interesting thought. Um, yeah.
Okay. So, so, so then you, you started this, this company and, um, why, why the, this version of insurance, Why this? Why clear cover? Why not anything else? So the thesis that we came up with while I was working at American Family was, you know, we were working on this idea of how would you build a next generation insurance company? Not someone that sells something to insurance companies, but like actually an insurance carrier.
And we were pretty focused on PNC and personal lines in particular, because AmFam had such a large exposure to personal lines. And so we were looking around and at the time there weren't that many people doing it.
Lemonade had just come out of stealth and Metro Mile was around and Root might've been pretty brand new, but like it was a pretty small group of companies that were trying to build their own brand spanking new insurance companies. And, um, and we came up with a thesis that was like a little contrarian relative to the market, which was that we believe the way you would build that next generation insurance company, um, was by building an advantage cost structure, not necessarily changing how the product worked or how the product was priced.
And the underlying thesis was all of that's interesting and pricing is obviously super important, but because of the way the market's regulated, it's a bit of a hamster wheel. It's really hard to build long-term competitive advantage there because as I'm sure you're aware as an agent, like carriers copy each other, they get to copy each other.
And like the newest pricing innovation becomes the oldest pricing innovation relatively quickly. On the other hand, you know, carriers who at their core had an advantage cost structure were able to offer customers maximum flexibility and consistently low prices.
And like, we felt like that in a, in a market where candidly the product feels kind of commoditized to a lot of consumers, being able to do that was actually the key to unlocking this sustainable competitive advantage. So we said, okay, that's our theory.
You have to build some sort of cost structure advantage that would allow you to build this sustainable competitive advantage, and then you could build a new big insurance company. And so there were two questions that we had to answer, knowing that was the thesis.
One was, is that even possible, right? Like Geico and Progressive do just fine, right? You look at the expense ratio, and it's not too shabby. So like, what are you going to do to make those companies to do any better? And, you know, I won't spend the whole time talking about it, but like our thesis was effectively there, there were two things we could do differently that we believed would actually allow us to have an advantage cost structure.
One was we would build the company from scratch with like this digital bedrock, right? Like if we had built a digitally native organization, we would have some operational advantages that would lower our costs. And the second was, and this is a little bit in the weeds, but there's structural cost arbitrage between digital customers and analog customers.
Essentially, an analog customer costs more to acquire and serve because you have to do a lot of things for that customer. You don't have to do for someone who wants to buy online, whether that's from an agent or not, but wants to buy online, wants to self-service, et cetera.
And so if you built like a really concentrated portfolio of digital customers, you would naturally have a lower cost structure than someone who had to balance analog and digital. So we said, okay, that's our ticket.
Like if we built a digital company focused on digital customers, we could actually really lower our cost structure. The second question we had to answer was, where do we want to start? There are lots of lines of business.
Like where are we going to start? And this was another choice. We chose to start in what I'll call mass market auto, like the non-telematic segment of personal auto.
And everybody was like, you guys are nuts. That is the dumbest decision you could possibly make.
And I mean, it's, it is a knife fight. It is wildly competitive.
Like I had a conversation with our chief actuary yesterday and he reminded me

that when I was pitching him, maybe I should have said this.

And he asked what we thought like our, like would stop others from entering the space and trying to copy what we're doing. Um, I told him, I don't know if anybody else is stupid enough to try.
And so like, but personal auto, you know, for us was actually the right market to implement this strategy right like if you think about building a cost advantage applying it flexibly across a really large base of customers like it was it was very much the right place to start the unit economics work on a single policy you don't have to try and sell a bunch of policies and make money there were a bunch of distribution opportunities we could work on so you know we we made that choice and you know it hasn't been all, but that was, I stand by the strategic decision there. I think, you know, based on what we wanted to accomplish, starting an auto was the right call.
How do you fight the retention game? Cause that seems to be the, that's the acquisition, you know, we'll take, take lemonade who you already referenced, right? Tremendous at acquisition, but they can't get profitable because, well, one of the renters is really tough. But they also struggle on the retention side as well.
And Geico struggles. I mean, Geico has, you know, been around forever and does great.
But they struggle with retention versus, you know, what you would call more of an analog agency model. They struggle with retention.
So how do you solve that? I think that's the natural first question for anyone who looks at your model and goes, that's great, but geez, I bet they don't retain anybody. Yeah, it's an excellent question.
So starting at a high level, there are two ways you can improve retention as an insurance company. One is to actually get people to stay with you longer, right? And that's the one most people think of when they're saying like, okay, go ahead and improve retention.
The other is by increasing the percentage of people who have been with you longer as part of the portfolio. So in essence, and I'm sure you've seen this in your own book, but personal auto in particular, personal lines generally, customers sort of exhibit the Lindy effect.
The Lindy effect, meaning that the longer something sticks around, the longer it tends to stick around. And all that means is that if you look at a personal auto customer cohort, what happens is churn is quite high when it's new.
And then as the customer cohort ages, churn gets much better. Retention gets much stronger.
So if you were to look at how much of a cohort sticks around from six months to 12 months, maybe you might lose 40% of the book. But from month 36 to month 42, you might only lose 5% of the book.
So really, one of the ways that you look at retention in some of these newer startups, what you have to understand is that they're so heavily weighted towards new business. They're very naturally going to show worse retention because new business retains much worse than mature business.
So one is like you just have to get old enough and build a portfolio that's old enough that the retention starts to look normal and looks more apples to apples with your peer group. The other thing is improving your retention overall.
And like, you know, for us, there's, there's been a couple things that we've done. One is building technology and user experiences, like trying to make sure the experience is worth sticking around for.
And the other very, very candidly, not to pander, but is, is operating in multiple channels. Because we know that like, we know that we get plenty of customers who buy from us direct who are great, but they tend not to stick around as long as customers that we get from our agency partners.
And so by building technology that allows us to operate in multiple channels, we can also start to balance retention and say, look, I know that maybe over the customer's lifetime in absolute dollars, I might have to pay slightly more in acquisition costs for an agency customer just based on commissions, but they're going to stick around for a period of time that more than justifies that extra cost. And like, it took us a minute as a startup to do the math and not be overly dogmatic about channels.
So separate story, but essentially building user experience is one, but also this, this idea of being multi-channel has been a big part of how we've thought about, you know, improving, improving retention overall in the book. Yeah.
So something you said in there that I find particularly interesting is, and, and there's an assumption in this and just listening to what you said, but your ability to use data and break data out in a way that you could actually define the exact, I'll use the word issues in certain segments of that retention curve that you could potentially target and fix. Like say our first six months, we have a 40% drop in retention, but once we get past six months, that goes down to 10 or whatever you said.
But now you can actually go in and say, okay, what is causing in those first six months, the 40, now we can attack that 40, get more people to the six month mark. So then ultimately more people are pushing down the line further.
And I think what's important for our listeners, because data in the IA space is a major topic that I think many agents are giving lip service to, but aren't actually understanding what it means for their business, is that if you don't have the information to be able to define some, just some of the high level ideas that you just brought out, you can't actually fix the problems. You're, you're, you're guessing at what the problem actually is.
And it's one of the reasons why I'm so interested in, you know, you guys, uh, Hippo openly, uh, branch is another one, probably competitor of yours to a certain extent. Um, you know, they, um, I'm so interested in these digitally native carriers because you guys are built to understand what these data points mean versus some of our, our traditional carriers, which are trying to figure out how to handle this data because it's in so many different variations in so many different places.
And, and also they think so, um, provincial, uh, that it, it, it's hard to break out what the actual root causes of many of these things are. Yeah.
I mean, it is, it's certainly an advantage to, um, to sort of build the infrastructure of the organization, anticipating having to deal with a world where data is abundant and there's all this stuff that you can collect. And in many ways, I mean, it's a bit of a necessity for us because if you just looked, if you looked at retention at ClearCover the same way you looked at retention at Allstate or like Allstate would talk about retention, you would say, man, ClearCover really sucks.
But if you really have to get into the data and understand how cohorts behave and like why a cohort behaves the way it does, you would say, well, actually they're doing really well. Right.
And so like, it was like almost a survival method of startups to say like, well, we're going to have to get pretty granular in how we look at things because, you know, comparing us to apples to apples versus 80 year old companies doesn't actually work. Yeah.
Yeah, that's interesting. That's it's it's very interesting to think about your retention.
Over time, as you know, in this idea of a cohort versus just, you know, how many how much business do we retain this year? You know what I mean? I think, I think some of that is, you know, many insurance agents do not have the technology to allow them to make that calculation. Some of them, when you're writing multiple lines are, you know, how do you, you know, how do you, how do you, in a way that is in any, in an efficient in any way, how do you compare business brought in excess lines using, you know, you using an accrual method versus direct bill cash methodology.
And you're mashing the two together. And, um, a guy by the name of Chris Burran has been making the podcast rounds.
He was one of the smartest guys in our industry, independent or not, talking about how data and in particularly how it impacts accounting and enterprise value is so incredibly important. And you look at a company like yours and what you guys have been able to do and the success you've had, man, the opportunities that are available to you because you built that way, right? And obviously some of it, like you said, was survival, but I'm also assuming you have a lot of smart people, yourself included, that work for you, that were doing a little bit of whiteboarding on the way up too.
So talk to me a little bit about where do you see these things starting to go? You don't have to just talk about clear cover, but I feel like you guys have been around for four plus years. Hippo is going public.
Lemonade went public. Openly is making a lot of moves.
Coterie just hit the market. Attune.
These know, this is, these are like the, this, this, I don't know, this next generation of carrier. And it feels like it's working.
And I'm just really interested in where, where you see it going. What are some of the things that get, that get you excited about the next phase, the next wave of where you guys go? That's a good question.
There, there, there certainly is a growing number, although in absolute terms, there's not many, right? Like if you looked around and you said like, maybe there's like 20 or 25, like. It feels like a lot because a decade ago, there were zero.
Yeah, that's right. We have a slide we actually showed to the company and it looks at the top 10 personal auto carriers and it's like the newest one was built in 37, I think.
I think that was when they were founded. So certainly, yes, it feels like a lot relative to the past.
I mean, in terms of potential, look, I think there's a lot of growth. As you know, it's a really big market.
I think you're going to see a lot of companies with a ton of growth opportunity. But maybe more than anything, the thing that I'm excited about is back to this idea of flexibility and being able to adapt to a changing ecosystem.
Part of the reason we're super excited about the agency channel in our business is that the agency channel in 10 years is not going to look the way it does today is not going to look the way it did 10 years ago. And knowing that's the case, I really like being like digitally native and agile insurance company to be able to serve the needs of that constituent as the constituent needs change.
And And like, we're not alone, right? Like I think a lot of us are in that same boat where as these markets evolve and change, you, you, despite the fact that being small does have disadvantages in this case, the agility that you have from being small and have from having that digitally platform is a really big asset. It's like an untad, there's like potential energy in that asset because you haven't had to use it

yet, but I promise it's going to be useful once,

as the market continues to evolve.

Yeah. To me, I think of the, the next, what's,

what's been exciting about our,

our time here in this space is that we had the baby boomers come in and they

did a tremendous job of saturating the market from a growth

perspective. And there's so many tremendous agencies spread throughout our country.
It's phenomenal. Unfortunately, that created a gap in the Gen Xers because they were kind of boxed out.
And now you have, you know, whatever, you know, I'm like, I was 40 a couple of days ago. So whatever you'd call me.
Yeah. Thanks.
And, um, and, and, and like say this, this age group of 30 to say 45 to 50, there's like a, there's like a 15 year window of professionals, men and women who really are growing up in their agency life at the same time that you have insure techs and carriers like yours growing up. And like, I'm having conversations with carriers about how do I build, how do I build a sub, an API into your system with a sub domain on my website? So it's a native experience from my customers, but it's your product and, and, and seamlessly work clients through that process.
So they're committed to rogue, right? Because that's where, because that level connection is what increases retention, but they're getting seamless products and well-priced, well-developed products from carriers such as yourself. And those kinds of conversations, those didn't even happen five years ago.
So, and I'm certainly not even close to the only one having these conversations. So that to me, these partnerships and integrations and the, um, the, the, the lack of resistance to building walls around our thing is so exciting.
I mean, it just feels like completely undiscovered country to me. I agree.
And I would, the thing I'd add is the benefit in many ways boils down to the absence of fixed cost overhead to do experiments and to innovate with your partners, right? Like I think what you run into a lot is it's not that these carriers don't see the opportunity or they don't want to help, but the opportunity has to be of a certain size to warrant the kind of investment to turn a ship that big. And with some, with newer carriers like us, we're just more free to experiment.
And there's just, there's much more lower overhead to like doing interesting and innovative things with our partners. And that, that ends up, I think being an advantage to like, it opens up the universe of possibility because you don't have to rule so much out at the beginning.
I agree with you. And I'm not, um, for all the traditional carrier professionals listening, this is not, it's not a knock on you because, because many of them are trying and are innovating.
I mean, it's great. It's, it's unfortunately not the culture of all, but that's okay.
Um, from, and there's, there is something to be said for, and, and I, I'm going to bring up Hanover again because I, I give them a very hard time about their technology, but their product and their people are world class. So, you know, and their brand is very, is recognized in the market, particularly by commercial customers.
So you think about that,

you know, someone like ClearCover, you know, you guys don't have that national brand yet. There's still a lot of that sales.
So everyone is kind of working to a middle space and finding where they fit with their own advantages and disadvantages. I just think the idea of taking a, taking a, a, a, a leather, you know, take it, take, I write, there's a company in my state, Leather Stocking, there's another one, Dryden Mutual, they're, they're domestic, mutual, Leather Stocking is actually a co-op carriers in New York, because New York's kind of an odd duck.
Both are tremendous, right? But I think about the day when I'm mashing a Dryden policy, because it's an inner city, say, late 1800s build inner city that a standard carrier doesn't want. And I'm mashing that homeowner's policy with Dryden with a clear cover auto policy.
And it's seamless for the customer. The customer just thinks they have a great program.
And that type of, you know, under the rogue brand, you know, now we, that's what a true partnership looks like. And it can be digitally provided to the customer.
Man, we're all winning in that's a huge win. And, um, it's why I'm so excited that companies like yours are pushing the envelope.
You're forcing, um, some of the traditional companies to think differently about their business. And it's, it's wonderful.
Yeah. And to be clear, I, I agree with you.
I came from a big company. It's not, it's not the absence of ambition or desire to innovate or anything like that.
It's actually more than anything, rational decision-making that slows these groups down. The way I like to phrase it is, the elephant doesn't move more slowly than the mouse because it wants to.
It's like a biological imperative, right? If an elephant moved as quickly as a mouse, it would break, literally it would fall apart. And that's how some of these big companies work, right? It's not, it's not a desire to move slow or an absence of the ability to think about moving fast.
Like literally, if they tried to move that fast, the thing would fall apart. Mechanically it would fall apart.
And so, but they're making progress, right? And, and, and certainly they have a lot of strengths that we do not as new entrants. So I agree there's, there's give and take.
Yeah. So have you started to consider other products? We it's always on the roadmap.
It's just where it, where it lands on the roadmap depends on, on the quarter. I mean, look, at the end of the day, part of the reason we chose auto is because we felt like auto was a, was a great place to build a relationship with a customer and be able to add more value to that customer's life over time.
I think an easy way to think about that is additional insurance products. There are other ways to think about it, which are like, are there other digital protection products or other products and services that are going to be authentic and relevant to our relationship? We do work with agents.
And so it's less imperative there because the agent can create a lot of that value added bundle on our behalf. But yeah, certainly we're thinking about, again, all of the ways we can expand on, authentically expand on a relationship we have with customers once we have that customer.
Yeah. So because you're in InsurTech, I'm obligated to ask you about the utilization of blockchain in the insurance industry.
And I'm mostly saying this because I'm so, like the last 12 months, I've been so intrigued with cryptocurrency. I'm like down this frigging rabbit hole that I don't even want to tell you how much time I waste on like decrypt.co and all these stupid sites that I've found.
But the more I learn about what these kind of technologies actually do, and you can go take this wherever you want. It doesn't have to be silly.
I'm actually interested because I see like, I look at a technology like Cardano, right? And most people know it because every huckster in the world thinks it's going to be worth $3 and it's worth $1.47 as of, you know, like 10 minutes before we went live here. So what I'm interested in when I really dig into something like that is one of their primary objectives is to provide unilateral access to actual currency for the continent of Africa.
which if someone hasn't actually ever put their brain to this, what happens in most cases is even worse than the United States. All of the money is held by singular individuals.
And the rest of the country is in many cases still in like the barter system outside of the major metropolitan areas. And what they're trying to do through their cryptocurrency is really spread out, is allow financial transactions to happen at scale to a group of people because they all have a cell phone.
Okay. So I think about that.
And then I think about the amount of contracts of information that's passed. Is this something that we're ever going to get to? because I look at the speed at which these transactions can happen.

And it only, to me, it feels like there has to be a there there, not anytime soon. I just want to know if I'm crazy or not.
And if you don't know that much about it, it's fine. Answer that way too.
You know, I don't, I'm certainly not an expert. I spent a fair amount of time on it when I was at Fam Fam.
Yeah. A little less so now, but in my opinion just you know i i i don't i'm certainly not an expert we we i spent a fair amount of time on it when i was at amfam a little less so now but but in my opinion you know um so first we have to separate whether or not we're talking about cryptocurrency or the underlying crypto i'm more interested in the technology because the currency is what it is i i think more about, is there a utilization where,

simple things, dude, like think of loss runs.

Think about the process of loss runs.

Yep.

If actually implemented and agreed upon,

you could create a blockchain which pinged every single carrier.

They all fed, agreed on what loss has happened, and you would no longer need loss runs. Or you wouldn't have to answer the question seven different ways.
When's the last time you had a loss? Because every insurance carrier attached to that blockchain would unilaterally agree on the losses of a particular risk. I think about functionality like that, and I'm like, to think that the insurance industry would ever adopt something like that makes me feel a little crazy.
But the concept of it feels like there's something there. Yeah, no, I completely agree.
It's just it's a classic flywheel problem, which is, which is like, look, if you could, there are without naming it, there are many, like validating data points that I have to pay for today today as an auto insurer that if they existed on a free and trustworthy and immutable record, I would not have to pay for. Right.
But, but you, but, but it's sort of the classic, like if you think about like the various history, like they went to all of the small regional carriers who could not compete with the large carriers and got them to dump all of their data together so they could use it together and then started charging everyone for it. And so you have to have some sort of like hack at the beginning to get people to say like, yeah, I'm going to start sharing all of my data with you with an uncertain reward.
Right. And, and so, but yes, I think the technology is, is super powerful.
I think also people love to talk about it with respect to parametric. Right.
And like, I, I, I I think smart contracts are quite useful as you think about, you know, the expansion of parametric products. But again, like, the devil's in the details, like for a parametric product to work, you have to have a trustworthy Oracle.
And like, even now, like, it's very difficult for a lot of our claims. Here's a great example.
We launched our product, our product called Clear product called clear claims. And essentially what we do is we use AI on the front end to determine eligibility.
And if you're eligible, we can pay your claim in under 30 minutes. We pay claims in like 13 minutes.
You submit it digitally with photos. If you're eligible, you go through this super fast process.
We pay your claim like almost instantaneously, but it's not, we haven't reached the point where there's enough of like a trustworthy oracle where we can do that in three seconds yeah right you still have to go through like a fast-tracked process to have the photos estimated and then we make the payout and like in at some point maybe that changes but but the implementation of this is is difficult just because one you got to create the right incentives and two the technology isn't quite there yeah i agree with you yet. There's still, there's still too many.
It's still buggy. I mean, I feel like we're a decade away, but I look at it and I say to myself, like, if I were, if I had, you know, if I were in a, in an organization that had a time, a time scale that could play on that level, pushing a few chips into some of these spaces feels like it had major returns.
Cause I think about, I think about a company like yours and what you're trying to do. And, and I, and obviously I being more focused on commercial, I look at like the attunes and the, and the coteries and what they're trying to do on the commercial side.
And I say to myself, why are those companies still dealing with like wet signed loss run requests? Like just that simple I concept, you know, who cares if someone knows the loss data, right? They don't even have to know the carrier the loss was with just that the loss occurred. So you could even anonymize that and speed up this process so we could be the better deliverers of our products.
So I just was interested in your thoughts on that because the deeper I get into this, the cryptocurrency and then my nerdiness took me into the tech, which is a rabbit hole. Please do not step into lightly.
I just want you to know that if you are a nerd and you go down that rabbit hole, there is a, it is very deep. Um, and there are some absolutely bananas people in that space too.
Um, but okay. So, um, you know, I want to be respectful of your time.
Um, and I, and I appreciate it. And I think, um, so very tactically, where are you guys today? What states can agents participate in ClearCover today? And as much as you can prognosticate, where do you see things coming? Where do you see people going? How do agents start to get to know you guys and see if they want to be part of your, you know, if they want to partner with you? What does that look like, yeah, thank you for asking.
So we are, uh, in 16 States right now, I won't list them all off. It's kind of a long list or all on the website.
It's kind of a smattering. So it's, you know, California, Texas, Arizona, Georgia, Illinois, Ohio, Wisconsin.
Um, so, but there it's, it's a bunch and it's growing. We expect to be in maybe 25 or so by the end of the year.
So we're moving pretty quickly. And we are pretty rapidly expanding our agency relationships right now.
So you can just hop on our website and submit. There's a page there where an agent can just fill in some information and start to go through the process.
We work with someone like the larger agency aggregators as well. So if people are affiliated with an aggregator, that would be another way to do it.
But we are, I mean, we're very much looking to expand our agent relationship footprint. It's a big push for us this year.
We spent last year kind of tuning a bunch of stuff up and it's not, you know, our platform and like our engagement agents isn't perfect yet, but we're learning. And I promise, you know, it's going to be worth it as all of we've talked about now.
Like, I think there's a lot of potential in these relationships and we really believe in the channel. So yeah, the clearcover.com is where you can apply.
I'm at Kyle at clearcover.com. You can just email me and I'll push you to the right people.
But we are looking to expand these relationships. I think, you know, one of the other things that I think has been the best part of the last five years is things such as our general openness to share information, best practices with each other.
And I think in previous iterations of our industry, something like our handling of agents isn't perfect yet,

that comment would be frowned upon is, why would you ever say that? And today, I think agents look at something like that, especially this emerging group of digitally focused agents, not even having nothing to do with age, just mentality. They go, that's all right.
They're growing. I'm growing, I'm learning.
I feel like as an industry, we have really started to hit a stride in terms of working together that it just, it makes me very excited. It's why I love doing this podcast, man.
Like 10 years ago, you wouldn't, you know, you wouldn't have been willing to come on here and share all the things that you shared, your, your thoughts. You wouldn't want someone to gleam something out of something you said that they could use against you and today it's it's part of our culture um it makes me very excited i'm very excited for you and what you're doing i know new york will most likely be one of the last states you ever come to because that's the case with everybody um we don't have any of the super fun new carriers got the carriers that are there there.
You're all super fun. And I love you all.
I'm saying the new guys, we don't, they don't come to New York last cause it's the worst year. But, um, but when you do, you know, I certainly will be, uh, I'll certainly be calling because, you know, I, I believe in you.
I I've been following your career for a long time. I'm very impressed with the way that you look at things.
And, uh, Cover is doing a great job and would be a great partner for agents. So thanks for coming on, man.
Thanks, Mike. Really appreciate the chance to talk to you.
Yeah, no doubt. See you.
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