Nick Planeta is the Senior Vice President for Insurance and Partnerships at Beam Benefits, simplifying and modernizing employee benefits for companies across the US. Nick was interviewed by Chris Luiz, Director of Solutions Architecture and Customer Success at Monitaur and Cleveland Founder at InsurTech Ohio.
Nick, you've worked for both legacy carriers and in the insurtech space. What are your thoughts on the differences?
“Legacy carriers and insurtechs both bring important strengths to the innovation equation. Working at legacy carriers, I can't underscore enough how sophisticated they are in risk management practices and distribution, as well as the strong grasp they have on the regulatory and compliance environment. All of which are core to the insurance space.
On the insurtech side, there’s a remarkable amount of talent, particularly on digital products, engineering and design. There’s a real appetite to be risk-takers in an environment that otherwise is risk-averse in terms of technical innovation.
What’s really compelling is these two environments do look, feel and act fairly differently, but they each bring strengths to the equation on moving the insurance industry forward.”
In a previous conversation, we discussed the idea of building rather than predicting the future. Can you elaborate on what that means to you?
“One of my favorite quotes from Dennis Gabor's book, Inventing the Future, is, ‘The future cannot be predicted, but futures can be invented.’ No one has ever perfectly predicted even a single day of the future, but every one of us has altered that trajectory via our own actions. My observation is that our industry spends entirely too much time trying to predict the future (industry trends, competitor actions, etc.). Instead, we should be investing in inventing the future. We have way more agency than we give ourselves credit for.
We should spend more time as a community deeply understanding the needs of our industry across a variety of stakeholders and less time concerning ourselves with what might happen outside of our control. One misguided question I tend to hear is, ‘How do we make insurance more like Amazon or Apple?’ That's the wrong frame of mind. It's how we continue to make progress knowing our stakeholders deeply and making advancements in the industry that are great level-ups for our customers.”
A big part of what you're talking about requires partnership and the transfer of technology from insurtech to legacy carriers. How do we pull the future into our industry's present?
“I'm passionate about this topic. Having sat on both sides of the table, the most important thing is acknowledging and appreciating the cultural differences between the legacy carrier and insurtech environments. As I mentioned in question one above, they are genuinely different and complementary. Instead of ignoring that fact, it's important the insurtech and legacy carrier acknowledge it and find ways to translate.
A parallel I always like to draw for our partners is international project work. Many legacy carriers are multinational, and there are a lot of overlapping capabilities across different countries. However, there are also a lot of differences in terms of culture, language and approach. If you go into that country and force project work through without any culture or language translation, one side of the equation ports its values onto the other.
That's always a recipe for disaster. It never works, and sometimes we don't appreciate or de-risk enough. As an example, a legacy carrier has little language to understand what ARR (Annual Recurring Revenue) means in the insurtech space. Conversely, for an insurtech, the idea of gross-written premium versus net-written premium is usually a foreign concept, and yet those concepts are closely tied together. Spending that time to break down the language and culture barriers is a critical path to getting started on the right foot. Once you're in there and understanding each other, real magic happens.”
Product usage increase is not always good. How are we communicating that to startups?
“Frequently, venture-backed companies were rewarded for growth, and there’s a lot of energy and focus on growth-based metrics. That has materially shifted in the last 18 months, but historically, that's been a strong push in order to demonstrate product market fit, traction and velocity. What's interesting in insurance is that it’s easy to grow fast, and it's easy to be profitable. If you want to grow fast, you can undercut the price of your competition and lose money all day long. There's a clear path to growth if you're not careful about your underwriting results and the risk that you're taking on your book.
The unpredictability of your cost structure in the gross-profit equation is important for startups, especially those without a ton of depth in the insurance space, to contemplate as they're making pricing decisions. When there's a lot of pressure on growth and uncertainty on your cost structure, it's pretty easy to lean into growing faster by undercutting the market price. You can get into a lot of trouble quickly.
The flip of that is it's also relatively easy to throttle the growth of your company and make a disproportionate profit, and that's by raising prices above market standard. The magic is those who can balance those two factors - the top right quadrant of growth while earning true underwriting profitability. It shouldn't be underestimated how difficult that is in a risk-based environment, but that's the gold standard to strive for. Prioritizing growth or profit too heavily is going to lead to a pretty unsustainable outcome. In terms of communicating that to the startup community, it can either be a hard lesson that founders learn via financial results or there are some case studies in insurtech history that we can look back on, learn from and grow from.”
What advice can you share with insurtechs that are trying to work with legacy carriers?
“I'd pick on three things. One would be oftentimes the legacy carriers’ lack of progress on innovative practices is not due to incompetence. There are constraints that legacy carriers have that insurtech startups do not. For example, if you're a Fortune 100 company, you typically have a bullseye on your back in terms of litigation. There's a serious legal macro risk that you need to balance if you're going to take an innovative risk on any given customer experience. If you're an insurtech with $10 million in ARR, that risk is minimal. It lends itself to an environment where legacy carriers are structurally and logically more risk-averse because the consequence of taking that risk can be dramatically higher in column A than in column B. We don't always think that way when we're out and innovating as insurtechs.
The other thing is that taking the time to deeply understand each other, empathize with each other and communicate about the cultural and language differences I mentioned before is critical to the success of a partnership. Otherwise, you're just crossing each other when you're trying to make progress. When you're trying to make rapid progress in the way that we all aspire to, it's hard to do so if you're always a little off the track. They say if you raise a stair by a quarter of an inch, 90 percent of people trip. It's like if the insurtech stair is one-quarter inch different in culture and language, 90 percent of people are tripping on that step. It's difficult to make your way up the stairs if you're stumbling around due to slight mismatches in communication or expectations.
The third is both sides must be able to communicate to their respective companies the value and approach they're taking on any given partnership. Because often how projects are governed in an insurtech startup and how projects are governed in a legacy carrier are dramatically different. You need to find common ground to support the governance models of both companies. That's always a challenging item to navigate, so I'm excited to be a part of the teams that help build those bridges.”
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