Boost Insurance’s Alex Maffeo: ‘Integrating with insurance companies is like slapping a modern app on Windows 95’
- As an investor, Alex Maffeo saw how hard it was for entrepreneurs to bring a new insurance product to market.
- Boost Insurance is his answer to improving outcomes for insurtechs.
When you talk to insurtech entrepreneurs and investors and you lament the issue of how long it actually takes to bring a product to market, you can immediately get heads nodding (and if you’re lucky, a few amens, too).
Our guest this week, Boost Insurance‘s Alex Maffeo, is working very hard to shorten the go to market timeline for insurtechs. Alex traded in his VC hat for that of an insurtech entrepreneur and Boost Insurance is his remedy to the struggles every insurtech startup has out of the gate.
We talk about how his platform is able to accelerate new insurance products to market, how to integrate data flow between startups and larger incumbents, and lastly, how to bridge the cultural chasm between incumbents and insurtech startups.
The following excerpts were edited for clarity.
You spent about a decade as an investor. What’s it been like moving to the other side of table as an insurtech entrepreneur?
It’s been interesting. If I ever end up in the venture capital world again, I will be a whole lot more empathetic to founders and startup CEOs. It is a whole lot harder to operate a business and bring it from zero to one than it is to sit in a board room, point fingers at problems, and tell other people how to solve them.
Why did you choose to create Boost?
There was a comp in the marketplace lending space that we saw. It was quite an interesting business model but very quiet and in the background. In the early days of the Lending Clubs and Prospers of the world, the startups had their lights turned out for a while [by the SEC]. They needed to find a nimble banking partner to help support them. That’s when Web Bank and Cross River Bank stepped in to support them. Without these entities, the marketplace lending industry might not have reached where it is today.
We saw an immediate need on the insurance side for something similar. The most popular insurtech business model is that of the Managing General Agency (MGA). It’s essentially a licensed insurance agency than enables the insurtech to be able to create an insurance policy, underwrite the risk, and have good control over a sizable amount of the value chain and the customer workflow.
The problem is that the average go to market timeline for this model is anywhere between 18 and 24 months. About 18 of those months are spent finding a carrier parter that allows you to use their paper — the actual licensed insurance policy. It is an incredibly painful process talking to companies in the business of being risk averse, trying to get them to understand something new and different. This time it takes to bring a product to market was the number one problem I saw when I was a venture capitalist.
For the ones able to endure this marathon, they’re rewarded with having to integrate with terrible technology systems built decades ago. Talking about APIs with insurance companies is like speaking German. We like to say that you’re basically slapping a new modern app on top of Windows 95.
What’s the most critical piece of Boost?
We got going in earnest about a year ago. Since then, we’ve hired a great hybrid team from tech, insurance, and VC backgrounds, so that we cover all the bases. The most critical piece of what we’ve put together is our dedicated reinsurance facility. We’ve structured this with three large global reinsurers that agreed to serve on a single agreement to bear all the insurance risk of all the programs we do.
It took a really long time to put this together and it is the backbone. We went through the process of becoming a licensed agency in all 50 states. That really isn’t all that difficult — you take a test and file papers. Finding this risk capacity, though, was extremely difficult. It gave me my first gray hairs. It was important for me to build Boost as more than just a technology platform or startup accelerator. It took almost nine months to put the reinsurance facility together. We now have the authority to appoint insurtech startups and other digital platforms as our sub agents or distribution partners.
What kind of companies find value working with Boost?
Our reinsurance facility closed in May and we signed our first insurtech partner in June. I can’t say their name yet but it’s in the SMB cyber risk insurance space. It’s an extremely talented team out in San Francisco. They are white hat hackers who have built cyber security tools that are easy for small business to use, and they wanted to bundle these tools with cyber insurance.
They check all the boxes for things we see as key theses on the industry as a whole: they are extremely talented in technology and they bundle insurance with something arguably more useful to the end consumer. I met them in October 2017, when we weren’t yet ready to support them. They had already hired a prominent reinsurance broker. Fast forward to May of 2018 when we closed our reinsurance facility, they still hadn’t gotten their product to market. We had them improved by our facility in a month and it will be four and a half months from first contact to getting a product to launch via Boost.