Among the predictions delivered toward the end of 2019, one long-term forecast stood apart from the rest. “I think insurance will actually start to just disappear into the ether,” an industry executive said.

Mitchell Doust, executive vice president of the Americas at Cover Genius, made the statement during the first session of insurtechweek: NYC in November, after first talking about the history of insurance technology and then making predictions about the future of InsurTech.

A week later, during an interview with Carrier Management, Doust confirmed that he didn’t exactly mean that insurance carriers will close their doors and completely vanish from the business landscape. Instead, their behind-the-scenes work will be invisible to consumers who still need to protect the assets they buy and to guard against negative consequences of activities they undertake.

Cover Genius has built a distribution platform, known as XCover, around the concept of embedding insurance in consumer purchases and other activities that they use technology to help them engage in. The five-year-old InsurTech partners both with e-commerce brands and with insurance carriers in a B2B2C model to accomplish that.

“Previously, customers had to seek out insurance through intermediated channels or from carriers advertising directly to [them]. That mechanism was necessary for a long period of time, but in this emerging age where data is abundant in digital transactional forms, that shouldn’t be the case,” Doust told Carrier Management. “By consuming data and [creating] integrations into [product] distribution pathways [of e-commerce giants], we can actually identify the right moments to serve up insurance solutions to customers. And that generally doesn’t require a need for the customer to search for it.”

Doust offered the example of someone buying a laptop or mobile phone at an online retailer. If a Cover Genius API is “integrated into that purchase pathway,” then insurance can be offered at the point of sale “at the right time and the right price” based on data points that include indications of the customer need and price elasticity, among other things.

“That’s a win-win for the brand that’s selling that product because they’re offering a value-added service alongside their core offering. And it’s the best thing for the customer because they can get a tailored [insurance] product that makes sense in context at the time of their purchasing that good,” he said, noting that Cover Genius will soon publish some research that reveals another positive outcome: “For retailers specifically, offering the right type of insurance solution at the point of sale when someone is buying an asset can actually both improve the conversion on the core sale and also drive up the value of a shopping cart.” In other words, customers not only will “have a higher propensity to purchase that thing but also be more inclined to spend more money.”

Booking dot YEAH

In the InsurTech world, it’s not uncommon to see startups with B2C models describe themselves as the Booking.com or Expedia of insurance. But the description really fits Cover Genius. Via its XCover API, Cover Genius is literally the engine that allows travelers to purchase insurance when they book flights, lodging and cars through one of the sites that are part of Booking Holdings—brands like Booking.com, Kayak and RentalCars.com.

The Cover Genius story started in the travel sector in 2014, reported Doust, who was actually working in a strategy development role for Australian insurer Suncorp at the time. Angus McDonald and Chris Bayley, the two founders who imagined Cover Genius, were operating some online travel businesses and identified problems with how the insurance industry served the global travel industry, recalled Doust, who joined Cover Genius to develop partnerships in North America in 2018, a few years after a stint with another InsurTech, Trōv.

Back in the early days, McDonald and Bayley “were trying to find an insurance partner who could provide them with “a single-integration global platform” that would give a consistent customer experience to all travelers, regardless of where they’re coming from or going to. “They really couldn’t find that,” Doust noted. “Even the big global insurance brands operated in essentially siloed regional models.” To do anything globally with an insurer, the two entrepreneurs would have to “do local deals in each of the key markets.” Another obstacle: Local management of those insurers in Portugal, Japan, etc., might each have their own appetites for whether they want to do something on not. That’s “no different to then working with 50 different companies,” Doust said.

The Cover Genius founders decided that the world probably didn’t need more online travel businesses, but that all the online travel businesses did need a global insurance solution that’s driven by technology.

And whether it’s travel or an item they’re buying, “customers want to—and should—be purchasing insurance products from the brands they trust,” said Doust. That isn’t necessarily insurance companies anymore. It’s larger scale e-commerce brands that they gravitate toward.

The founders started in a very targeted way—with a RentalCover platform to insure travelers booking car rentals online. “We’ve since adapted and evolved that into XCover, our core platform now, which is essentially multiline, multiproduct, multigeography,” Doust said.

The Cover Genius website now lists nine industry verticals in which it can participate: mobility and auto, the gig economy, payments, logistics, property, fintech and business services, in addition to travel and retail. While most verticals involve property/casualty coverage offerings for individuals, the business services category is a B2B application of the XCover API, which allows insurance products like commercial auto, workers compensation, errors and omissions, and directors and officers liability to be provided to businesses.

XCover “is a single platform that can house, in theory, any insurance product that we can distribute via any digital touchpoint as long as we can integrate the API or some kind of technological linkage, which enables us to consume the data we need to price and deliver the quote,” Doust said.

In fact, the digital touchpoint doesn’t have to involve the customer buying something online. “Technology is now permeating into the offline transactional world as well. So, we’re thinking about ways in which we might be able to integrate with things like point-of-sale software systems or payment gateways… We can even start, potentially, to create solutions for an offline channel using the technology that exists in a physical” location, he said. For example, if Cover Genius integrates XCover into a point-of-sale software provider, then when a customer is physically checking out in a Best Buy store or other shop, “we can provide ways in which customers can access the same [insurance] products that we would surface to them online but in that offline transactional environment.”

So, would a clerk ask, “Do you want insurance with that?”

“It could be that,” he agreed but offered better ideas. “It could be a digital receipt that they get into their email after they purchase. It could be the use of a QR code while they’re standing there at the checkout,” he said. “We need to be cognizant of regulations around selling insurance in those environments. But that’s what we’re doing. We’re trying to figure out ways in which our technology can enable us to make the customer’s purchase decision and process for insurance seamless, integrated, easy and relevant in context.”

During his presentation at insurtechweek: NYC, Doust displayed a slide depicting two scenarios in which the XCover API can “dynamically bundle policies” from more than one insurance carrier: a baby boomer buying jewelry, a bike and electronics shopping at brick-and-mortar stores, and a millennial buying sunglasses and a tablet online. For both shopping situations, XCover can take those purchase data points and connect them with carrier underwriting appetites to spin out the right products from separate carriers to protect the purchasers of all the different types of assets.

As for the flagship rental car product, not all customers of online travel agents need rental car insurance. For example, a U.S. renter that owns a car potentially has coverage from his or her personal auto insurance policy, unless that coverage has a high deductible on insufficient limits, traditional carrier websites say.

That’s true, Doust confirmed, noting that the situation underscores the need for a platform that interacts with the local constructs. “You’ve got a lot of foreigners coming to the U.S. where the insurance model is different and they’re often offered a level of coverage as part of the rental car price…We identify where the customer’s coming from, what’s the right price for them, and can offer that up to them so that they get the right thing.”

“It’s not a one-size-fits-all globally, right? That gets back to that core problem that we sought to solve way back at the start,” he said. “Building that global network of regulatory infrastructure and access to the right product in the right location for the right use case has been fundamental to the XCover proposition.”

Looking to the Future

Doust, a Chartered Accountant in Australia who started his career at EY, remembers the days when a large insurer client introduced him to an 80-year-old man sitting behind a green screen CRT monitor, saying that the aging employee was the only person who knew how its system operated. While those days aren’t gone for good, insurers have come a long way. “It’s actually quite a positive environment now,” with both carriers and InsurTechs maturing to move innovation initiatives forward.

“Risk transfer as a mechanism is fundamental to society. If you think about what enables progression at a societal level, it’s giving people and organizations the confidence to take a little bit of risk [that] supports a whole lot of progress.”

So, while insurers won’t cease to exist, the insurance delivery mechanism needs an upgrade, he said. “When a customer goes out and buys a holiday or an asset and then has to go and search for an insurance solution for that, that’s very, very clunky. Some people would just forget to do that after they make the purchase. Some are intimidated by the complexity. Some will make the wrong decision because they’re uneducated on those risks. There’s just so many ways in which that can go wrong.”

“When I say it’ll disappear into the ether, [I mean] technology will enable the real-time assessment of risk such that the insurance element of a transaction can just become part of whatever that purchase is. And so in the future, I think protection for the risks associated with what you’re doing will just be a natural part of the cost of undertaking that activity,” he said. “That risk will still flow back to insurance companies or capital providers…It’s just that it’s less of an autonomous decision by the customer and it’s more baked into everything that they’re doing, which I think is a good outcome for consumers and society in general.

“It means that society at large will be much more adequately protected than it is today,” he said. “Underinsurance is a huge problem in communities, for individuals and even in more commercial context as well.”

Carrier Management asked Doust about insurance for some of the biggest asset purchases that individuals make: cars and houses. He noted that the requirement to have auto insurance to take ownership of a vehicle is “often the most clunky and analog element of that entire sales process.” Currently, Cover Genius is looking at opportunities with dealer management software providers to integrate insurance solutions in the same way they have been able to digitize the rest of that automotive sale process. “You’ve now got the emergence of some quite large platforms of online motor vehicle retailing,” he confirmed.

The same is true for the home-buying process. “In the U.S., you could look at someone like Zillow. They have a lot of valuable data about the asset being purchased, the purchaser—many of the things that would be necessary to underwrite,” he said.

“We just look for places in the digital world where we can get access to the right data to underwrite a policy,” he said, confirming that B2B sales of commercial insurance for small businesses are also now possible. If you want to start a new e-commerce business and you’re selling arts and crafts that you’re making in your garage, you can now spin that up in a matter of days, he said. “You can go over to Squarespace and get a website, you can go to Stripe and you can set up payment capabilities. You can go to Square and you can get a physical and digital POS.”

“All of those guys know what you’re selling. They know how much you’re selling of it, and they know where you’re selling it. That’s information that can be used to provide the early-stage small business insurance products that those businesses need,” he said.

Amazon? Not Yet

Cover Genius is still a young company, “but we’re on a really high growth trajectory and we’ve managed to turn ourselves into quite a significant business over a short period of time,” Doust said. With offices in London, New York, Sydney and Tokyo, Cover Genius is able to produce regulated insurance products in more than 60 countries and 50 U.S. states. The company fields inbound partnership requests from e-commerce businesses and also proactively seeks out new relationship in each of the verticals in which it operates, he said.

A $10 million funding round announced in November will help support the growth of business in the U.S., according to Doust, who said the company has a pipeline of partners in retail, shipping, auto and mobility, without sharing any current partner names beyond Booking.

What about some of the biggest e-commerce names, such as Amazon or Alibaba? Are they partners?

“No, not at the moment. Although maybe one day,” he replied. “We’ll see.”

During insurtechweek: NYC, Doust suggested that InsurTechs have an edge over traditional carriers when they meet with the Amazons and Googles of the world. “There’s a huge difference when we walk into a partnership meeting with a client who’s a technology company and we bring in our solutions engineers and our architects—and we’ve got tech people talking to tech people. It’s very different to having insurance people talking to tech people,” he said.

That said, Doust told Carrier Management that the growing team at Cover Genius has a large cohort of people with insurance industry experience. Globally, the company employs 70-plus engineers among a staff of over a hundred people. The plan is to double the size of the global workforce in the next 12 months.

In the U.S., Doust’s team numbers 13 individuals today, and “we’re looking at five-X-ing the size of our team” in the same time frame, he said, noting an even split in head count between the U.S. partnerships and insurance teams. “If you think about all the different market verticals that we’re targeting, we need product expertise in all of those. So, we have specialist insurance product managers that support each of our different partnership verticals—people with underwriting, pricing, product development experience in each of those areas,” he said.

Doust said that Cover Genius, operating as a managing general agency, understands that it needs to look after the interests of its risk-bearing partners in order to build enduring value in relationships with carriers and reinsurers. Declining to disclose specific KPIs—”We have multiple carrier partners globally who that data also kind of belongs to”—he did confirm that the Cover Genius portfolio is profitable.

“We’ve been able to bootstrap the business for the last five years, up until we recently took this capital injection…We’ve built a cash-flow-positive business model that’s enabled us to grow by self-funding,” he said. “As we broaden the product set, each of those products has different margin profiles. Some are quite profitable, some have thin margins,” but overall performance has been strong.

See related online article, “XCover and XClaims: The Nuts and Bolts of Cover Genius” for a Q&A with Doust that touches on questions about underwriting, price optimization and claims handling.