from scratch part 2 - teen drivers- the highest risk category

[Al3x Lee]

But yall act like there is never a game changing company that comes along and upends the market. Maybe this dude will do that. Maybe he wont.

He won't. The chance of successfully starting and keeping an insurance company afloat is significantly lower and more difficult than you can fathom.

I will say that major insurance carriers are very set in their ways. We all know this.

Yes, usually for good reason. They're cautious. You don't want to be the first one to do something new and realize there was something critical you overlooked.

Is there room to save 30% on the current business model? Maybe.

In the auto space? In 2023? No

My research shows that 30% average premium reduction is a conservative estimate.

Show us your research then. You keep coming on these forums talking about your 'research', but you haven't provided anything for us to review.

After taking a close look at how the ins biz spends money, and the shift from brick and mortar to home offices ( I am doing this running a small engineering business from home office), Take a look at the huge corporate campuses of the majors like state farm, allstate, etc.

Oh yes, let's compare your small engineering business to insurance juggernauts. Good luck training your underwriters to be profitable when they're learning from home. Has your research uncovered how many people obtain risk management degrees? Most people fall backward into insurance, it's much different than engineering. The intentionality is not there, so it's up to you to make sure you train those people and get them to do their jobs properly. Most people come into the insurance industry with no experience or education. Also, do you think your new no-name insurance company is going to attract top talent to help you?

Maybe instead of researching how much money insurance companies are supposedly wasting, you should research the trailblazers who set out before you but failed so you can try and avoid the things that caused those failures for your company.

https://insurance.wa.gov/sites/default/files/documents/Casc.pdf
https://dfr.oregon.gov/AdminOrders/actions_2005/insurer_2005/financial_2005/04-11-016.pdf
[EXTERNAL LINK] - Petition Order Filed to Liquidate Washington's Cascade National Insurance Co.

^ The guy who started this company was very intelligent. Graduated top of his class, owned a body shop in the 1950s, and then moved on to being an auto insurance adjuster in the 1960s. He worked his way up through the corporate ranks and even owned an MGA. After about 40 years of experience in a variety of roles in the insurance industry, he achieved his dream of starting his own insurance company. He still failed. Do you think you're smarter and more innovative than that guy? There's a hell of a lot more to insurance than telematics.

Also if you're going to start with high risk drivers like Teenagers and think you'll make a profit, you're already completely doomed. I suggest you go and read about what happened to Geico in the 1970s when they decided to open up to non-preferred risks. 40 years of profitable business and they ruined it in less than a decade and had to be bailed out by other insurance companies because they wanted to write teenagers and other high risk drivers.

Personally, I don't think your idea for a company will ever get off the ground, especially if you need your ego scratched by people on insurance-forums.com, but I hope you prove me wrong and get to come rub it in my face one day.

 

[Al3x Lee]

@northwoods2 A more relevant example popped into my news feed today. This guy sounds like he was once like you, thinking he could come in and destroy those big meanie insurance companies. Hell, he used to work for Nationwide, so he knew their inner workings. Yet his company will probably be insolvent or completely eroded and absorbed into another entity within the next few years.

I'm sure you're way smarter and more lucky than this guy though. Also 2023 is a much more forgiving market than 2015

[EXTERNAL LINK] - Root has struggled since going public, with shares down more than 90%

• Root, which began operations in 2015, pitches itself as a fairer way to price auto insurance. Potential customers drive with the Root app, and the company analyzes their performance using data from their phone. Then they get a quote that is based primarily on how they drive.
• Embedded Insurance has offered $19.34 a share for Root, the Wall Street Journal reported, citing people familiar with the situation. Such a deal would peg the value of the company at around $280 million, much higher than it was a few months ago when shares fell to $3.31, but still a fraction of what the company was once worth.
• Since going public, Root's shares have tumbled more than 90%, it has cut staff twice in the past year and raised rates

https://www.linkedin.com/in/alex-timm-b2371a16/

• With a vision of completely transforming the insurance industry, I founded Root Insurance in 2015 on the idea that car insurance rates should be based primarily on driving behaviors, not demographics. I'm proud to lead Root in revolutionizing this outdated industry, using mobile technology and data science to give good drivers personalized, fair rates through an easy-to-use app.
• Root is the first insurance company that’s built entirely for consumers. We give you rates you earn, based on how you actually drive. Unlike our competition, we don’t use variables like your occupation or education level to determine your price. We want to see the end of unfair discrimination in insurance. Download our app and join the revolution.

[EXTERNAL LINK] - Embedded Insurance: Who is Root’s bidder?

• In Q1, Root’s gross accident year loss ratio improved by 12.2 points to 69.3%, and its gross combined ratio improved 13 points year on year to 123%

 

[northwoods2]

I mean, @northwoods2 in your other post you proposed a feature and then in your very next sentence said it was something Progressive was already doing.

Progressive, along with all the others, are not using the PAYD feature to the advantage of customers, but using it as an excuse to ignore the potential. My own and many others experience have shown this with the dings they hit you with for acceleration events negates the savings. A good read (though boring) is to go through their patent disclosure. They mention PAYD twice, and hit on the "how you drive" aspect repeatedly.

Look up the reviews on Root insurance that are out there - mostly negative.

Also if you're going to start with high risk drivers like Teenagers and think you'll make a profit, you're already completely doomed. I suggest you go and read about what happened to Geico in the 1970s when they decided to open up to non-preferred risks. 40 years of profitable business and they ruined it in less than a decade and had to be bailed out by other insurance companies because they wanted to write teenagers and other high risk drivers.

I don't start with high risk drivers. They are included to get a family with young drivers on board. Their rates will not be much lower than they pay now as they have no driving history, initially. Better actuarial data may be able to reduce their premiums after a year or 2 of safe driving.

Oh yes, let's compare your small engineering business to insurance juggernauts. Good luck training your underwriters to be profitable when they're learning from home. Has your research uncovered how many people obtain risk management degrees? Most people fall backward into insurance, it's much different than engineering. The intentionality is not there, so it's up to you to make sure you train those people and get them to do their jobs properly. Most people come into the insurance industry with no experience or education. Also, do you think your new no-name insurance company is going to attract top talent to help you?

I will not be training them. Nor will I be running the details as this will be left to professionals who have a background in corporate level insurance. Most likely, the underwriters will be on contract, as will the majority of the business functions.

The attraction??? A better product at a lower price!

Show us your research then. You keep coming on these forums talking about your 'research', but you haven't provided anything for us to review.

Here is a link to the article that first got my attention:

PAY‐AS‐YOU‐DRIVE AUTO INSURANCE IN MASSACHUSETTS http://web.mit.edu/jf/www/payd/PAYD_CLF_Study_Nov2010.pdf.