Dogan Kaleli is the CEO of Stere.io, a digital platform for MGA/MGUs and Insurtechs to find capacity and access digital tools to launch, improve and grow insurance programs. Dogan was interviewed by Michael Fiedel, a Managing Director at InsurTech Ohio and Partner at PolicyFly, Inc.
Dogan, why do carriers and reinsurers only work with one percent of programs they review and what kind of challenges have created this current reality?
“First, we need to remember that the underwriter’s role in the insurance company is to protect the risk capital. Naturally, they cannot underwrite everything; they have to be picky.
Secondly, you need to understand some of the inefficiencies of underwriting programs. It can be overwhelming when their internal processes don't allow time to see all submissions in detail. Much of the process is manual, not data driven, so maybe half of the submissions get eliminated from the underwriting process or from a quick review, not allowing a proper analysis of the opportunity.
Carriers ask several questions. Is the MGA or insurance program a digital one or not? Do they have enough expertise about the product they’ll be underwriting? Do they have a competitive pricing strategy? Are they being cost effective? Is being digital mandatory or are you open to more of a legacy approach? I call these questions ‘program appetite’ or ‘business appetite’. After all those questions are answered, you basically end up writing one or two percent of what you have access to.”
Is there a success rate that carriers should be aiming for, and if so, what should it be?
“I'm always hesitant to give ‘five or ten percent’ metrics because every company is different. What I can tell you is that it's not working well. At the end of the day, this is a relationship business, and for a good reason: the carrier is giving the underwriting pen away, so trust is one of the most important elements. Although trust and relationships aren’t enough. I see many inefficiencies and pain points during the underwriting and launch of programs. The process is not data driven, it takes so long to launch a program (which is concerning given speed-to-market is essential for MGAs and insurtechs), and carriers are overwhelmed with the number of submissions, therefore can’t spend enough time on more programs that they might want to end up underwriting.”
Have you quantified the value of the time that's wasted and what does it cost carriers?
“With the carriers that we work with, we go through a very quick exercise with 15 to 20 questions to understand their program appetite. Without getting their “secret sauce” and internal underwriting details, we ask them questions like ‘Do you do startup programs?’ and ‘Does it have to be a digital program or not?’ We're not super interested in the underwriting appetite of those carriers because that can fluctuate on a granular level. So, we try instead to map at a high-level. What we have seen is that if we can create an efficient process in leveraging those metrics and provide a better framework to the MGAs, insurtechs and carriers, we can actually save more or less 25% of what we call “placement time”, which is a big value. This means that the right MGAs are talking to the right carriers that much more efficiently.”
How big are the teams at a carrier that are being tasked with reviewing MGA submissions?
“In many different insurance companies, MGA submissions come to an underwriter's desk. If things get more serious, then you will see the operations team, IT team, claims team, legal team and compliance team. All those different departments are getting into what I used to call a ‘deal team’ because it’s a group decision. Finance is a good area to focus on for example. If the carrier is not set up in the way that the program requires them to, in terms of finance, claims or even compliance, then it can be a very big problem operationally. Imagine that after the deal is closed and the program is launched, you are getting your first bordereau, and then you are not prepared to handle the incoming financial data. That becomes such an obstacle. So, that's why it's very important to have almost all departments involved in the pre-buying process.”
How does the technology at Stere.io provide these efficiencies?
“So far, we have focused on the first step between the MGA and the program underwriters. We made that process completely digital and data driven. We created a detailed step-by-step submission process and a data room where they can access everything. I don't want to ruin the surprise, but, maybe a teaser here, we are working on creating a digital version of the due-diligence process as well. The due-diligence process involves many different departments in a carrier. We are working to create a far more efficient due-diligence process for the carriers and for the MGAs. It’s becoming more transparent between those two entities, which will eventually save time because speed to market is everything in this business.”
How do they potentially use this platform to know even faster, whether they want to look at this further or not?
“First, we wanted to focus on keeping this as a relationship driven business, because it matters. That's why we did not design the platform as an open marketplace. Once the MGA creates the digital submission on Stere.io, they are able to invite their own network. In addition, there's what we call ‘smart recommendations’. Based on the program characteristics, metrics and ‘appetite questions’ collected, there are a couple of smart recommendations populated.
Those are the additional efficiencies we created. After we secure the placement, the capacity for the MGA, it's crucial to start working with our partners. Stere also created a network of solution providers by pre-vetting the people/companies that we trust and going through the due-diligence process. Think of it as a one-stop shop for MGAs and insurtechs. In that case, more efficient tools are available for the MGAs beyond capacity placement.
I always say it's a digital ecosystem for insurance programs. We work with MGAs, MGUs and insurtechs. We started working with non-insurance businesses, distributing insurance products, which we call embedded insurance programs. We already closed one deal and we have others in the pipeline that create additional growth opportunities for both carriers and MGAs. Once again, we're not a licensed broker nor want to be. I actually call ourselves the ‘Grubhub or Uber of insurance programs’. We are the central point, the technology platform that connects all the states, with tools focusing on creating efficiency.”
As a head of programs alongside your background as a technology founder, how has that dual perspective played a role in identifying this need?
“It was such a great experience for me to have those two hats: the startup guy and the corporate citizen. Now, I call myself a ‘hundred percent entrepreneur’, which is exciting but a little scary at the same time. It gives me the ability to see this from a tech standpoint, from a MGA standpoint and from the carrier standpoint. Stere is a tech platform, but to be able to understand what an underwriter tells you, the first time they tell you, saves a lot of time. I think the carriers we have been in contact with enjoy that aspect because we have a team with an underwriting background. MGA's understand that as well, because they are also underwriters. But at the same time, we are bringing all these digital tools and the platform to support both sides. That's been one of the key points of my personal background.”
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