Ian Gutterman doesn’t think there’s any underserved market of people who need cheap insurance.

“There’s plenty of that available,” says Gutterman, a longtime investor and industry analyst, whose pointed questions during investor conferences kept insurance company executives honest for many years. As an observer of the industry, he has noticed that recent generations of InsurTech startups are focused frequently on “trying to do better versions of the things that have already been done.”

Gutterman is carving out a different path as he makes his first foray into an executive and founder role himself. “There’s an underserved market in giving buyers the information they need to make smart decisions,” he told Carrier Management during a January 2023 interview, explaining the basic premise for the launch of Informed Group in 2021—what the analyst-turned-entrepreneur refers to as an InsurTeach.

The “teach” component of what will ultimately be an online insurance agency is the Informed Insurance website, informedinsurance.com, where, among other things, visitors get a gamified lesson in selecting between two homeowners policies on the home page. Those who logically select the cheaper Policy A find out that the $62 in premium savings could spell trouble down the road, even though Policy A actually has a lower deductible than Policy B—$1,000 vs. $2,500. In the event of a claim for thunderstorm roof damage, the Policy A buyer may be on the hook for $16,000 more than the Policy B buyer. And in the event of a total fire loss, the out-of-pocket difference could be over $100,000. The reasons: Some of the savings from Policy A relate to the fact that the coverages for roof and contents are actual cash value rather than replacement cost coverages, and loss-of-use payment limits (for temporary housing) are also lower.

In this particular example, the cost to add the better coverages is about equal to the premium that would be saved by raising the deductible by $1,500.

The average homeowner probably doesn’t know any of this, believes Gutterman, who described the “information asymmetry” of insurance transactions. “That basically means the person selling you something knows more than the person buying it. When that happens, you get bad outcomes. You have buyer’s remorse. I didn’t understand what I bought.”

“Insurance just naturally has that problem, not because people are bad or evil or mean. It’s just complicated, and so naturally there’s going to be this tension where the buyer’s going to feel disadvantaged vs. the seller. To me, that’s the big problem in insurance. How do you level that playing field? That’s what we’re trying to do,” Gutterman said.

Right now, he and Informed Co-Founder Jim Farmer, an industry veteran and former personal lines product leader for USAA and Farmers, are offering an insurance education to website visitors through features that include a complimentary written policy review or a free virtual one-on-one policy conversation with one of the founders. The newest feature of the website is a deductible calculator, which allows site visitors to input their current policy premium and deductible levels to find out the ideal deductible for their policies.

There are probably lots of folks who work in the insurance industry who buy homeowners policies with high deductibles, Gutterman reported. That’s because they understand the math that the average consumer has no clue about. (See related article, “The Math of Homeowners Deductibles“)

While future plans for Informed include creating an online agency with automated tools and more humans doing what just Gutterman and Farmer do today, for now, Gutterman initially is positioning Informed as the Consumer Reports of insurance. “It’s really hard for the person buying [insurance] to be as smart as the seller, while for most other things Consumer Reports writes about you can get it. You don’t have to be a tech expert to figure out what’s the good laptop to buy or what’s the good TV to buy…You can let Consumer Reports do the test and feel comfortable knowing what to buy.”

“There’s no one who does those tests for insurance, so we’re going to do that. It’s really that simple,” Gutterman said, during an interview a few weeks after the website launch.

Like other InsurTechs, Gutterman’s InsurTeach will have automation and third-party data to scale up the activities that two humans are doing today. “The tech needs to accomplish a goal. For us, that goal is to make consumers smarter about their insurance and make better decisions…The tech is there to teach,” he said.

Explaining the planned evolution of Informed into an online insurance agency combined with a free education platform, Gutterman draws analogies to fintechs like NerdWallet and Credit Karma. “When someone goes to buy their home or auto, we want them to say, ‘Let me check out what Informed says I should do first.’ That doesn’t mean they’ll ask us to be their agent” but just that they stop to get some education “before they go renew their State Farm policy or go shop with Progressive or whatever it is,” he said.

Gutterman said one of his frustrations is that insurance companies tend to think of what’s good for the insurance company. “I understand why it happens, so I don’t want this to come across as pejorative in any way…That’s what a lot of big companies do…No one’s tried to create an insurance company that really put the customer first,” he said. “We are going to do what we think is best for the customer, and then we’ll figure out how to make money at it,” he said.

An Analyst Gets Informed

It’s not hard to understand how Farmer, with 30-plus years of personal lines positions at the likes of USAA, Farmers, Nationwide and Esurance, knows his way around a homeowners policy. But what about Gutterman? His resume instead shows 20 years of portfolio management experience at leading asset managers like Balyasny Asset Management and Adage Capital Management.

“When I was an investor, part of how I differentiated myself was that I would really get into the weeds on things,” Gutterman said. After the hurricanes of 2005, for example, his research included talking to climatologists and reading academic papers. “I tend to like to really get deep into things.”

Gutterman, who does also have a personal insurance agent license today, followed a lot of public companies in Bermuda in the catastrophe space when he was an analyst. “If you cared about cat reinsurance, you needed to understand homeowners. To understand homeowners, you needed to go spend time in Florida. That was a lot of it—just really doing the research to be able to do my job as an investor better.”

Digging into the subject matter, Gutterman observed that homeowners insurance was “the stepchild” of the industry. “Think how many resources have gone into auto underwriting over the last 20 years, and auto advertising and auto this and auto that. Homeowners, often, just came along for the ride. It’s not nearly as sophisticated from an underwriting perspective, a marketing perspective,” and it’s been less profitable.

“It just hasn’t gotten the same attention. And for a consumer, it’s a more frustrating line, and that’s personally where I’ve had some experience,” he said, noting that when choosing among fairly homogeneous auto policies, price and perception of claims handling are most important. “You’re not picking State Farm over Allstate or vice versa because one has two extra days of rental coverage.”

But homeowners policies are different and have changed a lot over the last decade.

Hidden Costs

Gutterman, a devoted blogger, has written extensively about changes that occurred around 2011-2012, “when the industry started having challenging results on roofs for the first time. This is more than Florida…The response for some of the bigger carriers was, ‘We’re not going to pay full out on roofs anymore.’

“It’s logical. I get it,” said the analyst, who fully understood the underwriting decision to help bring down rising loss ratios. “But did anyone go tell the customer, ‘We’re cutting your roof coverage in half?’ I’m sure a few agents did, but not the average agent.”

Homeowners insurers started going “down a slippery slope when they started taking things away,” he said, noting that hurricane deductibles in Florida were followed by hurricane deductibles up the East Coast and into Texas. Now most states have a separate deductible, and in Gutterman’s home state of Illinois, “there’s a small chance we could have a tornado, but I have a wind/hail deductible, and most states around here do.”

“The biggest risk I have where I live is a typical summer thunderstorm and a tree gets knocked over and hits something,” rather than a tornado. A 1 or 2 percent deductible on a nice home in a nice area is “a pretty big number.” A $700,000 home would have a $14,000 deductible on a policy that otherwise has a $1,000 deductible, he said, going on to go through some of the nuances of claims scenarios set forth in the gamified example on Informed’s home page.

The average policyholder doesn’t even know basics like “what I insure my house for isn’t what I bought the house for. The insured value is what it costs to rebuild the home, and that is going to be different depending on how old your house was and what appreciation is and what rebuilding costs.”

Most people just never think about these things, he said, noting that the opportunity to at least make people aware of them drove the decision to start up Informed. “And then you can imagine we’re going to try to find carriers who do offer more coverage and push people toward those policies.”

An Investor Turns Consumer Advocate

Why is Gutterman so passionate about this?

Although he’s never had a claim, he chalks it up to his personality. “I’ve always tried to do what’s right rather than what’s expedient…Even as an investor, you try to see the big picture, and I would always want companies to succeed even if I didn’t own their stock and even if I was very critical of them. Part of the reason I was critical of companies is, probably naively, I hoped they would listen to me and then they would get better,” he said.

“And if I was short on their stock and it went up because I told them to do something, shame on me for not realizing that they were actually doing the right thing now.”

“A lot of investors get emotionally invested: ‘I own the stock, so therefore I’m rooting for these guys,’ or, ‘I don’t own the stock, so I think they’re bad guys.’ I wanted everyone to win, and my job was to do the analysis correctly and own the right companies”

He continued, “If you were to ask companies, I think that’s how I was able to frankly get away with being tough at times. They knew I wasn’t being tough on them to be mean. They knew I was trying to be helpful. Even though they didn’t always like it, they understood I was coming from a good place.”

A White Label Bridge to Being an Agent

Once Informed lays the groundwork of educating homeowners insurance buyers, Gutterman envisions that consumers will grow to trust the information enough to want the InsurTech’s advice about what insurers to buy from. “We’ll then be their agent. That will be our business model. We’re trying to be an IA—not an MGA, not a carrier…That’s the most customer-friendly thing we can do. There’s no conflict of us trying to sell one policy over another. We’re just trying to find the best policy for you.”

But setting up a fully digital agency with proprietary tech and CSRs takes time, money and people. Rather than wait, Gutterman explained that Informed is taking a “bridge step”—working with a white label provider that runs digital agencies for a number of entities. Having not yet signed on the dotted line, Gutterman declined to disclose the name of the provider but offered an example of other types of setups where an entity like Informed generates leads and the agency brings its carrier appointments to the table. “If you get an alumni mailing [that offers] life insurance from your university at a better rate, your college isn’t running an insurance agency. They’re just doing direct marketing and generating leads.”

With this bridge, Gutterman admitted, “We can’t bring everything we want to bring on the customer experience Day 1. But it also means we can get to market a lot faster.” It also allows Informed to gain revenue faster, which will in turn make it easier to fund the buildout of the agency he and Farmer envision.

In addition, Gutterman noted that when Informed later seeks its own carrier appointments, the company will have a book of business to show the insurers. Carriers will be able to see the types of customers coming to Informed and the volume, he said, contrasting the same ask from a no-revenue startup. The expectation is that Informed also will be capturing high-margin, high-retention business that is hard to attract. Other InsurTechs and established insurance companies spend their advertising dollars on low-retention consumers who are actively shopping. “The whole reason we’re focusing on the marketing before we really make the big splash on the tech is we need to prove that we can find these people.”

Gutterman doesn’t believe that Informed has to become a carrier itself to develop the coverage combinations that will be optimal for target buyers. Instead, he’s banking on the flexibility of carriers that will want their share of educated customers who won’t be satisfied with the current options.

Gutterman is the epitome of the target homeowners insurance customer himself.

“I’m forced to buy 10 percent other structures, but the only other structure I have is a fence,” he said, noting that 10 percent is a meaningful but not wallet-busting number. “I’m paying for nothing. Is it that much? It probably isn’t, but it bothers me,” he said. He also believes it’s easier for carriers to change this than it was “back in the day when we didn’t have satellite data and we couldn’t easily find out what other structures you had vs. your neighbor. It probably did make sense to have a rule of thumb. Nowadays, we can simply snap the pic from the sky, and we can know pretty much what other structures you have. Why can’t we give you a dollar limit to other structures?” he asked, going on to deliver a similar analysis of contents coverage. “I’m forced to buy 50 percent contents. I probably need 25 at most,” he said.

Gutterman recognizes there’s a risk of Informed winding up with frustrated customers because the company may end up advising homeowners to opt for an ideal collection of coverage provisions that aren’t being offered. “We are then, hopefully, going to have to be able to convince carriers to change their forms with the carrot of knowing that we have these customers waiting for them.”

The Evolution of Car Dealers and Insurance Agents

Although Informed will evolve to be a digital agency, Gutterman envisions many insureds simply taking advice from what are currently complimentary tools back to their local agents to discuss potential policy changes. “We can estimate how much you would save if you picked a different deductible. Your average agent just shouldn’t be expected to know how to do that,” he said, explaining that Farmer, with his years of experience, was able to build a deductible calculator by reverse engineering the pricing curves of major insurance companies from their rate filings.

If a customer goes back to his or her local agent to discuss whether the recommended changes from the calculator or policy reviews make sense, the agent benefits because Informed has done the work for free. But it’s also helping Informed build its reputation, Gutterman explained.

Asked whether he envisions that the policy reviews that he and Farmer deliver today will be replaced by technology or more super-smart human agents, Gutterman indicates it will be a bit of both. “The ability to get free one-on-one advice likely will have to go away at some point. To get that, it’s likely that you’ll have to choose to be a customer of the agency. But if you say, ‘I want to buy a policy through you,’ then the plan is we will start you with the automated advice. And then, yes, there will be well-trained human agents who can then take over. If you say, ‘I understand how you showed me I could do X or Y, but I still have some questions, can I talk to somebody?’ Absolutely.” That should happen, he said.

Gutterman offers the analogy of the car-buying experience. In the days before you could do any research online, you had to go straight to a dealer to ask basic questions. Now, you research online first and then go to a dealer for a test drive or to ask advanced questions about specific safety features.

“That’s how we’re envisioning insurance agents evolving. The insurance agent shouldn’t have to ask you, ‘How close is the fire hydrant?’ HazardHub solved that already,” he said, referring to a provider of geospatial data for making risk assessments. “The insurance agent shouldn’t have to ask if you have a swimming pool. Satellite data can tell you that.”

Agents should instead be adding value to tech-generated information. “‘Your site is suggesting to me that I might need an umbrella policy. I don’t understand why. Can you explain to me more about when I might need this? What might happen to me that I might need an umbrella policy?'”

“The agent should be there for the more sophisticated part,” Gutterman said.

What Carriers Should Know About Informed

In an online post updating potential investors and future carrier partners about Informed, Gutterman wrote, “Our purpose is to help homeowners get the insurance coverage that best suits them at the best price. We are agnostic about who sells them that insurance or what carrier provides it.”

Knowing Gutterman’s reputation as an analyst who cared about the financial strength and viability of carriers, the “agnostic” idea gave Carrier Management pause. Gutterman explained.

Clearly, carriers with broader policies will do better with us, he said. If the carrier’s model is, “‘I have the cheapest rate, but I don’t cover much,’ [then] we’re happy to give them an appointment. They’re just unlikely to win a lot of business with us. We will get some customers [who] say, ‘I understand everything you’ve told me. I’m glad I now am more knowledgeable about the risk I’m taking, but I still want the least coverage for the lowest price.’ We’re not going to tell them, ‘We won’t sell that to you.’ We will have someone on our platform who offers that, and that carrier will win that customer.”

“No one’s tried to create an insurance company that really put the customer first. We are going to do what we think is best for the customer, and then we’ll figure out how to make money at it.”

Ian Gutterman, Informed Group Inc.

He added, “Once we get fully developed on our own platform with our own technology, it will be very clear to the carriers what type of customer they’re going to get because the AI is rules-based. It’s not going to be, ‘My local rep has a good relationship with Judy in Topeka, so I know we’re going to get more policies out of that agency’…It’s going to be very apparent if we have these different types of customer personas. If your policy is a better match per persona No. 4, you’re going to get a lot of volume out of persona No. 4…So, the carriers will be able to frankly know in advance what type of customer they’re going to see,” and the results will be more predictable to them as well, he said. “And clearly, they will then have the ability over time [to] come to us and say, ‘I want more of the customer who cares about this? I’m willing to go amend my form.'”

Measuring Success

Gutterman isn’t worried about other InsurTechs copying Informed or its mission to bring greater transparency to consumers seeking better information and better coverage. If they do, “then it’s incumbent upon us to get better…It shouldn’t be we only want to help the customer if it’s good for us. If our principle is we want to help the customer, then we have to have faith in ourselves that we’ll always be at the leading edge of helping the customer.”

The former analyst offers the example of Progressive as the ideal company at executing new ideas in the insurance industry. “When Progressive figured out credit [scoring] decades ago, they knew eventually everyone else would figure out credit. They moved on to the next thing,” he said, noting that Progressive started working on usage-based insurance in the “window of time” when they had advantage—before everyone else caught on.

“If we can always be at the forefront of better ways to help consumers, we’ll be successful,” he concluded.

Monitoring other InsurTechs’ paths to success in his role as an analyst and industry observer, Gutterman has written several articles comparing InsurTech “hares” that have hyper-growth models and “tortoises,” which focus on gaining market acceptance getting to profit. Informed’s model is more of a tortoise approach, he said. “We’re trying to build a sustainable business—something we can be proud of, rather than build something that’s going to get us the highest valuation the quickest.”

“My measure of success is this business being around for a long time and being very profitable and having people say Informed, ‘They run a good shop, they do a good job, they treat the customer right. That’s more important to me than how fast we can become a unicorn or something like that,” he said, adding that some venture investors probably wouldn’t want to hear that.

Gutterman is seeking investors. But right now, he’s using his own money to fund the startup. “We are certainly open to outside investment, but [we’re] trying to be thoughtful about it and do it at the right time with the right people. Given I have an investor background, I understand market windows open and close, and things are more closed than open today. So, we just have our heads down trying to build the business. Then, ideally when the window opens back up, we’ll be in a good position to go raise,” he said.