I have the pleasure of sharing an interview with Nikolaus (Nick) Sühr the CEO and co-founder of KASKO.
[Gilad] Tell me a little bit about yourself and how did you end up in insurance?
[Nick] I got into insurance through the family business -- an insurance MGA specialized in classic cars. Insurance has been a more prominent part of my life than with most people.
I moved to the UK from Germany to study Insurance and Risk Management. I returned to Germany in 2008 to learn the ropes of the business with one of the leading a commercial brokerage in Germany, then worked in the family business. I didn’t quite like it that much for several reasons. Most of all, my initial idea was to create an aggregator for niche insurance products but that didn’t go anywhere. Try to get insurers to give you access to their product inventory with an aggregator business was too much. Since am not particularly fussed about cars and they really didn’t need me there as the business was, and still is, booming, I then went into strategy consulting to get more exposure to the corporate world. During my strategy consulting time, I reached out to my Co-Founder with an idea to found something. We did a couple of side projects together whilst sitting in the consulting trenches and then started with a couple of hypothesis on insurance. We got the ball rolling, got out of the building early, and haven’t looked back.
So insurance and entrepreneurship have more to do with my parents than myself, and it just always seemed a logical step and then the timing was just right.
The first step is to digitize the insurance inventory because the supply is simply not there in a cost-effective manner
[Gilad] How did you come up with KASKO?
[Nick] So our original idea was very much focused, and we called it “KASKO Drive” and we wanted to build an app that does short-term car insurance, similar to the quite successful businesses in the UK “Cuvva” (@Freddy: Congrats!). We launched that product. We started working on it, and we immediately went out and tried to get insurance partners, so wanted to do it as an MGA model. And during those discussions, our proposition molded from, “we’re going sell short-term car insurance" to "we’re going to offer short-term insurance products, not within our channel but other websites and apps." So we're going to become a B2B2C MGA, rather than a B2C one… well, that didn’t really work because insurance is just an afterthought for most digital businesses and the digital supply was not there so the financials and liquidity didn’t work at all. Then insurers asked us if we could help them bring their own product to market quicker in their own channels and we started that and the flywheel got moving, there was just so much demand for it. It’s crazy. Our vision, however, is to build a B2B open and connected insurance platform/marketplace where large digital distribution platforms (aggregators, broker pools, advertisement platforms, banks, retailers etc.) can exchange customer access and distribution for mass customized insurance products. However, the first step is to digitize the insurance inventory because the supply is simply not there in a cost-effective manner. So that is what we will keep working on for at least the next year or two.
So it was quite iterative listening closely to our insurance partners. It wasn't a eureka moment. We just went out, started selling it, got some feedback, went back to the drawing board iterated again, and really kind of shouted it from the rooftops, and took the feedback from the market to heart and I just kept up and didn't stay down.
[Gilad] Who is the market for you? Who are your customers?
[Nick] Our customers are insurance companies, predominantly product managers, and the problem that they have is that they see ample opportunity in creating new products, trying new distribution angles. Let's look at a scenario where a broker asks for product B to inject something in a bancassurance proposition. Instead, you want to build your B2C brand. And what then happens is that they write a concept and business plan, they pitch it to their internal IT, and there are no priorities, and there are no resources there. They are so tied up with keeping their legacy alive, fixing regulation. It’s like asking a doctor doing open heart surgery if they can stop doing it and help you try this really new experimental treatment that could one day be the cure for heart disease. Insurance companies have a massive backlog of distribution and product opportunities in their drawers, but not the right tools to bring them to market.
[Gilad] Tell me about that.
[Nick] That's what we do, we built our own proprietary “digital insurer in the box” from scratch that does the three main things that a customer needs to do with an insurance company, being enacted with insurance, buy the insurance, you manage the insurance, you change your details, and then you submit a claim.
And we've built this proposition for an insurance company so we can build this side by side with their existing IT. Later, we'll pass through different data streams by having all the required subsets of quote offers, bind, issue quality pay, midterm adjustments, submit claims that we'll put as a side layer to the insurance company.
A company's name needs to be something that you can shout at someone in a bar with all the noise, and they’d still recognize it
[Gilad] What is the meaning of KASKO?
[Nick] KASKO in German means... you know what they call full compliance of motor cover, the KASKO pieces mean the whole damage to a car. I think in an Eastern European language, it also has something to do with hull structure; I think that in Spanish it means something like a helmet. It just so happened because our first product was called KASKO Drive, and then we just kind of stuck with it. So it has a meaning in German that is very close to car insurance, but we liked it because it's so short and on international space, it's something towards security.
[Gilad] It is easy to remember.
[Nick] A company's name needs to be something that you can shout at someone in a bar with all the noise, and they’d still recognize it. That was the idea behind having a shorter name, and then we just stuck with it. At least I read that in some blog about naming a startup. Seems so long ago now ☺.
[Gilad] That’s very good. What’s the education barrier for your customers?
[Nick] There’s no integration required really. The whole thing works because we can start within a green field setting and then have a very light touch procedural and data exchange which doesn’t require any reprioritization on the IT side of the insurance company. So we use existing processes to get the data into the insurer, without them having to create the entire customer product experience and the workflows.
So we’ll say, “Dear Product Manager, which products, which ideas, would you bring to market if you could do it in three weeks and you had to invest $30,000 in the first year? Which types of opportunities would you now follow?” and then the whole thing opens up.
You don’t need to set up a project, and you only need just to give us… what you want to underwrite, what’s the rating, we need some documents, we need to talk to your compliance people, your IT people, procurement, etc., need to do that the first time around. You don’t need to do a massive project, you need $30,000 and maybe just 2 or three days of your time, and we’ll deliver this to you as an end to end solution and then you need to bring it into your distribution layer.
[Gilad] Is there "a deep" tech play in insurance?
[Nick] No. Most of the time we to get people to down scope things to understand that in building a new product, you need to focus on getting your first thousand customers rather than what to do with a million customers. Everything happens in the grey, and you need to be flexible, you need to be out there and you know it’s kind of (god I hate this word because it’s so over- and misused) agile. I prefer pragmatic entrepreneurship: Whenever we get an idea, a scope request: I ask myself and ask my team to ask themselves: If this was my own money how staged would I make that investment to ensure I don’t overspend on some invalidated value and customer hypothesis.
"None of us know what’s going to happen"
[Gilad] Do you find that it lost its meaning?
[Nick] Yeah. But it’s kind of to feel, to me, if you do it right. You’ll always wish that you built a better product. But you’re out there, and you’re knowing what’s wrong, and you’re continually firefighting, to me that is the right approach. As soon as you get comfortable and it nicely scales, to me you’ve bet too much on getting it right because I think, in insurance, none of us know what’s going to happen.
[Gilad] Allow me to route the conversation to the EU. You talked a little bit about the US. The US has 50 states. Each state has its regulations. The insurance companies need to accommodate for all of the 50 regulators and the federal, and be extra careful with the current US Federal administration. How does it work in the EU, especially with BREXIT as you are based in London, and soon it’s not going to be in the EU?
[Nick] So we’ve had intermediation licenses. We are an MGA, and we are the German equivalent of an MGA and have these European licenses because that was part of our original business module and now we’re just looking at it and phasing those out.
But generally speaking, in Europe, you have harmonized insurance and insurance intermediation laws, and you can start selling insurance products in theory from the UK (pre-BREXIT) it into Spain. You need t adhere to the local wordings, the local language, etc.
Once you have a harmonized legal framework, each insurance market is very national because the distribution is very fragmented. There are different layers you need to integrate into. For example, the wordings are different, and there are different standards. So it’s very much a fragmented market and especially in the angle of Anglo-Saxons into UK and US insurers have found it very hard to tap into the continental European market and vice versa with probably alliance and acts of being different but even… it’s hard.
Well for us it doesn’t matter. So we’re active in four soon to be five countries and four jurisdictions. So the UK is a different jurisdiction, we are in Germany, Switzerland, Switzerland is not part of the EU, and we are in Canada, and we’re soon going to launch in the US. And for us, our regulation does not come from insurance it comes from data privacy and data storage and outsourcing requirements.
GDPR is great!
[Gilad] I see. Does GDPR play a large role for you?
[Nick] Absolutely. GDPR is great. From the DNA we are a German company, and for us, this has not been something that totally surprised us. We needed to have had to amend some of our processes. So we use AWS in the UK, we had to stop using a mailing service based out of US, and it sucks a little bit because the US services are usually better than the European services, but we cannot pass the data through.
Now, when we talk about going to the US, it’s really just a question of, ”hey guys, can we store your data in Europe?” So far, that’s fine. They don’t mind us storing data so far on European Amazon Services. We could pull up all these things and could then ring-fence the data in the US have that spin on a different service which is a huge advantage of having such a big player like AWS.
The second thing which drives complexity for us is, tapping into different data servers and payment schemes as ICO’s and anything that is not standard and where data exchanges are required. This is an investment into entering the market, but it’s not so much from a regulation perspective, it has more to do with different business lines have sorted different problems differently. So regulation doesn’t play a significant part for us, as we do it a part of our onboarding process to a different country.
[Gilad] Let me see if I got it right - you offer SaaS, Dev shop and MGA services?
[Nick] No no no. We act as a pure software vendor on a SaaS model. I’m aware of the MGA model because we have and MGA status but that was our previous business module, but we phased out of it. We sell technology that we would otherwise have built for ourselves and have filled for ourselves but we felt that through the insurance companies and enabling white labeling module was a better way to market than trying to do the sales ourselves. I think Lemonade is probably a really good tech provider.
[Gilad] They are doing a fantastic job. I wonder how fast they are going to be acquired for their technology and not for their book of business.
[Nick] For the processes. For everything that they’ve built with an entrepreneurial business mind and not with a legal department that dictates every move. Insurance companies get a specification from hell, and that no one’s taking the business decision to say “this doesn’t make any sense, fuck it.”
[Gilad] Tell me about that.
[Nick] But I feel it’s… had in mind so that’s what we, especially in our current stage… so the way that we act, we’re a technology company and kind of entrepreneurs for rent.
The nicest things we as a team would have done is build our own insurance company and do it. I feel that we’re going to have more impact on creating a software and application layer that can do without massive integration, one-off integration and migrations with the insurance company, and the only way to do that is to bring new business.
You’re never going to get that through transformation program, and you’re only going to get that through growth program, it’s just not going to work. Migration is an essential case. That’s what we’re banking on as a company, and the way we do that right now is very much on a general idea. But in a way you know, some presents me a product, I’m going to tell them five things that they should do, and then they either do it, or they don’t, it’s fine, but we’ll get so much… we’ll understand how to slice products and get them form MVP term status to scale. Whilst allowing the championing insurance company to get traction onto the product, but not having to overspend the budget.
It’s uncertain, so we’ll make a normal investment that’s about 250,000 unto a product that might be successful or not, most vendors would take the 250,000 and then they have the money in the bank and let’s see… It’s the insurer's fault. We would rather have spent the half the insurance company spends 100,000 on four product proposition kill three and plow the next that works, because that way, we’ll make the people and the products functions shine as entrepreneurs and the Kasko products are a success.
That way, we pull in the platform effects, but you need to do it from the market, you cannot do it from the internal digital transformation because that’s not going to work, that’s just the wrong people.
You’re never going to get that through digital transformation program, and you’re only going to get that through growth program, it’s just not going to work
[Gilad] Why do you think the internal digital transformation of the insurance companies is going to fail?
[Nick] I’m flabbergasted how people combine the Guidewires and the Duck Creeks and think that there is one way that this will actually work. Forget the checklist! The checklist is going to get you the first three months. Get out of the building, start delivering and continually build on it and get actual feedback. Know that is going to be an ongoing process. I still struggle sometimes with our KPI’s, because I’m thinking, “is this helpful?” and I think it’s that entrepreneurial function onto the insurance case which you can encapsulate into something like lemonade. That’s going to bring the processes, the tech stack, the mindset, that’s what they’re going to bring to the table. We believe that it has its limitations obviously, but you can gradually deploy it into merits of organizations, and to that create connectivity at scale. But the very important part of our business is that we never migrate, we might phase out, and we might integrate. We ’ll give you whatever data you need, but otherwise, the process happens on our end. We don’t want to… if you’re like a little tumorous new insurer outside of your own, rather than trying to get your old systems healthy.
I’m flabbergasted how people combine the Guidewires and the Duck Creeks and think that there is one way that this will actually work. Forget the checklist!
[Gilad] Fantastic. What's your vision for the future?
[Nick] I think that the future will be within connected and open platform based insurance, but it’s going to be one used case. You can build a platform and open system by decree, by designing it from scratch, it will be the best use case will win, it will be a little bit chaotic for the next three or five years.
[Gilad] Thank you very much for your time.
[Nick] Perfect, thank you very much.