Lisa Hric is the former Senior Director of Insurance Product Management at Metromile, and auto product expert. Lisa was interviewed by Andrew Daniels, Founder and Managing Director at InsurTech Ohio.
Lisa, you have experience at both large carriers and startups. How have those experiences differed and what have you learned from each?
“Large carrier life is where everybody goes to learn the business. I live in northeast Ohio. Progressive is here, so it's very rare to go into an insurance company in northeast Ohio where you don't have a six-degree connection to somebody because of Progressive. It's because they're large carriers. They have processes, they have data and they inherently know what they're doing. There's an understanding of actuarial principles and the various cycles in the industry. They've lived through it once before and they know what’s coming in the market on the other side of major events.
Small carriers are different, especially in the startup world, because processes don't already exist. Even if your startup has data, that doesn't mean that you’re ready to react the same way because you're still trying to feel your way through. Additionally, as a startup, you haven't experienced the whole insurance cycle. So you don't know that the industry moves as a pack. Everybody generally takes rate at the same time, we all make a lot of money at the same time, then we all reach a steady state of what's normal. Startups have a tendency of wanting to disrupt quickly, but there are a great number of things that function the same way across the industry. That's where you're trying to disrupt. The challenge of a small company is remembering that things like rate revisions take every carrier six months (if they have a six-month policy term). So, you can't make them go faster. You're spending time teaching the ‘table stakes’ in a small company."
How did the shift to a company like Metromile accelerate your development?
“Metromile was unique in that it was my first insurtech. They also had a special value prop in the market as pay-per-mile. They were the first (in stealth mode in 2011) to do pay-per-mile. They were laser-focused on bringing together the best of both worlds from both the tech side and the insurance side of the house to allow us to fight that fight of identity: insurance company vs. tech company. But the biggest reason I went to Metromile was that they were heavily weighted on the West Coast.
My experience prior to that was as a Pennsylvania Product Manager. I spent a lot of time as an analyst for Pennsylvania. I also managed Michigan. I spent a lot of time on the Eastern States. I helped Farmers roll out to the East Coast in their small commercial business. I was looking to learn something new and experience some of those states. I had only heard rumors about California and Washington. Part of you feels like as a state manager, they can't be as bad as everybody says they are. I joined Metromile thinking, ‘it's a mature startup I’ll get to do some cool things’ like the countrywide expansion, as I had done at Farmers rolling out onto the East Coast. Maybe I’d be a part of going public and maybe ultimately be a part of an acquisition. What I didn't plan on was all of that happening within two years. That's the interesting part of the whole phenomenon for me was watching that all come to fruition within two years. I've spent a lot of time at legacy carriers and I've learned a lot, but there's always going to be a soft spot in my heart for my time at Metromile for the insanely smart people that Dan Preston and his leadership team brought together. My insurance product team there knows that they'll always be my favorite team ever and the best team I've ever managed. I'll probably always bleed Metromile Blue.“
Shifting gears to industry trends. How do you see new EV purchases influencing future insurance products?
“I believe EV is going to be the first of a variety of challenges we're seeing. The industry has struggled significantly with pricing. If you look at underwriting guidelines across the industry, a large portion of carriers restrict Teslas or some models of Tesla because they couldn't price them. What do you compare them to? Then you layer in Covid and the post-Covid era of chip issues and supply chain issues and all of a sudden we have various cost-to-repair and other similar concerns where we don’t have enough information. One of the larger challenges that we're facing as an industry is states like California have now mandated no new gas engine sales on the road by 2030.
How quickly can we, as an industry, get ready to price all of the new vehicles in a particular state because most of the industry reacts to using averages? We have to aggregate data to get to a particular model year pricing for a particular car. In California, that’s going to be moving towards non-gas vehicles starting around 2030. So, how does that work and how do we get those prices right? It's also California. They are one of the most heavily regulated insurance markets in the private passenger auto space in the country, and the regulations haven't caught up yet. You would think they would because they have such a dependence on mileage in their class plan and their rating algorithms would allow you to use things like telematics. But they're not there yet. So, how do you get to car data or crash detection, or similar items? It's going to be interesting to see how quickly the regulation can catch up.
The other thing I'm interested in, between electric vehicles and connected cars, is what does this mean for the actual people handling claims? Are we going to need software engineers in a claims unit? Anybody who has had an auto accident in their lifetime knows that you pick up the phone and talk to somebody. You either now take pictures via your mobile phone or you take your car somewhere where they take pictures of it, and most of the time they can take the quarter panels off and take a look and see what's going on. They’re going to find a computer inside some of these electric cars. I don't know what that claims handling process looks like 15 years from now as more of those types of cars get on the street. As of right now, it's hard to say what this electric vehicle revolution could mean to the end-to-end process.
Even if we can sell the coverage, the next big severity challenge is what happens when we get into those cars as they continue to improve. We're going to have to figure out who needs to be involved in that, or if it all goes back to the manufacturer.”
Lots of buzz continues around connected cars. What data is available now and which data do we still need, and how do we make sure that this data is not damaged in the repair process?
“The Gen X reference would be that all of this data is the Holy Grail. We've all been on the search for it. This is the Holy Grail of auto insurance, especially if we can get to all of that information at “New Business’. So, if you, Andrew, come to me in your connected car and you've already sent data and I can see that information at “New Business”. Imagine, that I have an actuarial partner and they knew at “New Business” whether you were a good driver or not. Not because we ordered an MVR, but because your car could tell me that you've had X number of hard brakes, Y number of hard accelerations, all of that. Because in reality, what the MVR tells us is your ability to recognize a police officer down the street, or you know where all the speed traps are, or, for lack of a better description, your luck.
Now, I have the telematics data I can use to feed into a model at “New Business”. This is kind of what Root was trying to do with their try before you buy. But in reality, what we're trying to do is what the industry needs to get to a perfect world. The Holy Grail would be knowing everything about you in order to rate the telematics policy upfront. That's really what we're trying to get to.”
What are some of the biggest challenges you still see from a state management perspective?
“Everything we've talked about is top of mind for me. The most significant challenge is going to be all of the changes in the market and how each state reacts at the state level. The NAIC (the National Association of Insurance Commissioners) will meet and they will come up with an AI model regulation where everybody agrees on a skeleton, but the implementation of that happens at the state level. So, similar to when we introduced credit in the nineties, you're going to see that different states have different criteria. It’s going to be up to every state manager across the industry to say what that state is, and is not allowed to do.
The big ones are absolutely going to be moving towards electric vehicles. How quickly will regulation catch up? California has a state-mandated rate order calculation, so will there be something added to that which allows us to account for an electric car? We also see ChatGPT popping up everywhere. What regulations at the state level are going to apply to ChatGPT? All of these committees that are coming up on the use of AI and making these recommendations are going to be at the state level. We're going to see California, New York, and Florida have different rules than everybody else. Everybody that's been around for a while understands that's how it works. State managers will have to be ready to address that at the state level and be prepared to push back on their appropriate tech teams to raise the flag to ensure everything is legal and within guidelines. The rating tier is probably one of the more prominent examples today. Some states require you to file underwriting and some don’t. Because of this, nobody in the industry is going out of their way to experiment in some of these very complex states. But on some level, a lot of these changes may force us to experiment in complex states because of how everything is moving. It's quite an interesting dynamic in the industry right now.”
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