An Ad Man Stumbled into The Life Insurance Biz | TWIC with guest Aaron Shaprio, CEO of Dayforward (week ending 1-22-2021)

Over 2 years ago, Coverager published an article called “Behind The Scenes“. In it, Avi quoted Aaron Shapiro, author of the book Users, Not Customers and (at the time) CEO of the ad agency Huge. Aaron is now CEO of Dayforward (what was Avi’s influence on this???)

Aaron joined Shefi, Avi and Nick on This Week in Coverager. With a lot of activity in the life insurance space and the announcement of Lemonade Life, we discussed Dayforward’s recent release, the advantages of being a carrier vs MGA, obsession over the definition of “customer” and how Dayforward thinks about differentiation and positioning. Dayforward is focused on financial inequality and their life solution is step #1 in what is likely to be a string of financial solutions to close the gap.

 

Watch here:

 

 

Outro music –  Gathering Crowds by John Scott
YouTube https://www.youtube.com/watch?v=rGbFbDv0gwY
Amazon https://amz.run/3vcq

 

Transcript

Nick
And we're back. This is, This Week in Coverager. This is the podcast where we talk about news events for the week that have made an impact on Coverager or made an impact in insurance, Insurtech, FinTech. I am Nick Lamparelli. I am in podcasting headquarters in Naples, Florida. Of course, I have my co hosts, Avi, who's in Coverager. headquarters, part one in Queens, New York, and Shefi, who's in Coverager headquarters one-a in or is it the other way around in Brooklyn, New York. Shefi. Avi. Happy Friday.

Shefi
Happy Friday. Hello,

Avi
Hello everyone.

Nick
And for those that are watching on video, you can see in our Brady Bunch panel that we have a guest this week. So I'm gonna punt it over to Avi to make the introduction for who our guest is, Avi.

Avi
So yeah, thank you this week was a big announcement for life insurance companies out there waiting to see what Lemonade has to offer. But we have a special guest. Aaron Shapiro, the CEO of Dayforward, a new life insurance company that just a few weeks ago, kind of came out of stealth mode. Before that he made his name from being the CEO of advertising agency, Huge, a very big and successful advertising agency. And not every day, you get a very interesting person to enter the insurance industry, which is always great to see and have. And Aaron, really give us some background about you before insurance. And then we'll start asking you questions of why the hell did you enter the insurance pays but but the first question is, let the let the audience know a little more more about you before the insurance.

Aaron S
Great. So first, thank you for having me on the show. Just a small tidbit I have to say. So when I was learning about the industry over the last year and a half, I was a religious reader of Coverager. And and watch too many of your podcasts. So it's definitely fun to meet you guys in person and be on the show. So that thank you for having me. So just a little bit about my background. I spent my whole career in the technology marketing space, I started my career, I started a marketing automation software company called silverpop. If you think about the emails you get from companies that was that would come from our software. I sold that to IBM. And after that I started a advertising agency called Huge that we built up over over 13 years I was there. So from a small company with myself with three partners to 1500 professionals around the world. I sold that company to Interpublic, which is one of the big holding companies. And then I after my earnout I left about two years ago, and I thought, you know, what I really wanted to do was I wanted to think about an industry where you could really use digital and digital to really make a big impact and a difference on consumers. I got really excited about life insurance for reasons I can tell you, and here we are.

Shefi
So okay you have to tell us the reason...

Avi
Yeah.

Aaron S
Why life insurance out of all the industries in the world?

Nick
I can tell you, I can tell that he was in advertising, because he like created the story, like dangled something at the very end there is like, you gotta keep going, like, why did you stop?

Aaron S
I swear, it's not on purpose. It's like

Shefi
we need all the marketing we can get.

Aaron S
so and so. Yeah. So there's, I'll tell you what happened. So when I when I left Huge, and I said all right, so a lot of what a lot of what we did at Huge was we would help really big companies help modernize their business for the internet economy. So you know, on one hand, we had Google and Apple as really big clients. On the other hand, we had clients like, you know, Morgan Stanley, or Comcast, you know, these big firms, and they think about their digital and how to improve it. So I thought it'd be really interesting to do the same amount of the same kind of work, where you're trying to modernize an industry, but do it as a startup instead of as a consultant. So I thought of all of my clients, and I said, which industries need the most help that had the biggest trouble. And we actually had a lot of clients that were made nameless, who were in the insurance business, many, many of the largest insurance companies that you will cover, we actually had as a client, I saw the inside of these companies. And what I saw was, was that they saw the world was changing, consumers had different expectations. But there was just this paralysis where they didn't really go for it the way that I saw a lot of other other industries would go for. And that's how I got interested in insurance, and specifically life insurance. And then at the same time, I wanted to do and I wanted to do a company that I felt would make a big impact in society. And since I couldn't think of anything related to technology that would fix global warming. I got I actually got interested in both health and in income inequality, a lot of the economic problems people are facing this is all pre COVID. Right. It's a lot worse now. I'm having a lot of trouble with these air pods. So sorry about that. Club. Yeah, I know. So Anyway, and when you think about all the stats, you will know about income inequality. And people struggle with financial security, everything else, it felt like a really big meaty problem that I could try to tackle. And you could create a company that would not only have massive enterprise value, but if we did it right, could literally impact the lives of millions of families across America by giving them better products that give them better protection. And I got pretty excited about that idea. And just to finish the story, I concluded that if you're really going to make a change in this industry, you couldn't be an MGA, you couldn't just resell other people's products. That's not that's like putting lipstick on what everyone everyone else is doing. You have to become a carrier and be able to innovate across everything across product across underwriting across the full distribution, be able to go direct to consumer. And so a little over a year ago, we bit the bullet and said Alright, we're going to become the first modern D2C life insurance carrier following the footsteps of what a Lemonade or Root or Oscar have done, but do it for life insurance. And, and, you know, it was about a year and fortunately, we had really good investors and, and other support, reinsurance and so forth, where we were able to get our certificate authority and and formally launched in Texas just a few weeks ago.

Avi
So from an outsider's point of view, working with these nameless life insurance companies, what would you say were their problems? Is it the fact that people are getting married at a later stage? Or having fewer kids or they're not advertising as much as a Geico or Progressive for car home insurance? What are the problems? You see?

Aaron S
That's a great question. I would say the number one issue that I saw was they were unwilling to disrupt disrupt their channel, like they, their customer is their brokers and their agents, their customers, not the people buying their policies. And to me, that creates the paralysis in the industry. And I'll give you a small example I was, I was meeting with the C suite of one of the largest insurance companies that exists. And I did this whole presentation around how important it is to think about your customers and your users. You guys actually made a little a little tidbit a few weeks ago about my book that I wrote years ago. And those lessons. I basically gave gave my stump speech around that topic, right. And I realized that all these befuddled looks on their face. And I realized an hour into the meeting, that when I said customers and users, I was thinking about the people buying their policy, they were thinking about brokers and their captive network. So all of their marketing was oriented towards how do we keep our brokers happy? How do we convince brokers to sell our products? Right, they weren't talking about their end user. And to me, that is the that is the the kind of original sin of this industry. And that is the problem. And, And that, to me, that's the root of all the problems in this industry. If you think about when they talk about new product development, what I saw was, they would talk about these, you know, new fancy financial macinations, that gives the brokers extra commission, and so they'll be more excited. It's like, it's not about what's going to give the consumer more safety, or a better, to better protect their family, or even in the worst case, you know, better estate management for those people doing that. It's all about how to keep the brokers happy. And that's And that, to me, that's, that's why the industry is broken. And that's the real opportunity that we have as a DTC company, which is, let's, let's start from scratch, and let's create products that actually meet customer needs, heaven forbid, and really try to create an experience from end to end from how you buy to what the product is to what the post experience is, that really meets customer needs. Every other industry does it. And we think it's time that life insurance did it. So.

Avi
So yeah, go ahead. Shefi.

Shefi
Well, I'm just gonna point out where there's going to be instances where we don't think where we don't think alike, right. So one of the definitions that we have for insurances that insurance is a rarely differentiated product sold to a generally indifferent consumer. And so the reason now, yes, in their DNA, many of these massive insurers. For them, the end user is that broker, I'll put aside the whole conversation on commission agents deserve to get paid whatever they have to do, they're paid, if that's their motivation, that's something else. But that aside, there is a reason why some of these products are sold through agents, because the Internet has proven that this is not a really great channel to buy a product, especially if that product isn't required. So life insurance is kind of this product where it's some of them think it's nice to have, some users even call it a luxury product. And so this is where the power of a broker comes in and convinces with all the right selling points and all the emotion involved with with a seller so you understand why they're selling to agents, and you're also seeing Insurtech now going after agents basically saying, hey, come help us sell the product. So it's not necessarily one channel versus the other. It's how do we build this hybrid of channels?

Aaron S
Just to jump in for a second. So So first of all, I'm not suggesting brokers and agents are going to go away. Although I do think they're the direction is this way, right. It's coming down. What you're saying is actually the question that I asked. So I've been in the internet for too many years. And if there's one thing I've learned for the internet is that if anything can possibly be sold, it can be sold on the internet, right? In the early days, Oh, do you think people will really sell groceries online? It's like, yes. Well, people really, could you imagine someone selling diamonds on the internet? That's crazy. And now everyone's buying diamonds on the internet? Can you imagine selling cars on the internet, right? And, you know, Vroom just went public selling us cars, right? So I refuse to believe that life insurance is the only category that exists that won't sell online at scale. I don't know, if we're gonna crack it, we'll say I'm going to take my best shot. But if I am firmly believe that if we can't do it, someone else will fix it. Because I don't believe this is the only category that exists where the internet isn't going to be a major channel. So and the premise of the of what we did when we set up the company was, let's try to solve that problem. So we did tons of research to try to figure out what's going to get people to buy online and can we develop a product and an experience that can get can get people to cross that hurdle, realizing that some people will still want phone calls, right, and we, you know, we have a phone number on our homepage, you can call us and talk to a licensed agent, right? We expect a reasonable number of people to pick up the phone and call us. In fact, in our first weeks going live, that's exactly what's happening. But we still think that a major a large percentage of people will buy direct on the internet. And if we don't do it, someone's gonna solve it, but we're gonna give it our best shot.

Avi
So I think life insurance can be sold online, we see the, you know, successful PolicyGenius, when they interact with an interested consumer users searching on Google, they have a good shot. On the other hand, you look at a company like Ethos, which, you know, raised money from Jay Z, and Will Smith and I think Kevin Durant's or Robert Downey, Jr, and some celebrities. They were against agent against the whole notion of agents, they're conflicted and all of that, all of a sudden, they're selling final expense, and they're selling it through agents, and they struggled very hard in terms of distribution. What do you see the problems is with, if you're not on Google where people are, because it's not like a product where Hey, let me get you interested with life insurance, and you'll buy, you need someone that needs it, they have maybe a young family, maybe a professional that is thinking that he's about to get married, and it's time to get it now. Yeah, where do you see the places to advertise? And will you work with agents in the future? Will you only have your in house? Call Center people and you'll call?

Aaron S
Yeah, so first, we do see this eventually, as omni channel, we're not saying that we are biased towards director we're gonna try to make that work. But it doesn't preclude us doing distribution deals in the future. And in fact, we're in significant discussions now with where we think will be pretty meaningful distribution deal. So we're not saying that distribution doesn't exist. It's really about a customer first mentality. What I will say though, that's interesting. If you look at the stats, 10, roughly 10 million policies are sold a year 85% of those purchases, start with a with people looking online doing research about life insurance, but only 5% of those people end up buying, everyone else finds a broker in some way, and they buy that way. So the way we looked at it is this audience is online doing research. Our job is our job is to find those people through through modern digital marketing and building a brand. And at the same time, only 40% of families have life insurance, that means 60% of families should have life insurance, at least I think so. And don't. And there's an opportunity to expand the market by reaching those people as well, in fact, actually actually have it in reverse. I'm sorry, 60% have life insurance. 40% don't. But if you look, throughout history, for most of the 20th century, roughly 80% of families had life insurance, it's only the last generation that it's declined. And we think part of that decline is that with the advent of the Internet, and different consumer expectations emerging because of it, people want to shop in a different way. And the old model of you know, you know, my buddy's friend has a broker to talk to isn't really as relevant to younger generation, especially when the average age of a life insurance broker is 58. So there's a you know, there's an opportunity, we think, not just to reach those in market, but to reach people who should buy life insurance, but are not in market to that, but I have not bought for whatever reason.

Shefi
Okay, so before we go down the route of the market and the product. Sure I'll tell you about today. Yes. From Munich Re give us one rejection for the now. I think I got the right kind of carrier to turn you down.

Aaron S
So first of all, so first, you probably won't believe me, but we went to four reinsurance companies. And all four of those companies gave us a very compelling reinsurance deal. We believe we're the only company that went across those we got offers from everybody. At that same at that same time, though, we we felt that Munich was the best strategic partner for us. So we decided to do a deal with me as I knew that we certainly got nose from other people and not like when we when we raise money. The biggest the biggest no was a concern about if we could really become a carrier, and the amount of capital required, right because there hasn't been a new carrier in I don't know for sure, but we couldn't even Find what in the last 30 some odd years that was started from scratch since the 90s. I could be wrong, but we couldn't find one. And it's just it's a big lift, you have to have the you have to have the financial capital required the regulatory hurdles. You know, it's it does not fit the model of typical seed investment, I'm going to raise $2 million seed round and start a carrier, it just doesn't work you need the kind of investment we had. And that takes a certain kind of investor. And I give a lot of kudos to not just music, but our other investors who's willing to take a rest to put this amount of money into an unproven idea to get to stand up a carrier. It's a non trivial investment. So it takes a certain kind of investor to take that kind of risk, just because of those regulatory hurdles that are required.

Shefi
Well, just for the for the audience, I mean, since then, and I don't know exactly what came first obviously Bestow was established in 2016. But Bestow is going about becoming a full stack insurer. Yes. also live in Texas, right.

Aaron S
Yeah. So Bestow is a Bestow is not actually selling their own policies.

Avi
Not yet. They have a North American.

Aaron S
No, so basically, they're they're currently at MGA. But when they complete their acquisition of the shell, then I'm that I'm sure they'll launch their own policies.

Avi
So let me let Yeah, go ahead, Nick.

Nick
No, I was I was gonna say, Aaron, your, your point about the customer actually hits home very much. You know, I, my day job is I have an MGA and I asked the question all the time, who is our customer? Here? You know, and, you know, who are we trying to? Who should we be obsessed about? And that's one of the big problems and insurances. I find that it's hard to be obsessed over the consumer itself, because so few of them are actually going to qualify for the product. And so we actually took the other tack, we went the other way, and said, our customer is the reinsurer. And so our job is to take their capacity. And it's our job to figure out how to mold it so that we can then deliver it into the product into the market at that consumed so that brokers can sell it and that the end customer the policyholder can actually use it. And it I don't think a lot of folks that are listening understand that dynamic, I think, and there's nothing wrong with going the consumer first, it's just that there's, you know, there are conflicting stakeholders in the loop. And, you know, you as a carrier, not everyone's going to be your customer. I don't think a lot of people that come into insurance, understand that they see the TAM on it, and they're just like, wow, this is a huge market. But I don't think they realize like, for someone like day forward, you have to be very specific about who your customer is. Because your carrier Now you only have so much capital, and you only have so much reinsurance to back it, there's only so much business that you can actually do you have to be very specific about who you want to go after, how do you how did you make that calculation? Because I your your digital strategy it's then going to follow that right?

Aaron S
It's a very good question and look to be to your point. It's a massive industry. And there are many valid business models like what you're doing, I'm not suggesting we're the perfect business model. We're just one approach to this into this industry. And there'll be a lot of winners. And in this new world, the way we looked at it was we we thought of our customer as kind of the original purpose of life insurance, meaning your, your new parents, or starting a family or planning to start a family, and you're looking to buy life insurance to to protect your family and to protect your children while you're growing up. I appreciate there's a lot of other reasons people buy life insurance, where there's retirement components, or for estate planning, we opted at least for now, for the foreseeable future, we're not focused on that we looked at that core income, you know, that core problem around protecting the family. That was really what it was about. And that was how we got to our product, because we really looked at it from scratch and said, Okay, if you're a young family, and you're trying to protect your family, and we did a lot of audience research around this, what are you? What are you really looking for, and what we saw in our research was that consumers really struggled with the idea of a face value and a term length. First, they didn't know what the jargon was. So once you interpret it, you know, how does a family know if a half a million dollars is right for them, or a million or 250 or 500? You know, you go to calculators, and they give you different numbers, you know, the rules of thumb don't always apply if it's a 10 years or whatever the number, right and, and and what our insight was, you know, that number is supposed to be an estimate to protect your family's financial security and to and to basically replace that lost income that that breadwinner had. So why not just get rid of this approximation and just protect the income. That was kind of the idea, the idea behind it, and in many ways, it kind of harken back to the early earliest days of life insurance, if you go to Wikipedia, the earliest no life insurance that existed was actually an ancient Rome. And they had these funeral clubs where basically burial clubs they called them. And basically, the idea was that all the families agreed that if one of them, one of the members died, they would support that, that other family who had the breadwinner die until, you know, there was support them, which is basically they would replace that income of that person last. So that was the, that was the kind of intellectual Genesis behind the product. And then once we got into it created a lot, we kind of refined it and made it, you know, really consumer appealing and had a lot of kind of elegance to it as well. So that was kind of we how we kind of come up with a Notion. And then it seemed interesting that as a carrier, we could do this, because we could really rethink the whole experience and not be locked into the conventional notions of what a life insurance policy has to be like.

Avi
So we were talking about this, I think, a few weeks ago, and I want to tell you something that you did really good. And you got me thinking, and you're right. When I was getting Term Life Insurance, I was speaking to the northwestern guy on the phone, and he was a broker of a friend, he was a friend of my wife. And you know, why not let him make the commission. And he told me all, most people think a million, that's a good amount, you don't want half a million, but a million, you know, that's a good amount. So after I went through the process, with your platform, I discovered the how a million is really not enough if I work to go tomorrow. So if you think about it, if you think how much money you spend every year, and I have a two and a half year old are paying rent. So yes, if I died tomorrow, my wife would be very happy, she'll take the million dollars. And then if she moves to like Seiko Maine to live on the middle of the highway, she could buy a small house for $100,000. She'll go to Walmart, she'll get a tender and all of that. And you could leave that right, yeah, but she's from New York. And you know, she likes to go out and have some wine, red wine and all that stuff. And you think about it, like if, if now when, and again, my kid for him to reach 21, it's gonna be another 1918 years, a million dollars is not going to cut it for her. Unless she really, and this is what I liked about your product, the thing I didn't like about the product. And I just read yesterday with a lottery. I think someone won the Powerball. Statistically speaking, I don't know the numbers. But the lottery says that when people win the prize, they have to take it all at once in a lump sum over the annuity. And I think the also the other thing is the price. Because when I went and said, you know what you made me realize that I really need 2 million in coverage. Okay, now, this is my thinking. And I could be you know, but that's the thing. I'm saying to myself, I have a hard life, you know, I need the 2 million term like, I'll need that. And if my kid gets to 15, do I want the amount the potential amount to decrease? Which is what happens in your case? Or would I rather have like a 2 million and my son will remember that I did something good in my life. You know. So that is, and again, I I love the fact and let me tell you what Lemonade did this week with Bestow. And I told Shefi, this, they gave you two options, a 10 year term, a 20 year term, no more than a million dollars. And Bestow does this because for under a million, they could eliminate the medical Yeah. And I think that's wrong, because you're really, this is one of the products and I Lemonade already got me with pet insurance, which I'm going crazy because of it. Once you get into that product, you're not going to switch because now you're older, you have higher cholesterol, you're going to end up paying more. And I'm not happy about it. I really like the transparency what you guys offer with the product, I think it may hurt you where people are going to say thank you very much for the insight day forward. I know I need 2 million. Let me go to a company that no matter what if I die, your 18, year 10, whatever, I'll get the full 2 million. What do you think about that? So

Aaron S
I understand where you're coming from. But the flip side is, is that if you were to get $2 million in coverage, versus our policy that declined over time, it would be about three times the price

Avi
Are you sure because I did the calculations. And it's happened to be the same like when I got from Northwestern Mutual, and I did my calculations, it was very similar the that

Aaron S
it would be different. It would be a different rate class. We can we can discuss this offline. But it would be then you were comparing different rate classes. We we set our policy so that way. Let's say let's just simplify the math. Let's say it's 20 years in length, and you make $50,000. Right? So so if you if you took let's say 10 times that amount to be $500,000. That policy would be versus our policy, which would be 100 would be then let's say 20 times 50. You get a million if you died right away and with the client, those two policies would be would cost the same. In fact, we structured our way card so we would be the same. The way we built our table was we actually looked at all the cohorts of consumers. We had What you would get what you what would be the recommended length on PolicyGenius for your income and age and health level, and we made sure that you are the same or less if you bought our policy. So we're equivalent. So this line versus this curve, if you look at the net present value, your payoffs are the same. The difference is, is you're getting more in the early years, but you're getting later and later, then we don't need as much money. So I guess in the ideal world, if you got 2 million all the way across, like, that's obviously a better deal. But that's three times the price. That's the difference. Right? So since you can't pay three times the price, you want to you want to do it economically, we create a very economical solution where you're getting more coverage in the early years when you need it. And in the later years, when your kids need less money to support their children till they're grown up, you're you're getting less money, but your family needs less money there. And that is savings to your pocket in the form of less premiums over the life of the policy. The other significant thing I want to point out, which I don't think we did a very good job at marketing on our site, and we're going to promote this more is that one of the most unique things about our product is that we allow your we allow you to change your policy as your life changes without any underwriting required. So let's say that you get a raise, right? If you let us know you get a raise, then you can, we can automatically protect your new income, and then it just your premium just provided increases to reflect your new raise. Likewise, if you have another child, you can automatically extend so that that child reaches adulthood as well. So we have a built in flexibility on the policy with again, no no underwriting required no preset pricing, that's all preset pricing. It happens for everybody, no matter what that we think is also really revolutionary. Because it means now you're not stuck with this policy you bought, you know, a million years ago, and it's no longer relevant to your life today. We actually allow you to adjust as your life changes. And I think that's a pretty big deal for for policyholders.

Avi
Yeah, I think it's Yeah, go ahead.

Shefi
Yeah, that is I think,

Nick
I think that's the I think that's your going to be your big challenge is, I do think insurance can be sold on the internet. But there's a heavy weight on, I think the direct carriers on their shoulders, having to communicate all of the different information because even as you were discussing, that I was just like, has a lot of information like that? How can you cram all that into a website or you know, a webinar or stuff like it's hard to do, which always brings me back to ah, but just maybe I should just get an agent just for me, because it's a very,

Aaron S
very good question. So our hypothesis was that a very simple statement, which is if you die, your income continues until your children are growing up. That's what you're purchasing. And if people buy that, we are eliminating the two major frustration points that consumers have today, which is how much coverage should I have? And how long should my policy be? That's what you have to buy. So our bet is that we can by eliminating the choice in how long the policy should be, and how with the face value, we're actually making it easier for your buying, because we're saying we just protect your income, our highest, our highest performing and earliest tests is really simple. Protect your family by protecting your income. That's it, it's like, it's so intuitive. It's like that's what I'm buying. I'm not buying if it's 500, or 750, I'm just protecting your income. Now you have a good point, which is when you when you want to understand the details of what protect your income does mean we do have to explain that. And that is a Marketing Challenge. And we are constantly it's we're a week and a half in. So we're already already have learned that week and a half like where we did a good and bad job. And we're already making revisions to the website and our marketing to do a better job explaining that. Because it is a different is a different kind of concept different from face value, and it is in your in your two points or differentiators? That's right. Right. And that's to us, like when we when Shefi Avi and myself have these discussions?

Nick
It's the first thing I look at is how are you going to differentiate yourself? Like it's, you know, life insurance is a whole bunch of Term Life players, property casualty, there's a whole bunch of them, you know, tenant insurance, there's a whole bunch of them, how are you going to differentiate yourself in this, you know, bloody red ocean of competition. And with that, is that a big differentiator that I think can carry the day, or I think amplify your initial message of the, you know, you're just replacing income, like make it simple. And here are these other things that will continue to make it easy because I don't want to have to take a metal medical exam and to have to go through re underwriting at some point because I have a new kid or a raise or whatever. It's It's that thing that makes the consumer pissed off at the at the insurance companies like why can't this be like Amazon.

Aaron S
No, it's great to hear and that's what we tried to do. We said what are all the pain points? let's let's let's get rid of them. That was really the base of it, and look when When we started, when we first started working on this, you know, we knew there are the MGA that raised a lot of money, we expected it was only a matter of time before Lemonade launched their product. In fact, the CMO of Lemonade used to work for me at Huge. So it's, you know, we knew we knew that there was going to be competitive, right? So we said, the only way we're going to win is we have to create a differentiated product, right? If we if we offer, you know, $500,000, whatever, 20 year term for 1995, instead of 2195. Like it's just a race to the bottom, no one's gonna win that game, we have to differentiate. And we felt there was an opportunity to build a brand around financial security, where we did differentiate, where we could really build a meaningful relationship with customers, and really create something new. And by the way, as a carrier, this is the first of the innovation, I hope you'll come back in a few months, I hope you'll be back in a few months when we have our next round of innovation.

Nick
on financial security, so I'm assuming that life insurance isn't going to be the only thing.

Aaron S
No, we see it as the first in a suite of products. I don't want to be that specific on a roadmap. But what I'll generally say is we went through the exercise of what is the last generation companies sell like, like a MetLife, or New York Life, and you look at their suite. And we saw just as much innovation as we brought to this product we think we can bring to the whole product line. And you know, that's a long road to get there. But that's kind of how we're thinking about the product. And in doing so we think we can build a really compelling brand and company that resonates with this generation of consumers in a way that we think no brand has really has really done today.

Avi
Sure, ya know, I really, I think the simplicity, very simple. What you guys did in explaining to me, as I said, you know, as someone who bought recently, and I thought I knew, I discovered that I didn't. So I think you did a great job there. I think as a marketing professional, you'll know you're going to have to now compete with the notion of bigger is better in America, get a bigger size popcorn and a drink. You know, you're not going to drink it anyway. But you're going to pay for it anyway. So people might have that. But let me ask you this. It's such a great product to go into the Employee Benefits channel, because it makes a lot of sense about distribute distributing with companies, I think,

Aaron S
yeah, I'd love to get into that space. I totally agree that it makes a ton of sense in an employer market. We just have to get there. Absolutely. Nice.

Avi
Shefi...looks like you you have something to say,

Aaron S
I have something to tell Shefi that I have to say. Which is, which is we were trying to do like a super quiet, soft launch just to test and kick the tires. But you're such a good reporter. I know you're such a good reporter like a 12 hours later you put on Coverager like, Alright, well, there it goes that

Shefi
I'll tell you what I told Daniel Schreiber in a LinkedIn message the first time we've covered his his claim. My background is in quality assurance. I think I will die with that with those traits. And sometimes I'll just tell Avi, Avi, I feel like there's something different here. I can't exactly tell you what it is maybe just a sentiment for now. But keep an eye...

Avi
I can tell you that Lemonade Lemonade wasn't very pleased with the life insurance announcement. I don't think they were ready. And frankly, I tell you, I was disappointed. It really tells you about the struggles. And I know this personally, because one of the things we do speak to a lot of current and former employees of companies. Bestow is struggling. They're struggling with their tech, they're struggling with distribution, they tried very hard to build a brand display advertising all of that, but their biggest revenue that comes from you know, their channels is actually lead gen. And you have to ask yourself, who is this person that is comparing life insurance? Yeah, where are you? You know, and because it's not, you know, it's not like car insurance. But I still I believe people are not going to choose the first option that they see. And you're seeing their move. So Lemonade probably getting 100% and Bestow is maybe keeping the 25% so because we get like 125. So it's not a lot and that's it. You can't win with that. But I think they're very proud that they were able to get the Lemonade, but I'm not so sure that Lemonade is that committed to the product. They think it's another checkmark to please their investors because they really don't want to get into the car insurance. And you know, 30 lines of coverage. That really take a toll.

Aaron S
Yeah, I was surprised the launch life before car

Avi
needed. I don't think they would launch car.

Nick
attendant into the homeowner. Yeah.

Aaron S
Sorry, would you say about car? You'd be surprised if they don't launch car. Why not? They

Shefi
if they do.

We believe that. They're going to go as fast as AI gym or AI Maya and work. Car car insurance claims are very tricky. Even Pet insurance and they're realizing that now. There is no standardization

Avi
they'll probably Oh, yeah, pet insurance as a pet owner, pet parent or whatever. There's a lot of fraud and the pet insurance space by vets. Yeah, they come and tell you Oh, listen, this is not approved, but we're gonna write it in a way that is going to be approved. And I'm like, Listen, my pet is not going to say anything, he can't speak, I'm not going to say anything. And this is what happens. And really, the claims end up being, you know, pretty high. So I would be very surprised if Lemonade gets into car insurance, eventually, I mean, they're going to have to do more, because I think the renters, you can continue with the renters, you can get in with the pet.

Aaron S
Yeah, if you look at their financials, they're losing money on those, those renter policies. So at some point, they have to cross sell,

Shefi
Aaron, who came up with the name, Dayforward

Aaron S
we actually, we actually hired a creative person who I'd worked with for a while. And it was one of these crazy brands where we one of those crazy exercises, where you kind of have a million names up and down. And then and then I was like Dayforward that I really liked that, you know, from this day forward, it really kind of worked and resonated. And then I went on Google, and then I went on one of those domain registration services. And amazingly, no one in the history of the internet ever bought a Dayforward.com. So I bought it for 10 bucks. And I was like, we are

Avi
always available.

Aaron S
It was available, it was available. So I bought a Ford comm for $10. And, and we got a name. And I think the name or

Avi
the name is really good. Yeah, it

Aaron S
worked out really well. And we have a great team. I mean, we I'm sorry, would you say? It's an asset

Nick
now on the balance? Worth 1000s and 10s of 1000s.

Aaron S
Yeah. And then one of the things that we did on the on the whole marketing side is we actually, I hired a bunch of folks from Huge, who make up our so we have kind of an internal agency in house. So all the marketing and advertising we do internally from the media buys to the creative, and it really lets us do a lot of innovation on that front. So it's kind of a fun company, because I'm what am we got that group, then we have all these engineers. And then we've got you know, we've got actuaries on staff, underwriters, you know, ahead of ahead of League, our chief or Chief Counsel used to be a senior lawyer at Prudential, you know, dealing with compliance stuff. So it's like this really eclectic mix of, you know, people from the insurance life insurance industry, plus all these tech people and all these advertising people. So it's kind of a fun constellation.

Nick
So it's, it's one of the things that the first thing I look at when I view and Insurtech is, is there anything differentiated here? Like is it? You know, they just trying to put digital lipstick on an analog solution? That doesn't excite me. But when I do see something differentiated? The second thing I say is, what's, how difficult is it going to be for them to acquire customers? Which is the challenge insurance? Because no one, no one eagerly wants to buy the product? See, you, as you know, being Don't take this the wrong way. I'm going to call you the Don Draper of insurance. You came from an advertising agency, since you are the Don Draper of insurance.

Aaron S
But hopefully not hopefully, I'm not as much of a psychopath, right.

Nick
Okay. You're a genius. So that it is, you know, to to be able to differentiate yourself and connect with people at the right time is such a challenge in this space that I always view like, okay, it's a differentiated product that someone might have, but it's going to cost them so much to get business to come into the door, the economics are going to be difficult. However, I sort of thought about that, because that's a big challenge with direct writers.

Aaron S
Definitely. Look, when I was when I started this business, I looked at it as there are two risks to this business. One is can we actually become a carrier? Right, with all the regulatory and financial complexity? Can we pull it off? I had no idea that was the first risk. Second risk was can we actually acquire customers at scale for an affordable price that makes our economics profitable. So the last year proved we can do number one, we were able to become a carrier. And at this point, it just execution to get into all 50 states, right, there's no real risk there. The second question is, can we actually acquire carriers? consumers affordably and honestly, I don't know. Right? I think we're gonna get we're gonna give it our best shot. I think we have a good team that can do as good a job as anybody. But time will tell right

Nick
about so most of the most of the folks that come into the Insurtech space Come come from the tech side. You have a tech background, but you know, from Huge, you're also coming from a marketing area so you understand marketing and advertising and the effect of that. So how do you think you're going to go about tackling that

Aaron S
Yeah, that's that's a good question. So the way we looked at it in the aggregate is we had to add confidence. We could we could do that. So we asked ourselves, could with the right amount of capital and the expertise we could have? Could we build a brand in this space that could meaningfully drive affordable customers at scale? And our where we saw the whitespace, the opportunity was, if you look at the research, most consumers who have life insurance do not know who their who their life insurance company is, they just knew their broker is, is I don't know if you know who you're in the industry, you probably know, I personally actually have no idea who I should probably figure this out now that I'm selling like, a Ford. That's right. Well, as soon as soon as they get to New York, right. But yes, I have no idea, right? No, people don't know. And then if you ask consumers name a life insurance company, no one knows who they are. The Net Promoter scores of the Matt lifes of the world are all single digits or negative, right? This isn't. And if you look at it, you say why is this the case? Well, you could from an economic standpoint, you could say that most of the marketing dollars that an industry of this size would normally spend to build brands are now going to commissions. So there's no money left over to build brands in the space. So our hypothesis was that if we free that money and allocated to a brand, there is a white space in this market, where we could build a brand successfully. And do it in a way where we can actually drive sales at an affordable rate. And our assessment of the MGA is where, first they're not marketers, so we didn't with although I have a lot of respect for those companies as competitors, but I don't think they're great marketers. Lemonade is a good marketer,

Avi
like you don't think working with agents is a brilliant marketing move. Is that what you're saying?

Aaron S
I think we hit that territory. Although what I'll say is, I think there's opportunities in agents. So we are, but there's innovative stuff to do around agents. But that's a whole separate conversation. So what we felt there was there was a whitespace, where you could really do it in an innovative way. And build affordability because of how much Mark how much money that would normally go to marketing. Right, there is no equivalent of Progressive and Geico in terms of the way in which they approach marketing, when you look at this sector, even though the sector is actually larger than homeowners insurance, right, it's less than auto, but it's more than homeowners. So there is an economic. Now, clearly, it's a different sales model, because that's a must buy. And this is a nice buy and all that stuff, right. But there felt like there was a whitespace. And we did a lot of brand research on how you would attack it and one of the channels that could work. We found tremendous arbitrage opportunities just in media, because people are not buying media well when to attack in this space, where you wouldn't see that arbitrage and other more mature categories. So we felt there was an opportunity. Now, I don't know if we're going to succeed where we can have into this right asked me and asked me in six months if we can do it at scale. But we felt it was open enough where it was worth a shot. And we think we have as good enough team as me with enough capital that we can see if we can make it work.

Avi
Let me tell you two things. One, it's a very interesting point which you bring up Progressive Geico versus the life insurances of the world. And we see how that impacts awareness. If you look at Google searches, obviously car insurance way more than life insurance, just because you see more car insurance on TV, then you see life insurers and that's one interesting point. The second interesting point, they really like, after six months, come to ask us if we can do it at scale, we have a lot of MGA that raised a lot of money. And they're giving it a second and a third and a fourth try. And you know, it's it's such a I tell this to Shefi. And every client that we speak to we say that life insurance is the best line of business, because it's not commoditized or as disrupted as car and homeowners insurance. But it's also a very challenging product to distribute. And obviously, it can not go to the users worse customers Credit Karma, which has users, there are big insurance distributor, mostly focusing on car insurance, and they enjoy that usability aspect. And everybody come in check the credit score, hey, we know how much money you have in your loan. We know how much you pay for release, we know where you live. Here is a good quote. And they're very successful in that. But acorns, I can tell you try to do something around life insurance, but their target audience audience or customer base is young people. They're not married, so it's not relevant for them. So finding that media, you know, those mommy blogs and doing interesting, you can do very interesting things with the brand like now I think about it, do I want my wife to have a million dollars upfront? Or do I want to limit her capabilities and say, every month you cannot pay more than you know, somebody? We're

Aaron S
going to get? Look, look, you're joking about it, but it's another really short a lot of people with a million dollars

Avi
exactly with the lottery. We hear the stories and you know what, as I said, personal opinion, I'm like that I go to a buffet, I take three plates, I get a seat, they put the three plates and I go for a fourth. That's me. I don't know if everybody's like that, but but it's it really is different. I really think you have that simplicity. And now it is like media we're big fans of we call it the awareness baicells And, of course, don't work with lead gen companies don't go to Everquote don't do that. No Assurance IQ. Yeah, well, okay, try try it for the credit, get a referral. But

Aaron S
what I would say and I say, Yeah, I say we're gonna try not to, oh, we're gonna we're gonna try not to.

Avi
Yeah, but there's there's a lot that you can do it also, I think with agents, as he said, If you utilize them properly, there is nothing like bringing guilt and a friendly neck to the table. It really helps because it is every life insurance startup, we spoke with a very long sales cycle, it could take weeks, it could take months from the first quality eventually. And you know what, let me buy.

Aaron S
Yeah. And look, there's you have a great point. And there's one thing I haven't done. I've been fortunate with my career to start two companies that that both did pretty well. And the biggest thing I've learned is that, like, these companies change, right? I everything I say now, if you're in six months, I could be like I was totally wrong, right? Like, we just, we just have to see like the nature of this is like, we're in the game we have to test, we could be totally wrong and end up pivoting. It could end up being that our technology that we've built that we haven't talked about, but I'm very proud of. Maybe that ends up being our core business. Like, who knows, I mean, my first company was the marketing automation, we started doing email greeting cards. That's what I launched the company like stupid animations, to say happy birthday by email. And we ended up pivoting and became enterprise software. And that's what ended up getting sold IBM, right. So you just you just don't know. So I mean, what I'm what I feel grateful for is, you know, we're in the arena, we can give it a shot. And we've learned a tremendous amount in the last week being in market for a week and a half. We're gonna learn a tremendous amount over the next few weeks and months. And we have to be nimble to see how the company will evolve and what the market tells us.

Avi
So who's the best? Who's the best advertiser in insurance, I have to ask that in your, in your mind, who is the best advertiser?

Aaron S
I'm, I'm a big, I'm a big fan of Geico, I think they do a good job. I mean, I know it's, I know, it's like traditional stuff. But they, they do great ads, they're funny, they work, the awareness is through the roof. I have to give Lemonade a lot of marketing credit, though, because while their budget ad budgets haven't been high, if you look, if you do customer research, and you you have unaided awareness of insurance, awareness of insurance companies, 18, to 34 year olds, Lemonade is top three, it's pretty incredible for brand new company to have that much awareness for a category with this much money being spent. So I guess I have a lot of respect for what they've done. I have a lot of respect for Root too, if you look at their referral program, and how they how they generate, you know, leads through referrals. It's pretty amazing. So, you know, I I have I have respect for a lot of these companies. I mean, at the end of the day, insurance is a really interesting industry. There a lot of smart people in it. A lot of people are doing good things. And I'm the first admit I have a lot to learn in the sector. You know, I'm new to it. So I see myself more as a student than someone who has all the answers in the sector.

Nick
before we sign off, do you want to talk about the technology a little bit? Sure.

Aaron S
So we, when we when we decided to develop the product that we talked about, we looked at Okay, how are we going to support this from a tech standpoint, and we actually found that there wasn't the right insurance systems that would really support this kind of a product. So And generally speaking, a lot of the software is pretty legacy in this industry. Unlike P&C we have a lot of interesting startups that are doing SAS businesses. So we actually made the difficult decision to build a full from scratch policy, admin and underwriting system. So the underwriting is all around technology. We actually had we we basically have a whole bunch of developers and our job was our job was to automate our underwriter, we would grill her with a million questions and kind of automate the whole thing. And so we're very proud of the fact that that the policy application go through online. Not only is that our own underwriting engine, but it's fully dynamic. So based on the questions that you give, and the data that we can pull behind the scenes, we can we update the questions that we asked you, we give you we're able to give you final final prices, within minutes without underwriting or human involved. So for for most for, for most people, you can actually from the time you go online, you could check out put your credit card and get a bound issued policy within minutes. Literally for like three or four minutes, you're through the whole thing. For those people who who need medical, we actually make it that only about 20% of the people need medical. And even for those people, we actually built an at home test kit. So you get you don't have to have a phlebotomist come to your house, or go to a place a kit gets sent to you and you do a zoom with our nurse practitioner, where you swipe the inside of your mouth and you pinprick the size of your finger, and then you send it back and 24 hours later. That's the medical results. And it's all proprietary. We built it in partnership with a lab.

Avi
That's very nice.

Aaron S
Yeah, we did. And we did that because like in COVID, who wants a phlebotomist to come to your house, right. But we wanted to make short we wanted to have some people get medical because we wanted to have competitive prices elsewhere. And we also wanted to support very high levels of income, you can ensure whether you can have a half a million dollars of income and we'll issue your policy, right? So it's pretty big coverage levels that we wanted to support. So we're really proud of a lot of the plumbing that is kind of hidden behind the scenes that really makes all this thing come to life.

Avi
That is smart. Do the Add home test kit. That's, that's really good. Because many apps now, not an insurance. They do the whole thing like measure your body weight and water weight and all these things. And people are very engaged. They're very happy. Apparently they don't like people coming into their homes. You don't know what you can find there. But yeah, that's very, very good idea.

Aaron S
Thank you. Yeah. I mean, when I that was like, my, I remember when I got life insurance. The scariest part was when this phlebotomist came to my house. Right? I remember sitting in my living room, and my son walks by and they're like, doing all this stuff that it was like, This is not happening. This is wrong.

Avi
Oh, yeah, I had I had to come to my house. And yeah, one for AIG and one for Northwestern. And they came up with this little orderable what scale which was nice, I thought. But yeah, very nice stuff. I mean, it's nice to be apparently you could lie to them in the second day, write it down, that when they bind the policy, the life insurance company can back out of it.

Aaron S
Sincerely.

Avi
Yeah, that's what I told me.

Aaron S
I don't know if that's I remember, my my phlebotomist was like, Oh, you weigh 185. We'll just say you weigh 180. And I'm like, No, no, you can you should tell the truth. And I'm like, how wrong is this? And I'm telling the phlebotomist to tell the truth on my application. Like, it's insane.

Avi
Well, listen, this was taking care of watching your wallet, so you don't pay extra and commission premiums.

Aaron S
So, yeah, so But yeah, but it's definitely been a fun ride, you know, building all this stuff. And we're really excited that we're that it's out there in the world for consumers to use it. And, you know, hopefully, we can get many more families in short because of this, and families can have a safer future as a result.

Avi
And what is your next state after Texas?

Aaron S
We've applied to several states. So we can, we can definitely let you know, Florida. I don't feel comfortable saying now. But as soon as we find out, I think shop is gonna know before I know. But But I'll definitely let you guys know,

Avi
let us know. Many, many companies are moving to Texas, many companies are actually moving to Texas now. So it's, you've chosen a good state.

Aaron S
I mean, it made sense. It may it's the second largest insurance market, the regulators have an excellent reputation. So it just made a lot of sense. Yeah.

Shefi
Well, welcome to the industry.

Aaron S
Good

Shefi
Good luck. Yeah. It was wonderful to have you in here the entire story.

Aaron S
Thank you for having us and and keep up the good work as well. I expect all of my primary information needs to continue to come for you guys. So

Shefi
thanks, Aaron.

Nick
Aaron. Thanks, everybody. Very much. Thanks. For everyone that's listening for Avi for Shefi for Aaron. I'm Nick. Have a great weekend. Have a happy next week, and we'll see you next time. On This Week in Coverager. Thanks, guys.

Transcribed by https://otter.ai