Insurtech Unscripted | with Ali Safavi

The Rise and Potential of InsurTech | With Amir Kabir

December 13, 2023 Ali Safavi (CEO | COVU, Inc.) Season 1 Episode 10
Insurtech Unscripted | with Ali Safavi
The Rise and Potential of InsurTech | With Amir Kabir
Show Notes Transcript Chapter Markers

In this Episode 10 of Insurtech Unscripted, Ali Safavi talks about innovations in the market. Did you know that the insurance industry saw its first technology wave back in the 1980s? Today's guest, Amir Kabir, general partner at AV8 and a well-known investor in the InsureTech space, is here to take us on a truly enlightening journey through the evolution of InsureTech. We'll start from the birth of big insurance companies in the early 1900s, moving into the tech infusion of the 80s and 90s, and finally arriving in the present day with a focus on the rise of venture capital funding and the birth of "InsureTech".

We'll also venture into the world of the second wave of InsureTech - highlighting the critical issue that startups in the field are trying to solve: a lack of customer-centricity in the insurance industry. We will discuss intriguing opportunities in niche insurance categories like collectibles insurance and the power of B2B2C distribution channels. Get ready to navigate through the challenge of identifying large and back able markets for digital innovation in the industry. 

Finally, we'll ponder on the potential for monumental success in the InsureTech, discussing the prospects of a $50 billion exit and how it stands when compared to the market value of established insurance companies. We'll also touch on the role of tech in enhancing underwriting and profitability in niche insurance markets, and the potential of startups to become risk-bearing entities. Join us as we unravel these fascinating concepts and journey through the transformative world of InsureTech.

COVU is founded and advised by a team of insurance, finance, and tech industry veterans with a passion for transparent and unbiased advice. COVU's mission is to help both everyday people and professional advisors manage risk and insurance smarter. We help our customers find and fill their coverage gaps and achieve true peace of mind.

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Ali Safavi:

Hello everyone. My name is Ali Safavi. I'm the CEO and co-founder of COVU and your host for InsureTech Unscripted. Today I'm honored to have one of my very good friends. I'm here with Amir Kabir, a general partner at AV8. Obviously, I've known Amir for, I think, almost the beginning of the InsureTech wave, at least the one that really picked up, and we've been friends since and he's obviously one of the most knowledgeable investors that I know in the insurance space and he has a lot of thoughts and thesis on where he thinks the space is going. So we're excited to have you on board on the podcast, amir. Maybe you could tell us a little bit more about yourself before we dive deeper.

Amir Kabir:

Yeah, sure, man, thanks for having me excited to be part of this and talking to you. Yeah, we have, I don't know. We've known each other for maybe 10 years now, I'm not sure, but maybe a little bit less. But yeah, as you said, since kind of the whole hype cycle of insurance, of InsureTech, started. But yeah, a little bit about myself. I've been investing in the InsureTech space for a little bit over 10 years and I kind of got into the FinTech InsureTech world. Coincidentally, I don't have an insurance background. I come from the tech side. I was at operating roles for enterprise startups back in Europe and when I came to the US I worked for a venture fund actually with 66 ventures on the East Coast for a while and got into very early stage FinTech and InsureTech deals and did my first InsureTech deal, I think in 2013 or so, which was simple insurance, and that's how I got into venture. From there I made my way to the West Coast and helped build up Munich Reventures, which I think is very familiar to a lot of people in the insurance world who are kind of like the first kind of corporate venture VC that dives into insurance pretty heavily and invested in all sorts of InsureTech version, ones that people know like next insurance, Insure HDVI and so on and so forth, and I joined AviAventures a little bit over two years ago as the fourth partner to kind of lead the FinTech practice and have invested so far, I think, in seven or eight companies in the InsureTech world, which is basically built upon the thesis that I have written about the next day of InsureTech and what I've seen over the last 10 years.

Ali Safavi:

Very cool. So I usually like to start my questioning with one of the most controversial ideas, but just given the fact that you already have put your thoughts on paper so clearly, it makes my job a lot easier. So let's start with. I mean, I think the way that you looked at InsureTech is interesting. You've looked at it in waves and you tried to compare it to before. So maybe you could start talking a little bit about the history of InsureTech, changes in insurance as an industry and as relevant today and as we kind of try to think about the future, how the history kind of comes into play.

Amir Kabir:

Yeah, that's a good point. So I started writing about insurance I think over a little bit over two years ago and what I tried to do was, in the part one, was to kind of trace back the history of insurance and the evolution of InsureTech and see what happened actually the last 100 years, specifically in the US when it comes down to insurance and personal insurance and so on and so forth. So when you look at the first write up that I did and the kind of graph that I created, you can see the big behemoth of today. The incumbents like the State Farm and Geico and Progressive kind of started in the very early 1900s, right 1920, 30 years around, and then the first kind of technological wave in insurance kind of came about with the fact that it was within like the 1980s, right I think 1983 applied systems kind of started 1985, insurity, select quote 1997, insurion and so on and so forth. So these were kind of in 2000 like guide buyers, so that the 80s, 90s kind of defined, I feel, the first kind of wave of technology in insurance and going forward. When you look at the graph and what happened is that within the 2000s a lot of like the first version of InsureTech, I would say, kind of emerged which were basically focused on price comparison websites and some sort of distribution models within insurance, like very rudimentary distribution models, and then in 2010 and onwards to like 2020, that's where I feel like the kind of term InsureTech work was kind of minted let's say, right, they're going into the crypto world minted. The InsureTech work has kind of minted because people were basically comparing like insurance as part of the financial services ecosystem to FinTech and kind of counter word here was InsureTech and I think that emergence of that word, insuretech, coupled with like venture capital money flowing into the ecosystem, started the first wave of InsureTech. And within 2012, 13, 14, 15, obviously, the wave of InsureTech took up and all of the prominent InsureTech companies that people know about, as I mentioned before next insurance lemonade, root, insure, oscar, health on the health insurance side, ladder, life and so on and so forth. They started around that time and we had some kind of interesting exit scenarios in 2020, 21 where people the first kind of the wave of insure tax were able to create some sort of a liquidity for early investors and however quickly we saw that like the public markets dismissed somehow what insure tax had built and the underlying business economics, they were not really supporting the way to go public. And so right now I feel like we're entering insure tax, wave two, and that's like based on the article that I wrote subsequently, where it's about like what have you learned over the last, let's say, maybe 10 years when it comes down to really insure tax, and how can we move forward and what are the learnings from there that we can apply to the next day of insure tax, if that makes sense.

Ali Safavi:

So let's jump into it. So, basically, you're saying that this is the learnings from insure tax 1.0, then, based on that, insure tax 2.0 is created. So, on a high level, what are the big learnings that you feel like a lot of investors or entrepreneurs have learned, or haven't learned since or have missed that you think worth highlighting? And then how's that insure tax?

Amir Kabir:

2.0?. I think the biggest kind of learnings or miss was like hey, technology will transform insurance and everything will be better, faster, cheaper and whatever you wanna call it. So obviously tech is part of like insure tech. The same way tech is part of FinTech right, but in both instances I feel, specifically because you are operating in a very regulatory environment, the insurance and the financial services and FinTech have to come first and I think this is the biggest learning here that technology will not help you win with an insurance. No matter how great your technology is, that will not help you win and make big money for you, and I think that was the biggest learning here. However, I think insure take wave one and again going back to like why technology will not help you win, it's that because insurance is not really a top line business. So comparing insure tech to like a SaaS company or like an enterprise software company or even like a consumer company in the commerce world is completely ill equipped here, because it's not a top line industry, meaning the more premium you get in it doesn't mean you're better or doing the better thing. It's more actually a bottom line industry where the fundamental is unit economics after a line and the last ratios play a very important role. So I think this is the biggest learning from my perspective that I think people have realized. And then, on top of that, I think what people have seen as well and goes back to the learnings, is that insure take wave one really focused on, like the large, saturated markets, highly commoditized products like auto insurance, home insurance, rents insurance. When you look at those products, most of them, or some of them, are mandatory. Others are not. But most of the people within that just focus in the United States here have already auto insurance. Right, they have home insurance insurance. So it's not that it's an underserved market. So what are you competing here about? You're competing mostly about price and maybe how do you service customers. So that was kind of the first wave of insure take. When you look at them, they were able to quickly acquire customers and show like a top line that people got excited about. However, the underlying, the bottom line, was not really great here and over time it was showing and, honestly, if you look at the public markets now it still shows. Right, those insure takes that went public and the numbers are publicly available. You can look at them. It's not that they're making, they're the profitable businesses. So I think that was the biggest kind of thing here to focus on like large, saturated markets where you basically are just competing about price, right, because at the end of the day, I have auto insurance from progressive and I pay, I think, $140 a month. If I get it for $50 a month, yeah, I take it right, but it doesn't necessarily mean that you're covering your losses there and it doesn't necessarily mean that you're getting the right risk profile from a customer perspective. Right, and from insurance perspective. Those, I think also the learnings are, those who switch quickly or like look for insurance, are actually the ones you don't want, right. And so the other thing is also like there was limited differentiation, I feel, in terms of like what, how, in terms of underwriting, meaning what incumbents would do and what insurtex would do was not much difference. And it goes back to again it's a very regulated industry. So meaning like if you do auto insurance and I've seen a bunch of places too they would pitch me like, hey, we don't take FICO into account, we take like other stuff into account to underwrite you. Well, I'm like, well, that's great, but you can't really do that depending on which state you're in and the regulatory bodies you have to comply with and you have to like, apply for, like new products and so on and so forth. So it's a very tough endeavor if you wanna really come up with a new product. So from the underwriting perspective there was also not much differentiation. Some would do more, some would do less, so it was not really that much. Going back to, like, the products that is insurtex focused on were very like quote unquote, easier products to underwrite. So and obviously the distribution. I think the learning there is that customer acquisition is very expensive and customer lifetime value, depending on the product, is kind of limited. So that means you constantly have to get new customers and I said before, if you have to constantly get new customers you most likely will not get the best risk out there. So I stop here because I think these are like the fundamental things from the learnings perspective and what insurtex Wave 1 kind of showed for venture investors and the ecosystem. However, I think it's very important to outline that insurtex Wave 1, the companies really navigated like incumbents and service providers, consumers, regulators and the broader financial market and showing that, hey, digitalization of insurance is inevitable and that's, I think, a very important statement to make, because all the work that went into insurtex Wave 1 was very important, although maybe the outcome of some of them, or maybe most of them, was not really great. However, I think there was a lot of learnings that can be applied going forward.

Ali Safavi:

So let me ask you this like on paper and theory and again I just want to make sure I kind of get the hypothesis is that paper regulation changes and makes Like is less involved with how unwriting is done for a product like auto insurance, are you saying, then we'll have truly innovative startups in auto insurance?

Amir Kabir:

Like Regulation is the main blocker for, you know, like a true startup when in a space like auto insurance, I think so honestly because, again, you know the way you can go to market is that you take an existing product right, which a lot of insure tech version once did, and you know so-called an off the shelf product, and you digitize that and, you know, distribute it through various channels. And then others you know took an off the shelf product and came up with new kind of innovative underwriting ideas around that and had to first apply to get that approved from the regulatory body said to be able to sell it to the consumer right and others. You know the other way to go about it is also to use, you know, ens paper and which is not so, which is not so scrutinizing on a regulatory side. But I think that's that's. I mean it's important that regulatory barriers are there right, otherwise everybody would go around and, you know, do whatever they want in terms of, like, writing insurance. So I feel like there's no way to get around it. You have to work with those, you know, regulatory entities. But the other learning here too is that you know it takes a long time to get to market. You know some insure tech took six to nine or 12 months to get a product approved or a new product approved or a modified product approved, and then they could go to market right. So the time to market is very long and you need to have a long breath if you want to win here.

Ali Safavi:

Very interesting. Okay, and and obviously let's talk a little bit about insure tech 2.0 before we drill down in some of the areas that I was curious to ask more about. But now I'm talking about all the learnings from insure tech 2.0. Sorry, 1.0. Let's introduce insure tech 2.0.

Amir Kabir:

So again, this is my kind of you know two cents here, and the stuff that I was thinking about over the last years that I've seen is that, in terms of like venture, I always try to, you know, ask like what's the problem here, right, you know that's? That's, I think, a fundamental question. When you think about venture and venture investing and investing in startups is like what is the fundamental problem that the startup is trying to solve? And insurance, you know, going back to like version one, when you think about it, you know what was the fundamental problem? And from my perspective, the fundamental problem was that a lot of people, or, like you know, the broader community or the consumer, was thinking that you know, there is not much customer centricity in insurance, right, and people were like, hey, you know, insurance companies really don't care about their consumers. That's why the NPS scores is so low and so on and so forth. I mean, when you think about like that insurance companies kind of categorize you and me as policy holders rather than consumers is kind of interesting. It indicates that, right. So that was the fundamental. You know, I feel problem that people saw and built around that and try to build, like you know, nice apps and you know cost consumer facing products around insurance and you can buy quickly. You know we pay you quickly a claim out and so on and so forth, and all of this was great. But again it happened in, like you know, large, saturated markets where it was really hard to acquire the good customers and you were competing against the behemothists that spent like a billion dollars on customer acquisition every year. So as a startup, even if you raised a lot of money, it was really hard and is really hard to compete against those incumbents. So, going now to insure tech wave two you know I feel insurance is a very, very big market, obviously, when you look at it, and besides, like you know, home auto renters, there's tons of other insurance products and niche insurance categories where you know insurance operates and you know commercial insurance obviously is a big one where I feel there's a lot of opportunity. But other categories that I kind of placed bets on is, you know, for example, collectibles insurance. Right, it's a very growing market. The collectibles market is very huge. But if you want to right now go and get your collectibles let's assume you have a collection of collectibles of like a million dollars if you call your home owners insurance and be like hey, can I get this? You know insured under my homeowner's policy, they're most likely say no and if they say yes, they give you a rider on top of that which doesn't really cover everything you have. So there's no like really visibility and some actually want to have a real time appraisal of your collection. So it's a very cumbersome process to get that and it goes back to like what's the problem here is that, hey, if you're like an avid collector, it's really hard for you to get insurance because nobody's really offering, you know, the easy to way purchase of insurance. So there's actually a problem and maybe we can build like a new digital insurance product around that and try to get it to the consumer in various channels. So I think insured tech wave two focuses on these niche insurance. You know categories that have been you know that still to date require a lot of manual. You know processes or operations. So meaning you know you have to fill out like dozens of PDFs, you have to send emails to your agents. Your agent comes back and asks 5,000 other questions to you. Then you maybe have to go somewhere to get something appraised before you even get an insurance quote. So all of these you know, manual processes, I think, in various insurance categories open up the opportunity for insured tech wave two, where technology and, you know, digital underwriting really makes sense because you, as of today, there's not much there right. And then the other thing here too, insured tech wave two, going back to the learnings, is that you know, if you really focus on direct to consumer, it's going to be a very tough road. So most of the insured techs I think all of the insured techs that I have back today are basically mostly focused on B2B2C. So going through partners and partner channels to distribute your product is way more lucrative. And I think that was also again a learning of insured tech wave one, because all of the insured tech wave ones kind of started that to consumer and then quickly realized, oh man, you know it's hard, so maybe we should, you know, talk to some partners or agents or agencies and see how they can distribute our products.

Ali Safavi:

Very interesting. So let me ask you a few questions more specifically now in terms of how you're seeing the future. Number one is when we talk about niche product sets, the idea of it is great, right, but at the same time, we want to make sure we're going out for ideas that are big enough markets. Sure, the first thing that I've learned and I've had is that a lot of markets are recent, because, to me, insurance industry has been one of the best industries when it comes to sales. Industry has been built around sales and products like, let's say, disability insurance. The reason that is not as big as life insurance is because it's just harder to sell and just having a startup isn't justified like Mark and again. For me maybe, like I don't even see disabilities in each market, but I'm saying for market opportunities much smaller. How many markets do you think are out there for insurance that are large enough, markets that are busy, backable and record through digital innovation, versus just a company with an underwriting model that is not really like a software company?

Amir Kabir:

Yeah, absolutely, it's a very great question. So when I kind of started in insuretech world or investing world, I always was like, hey, if a startup can have a billion dollar outcome and you as a venture investor have 10% and again I'm talking about like a seed stage investing and funds that are, you know, smaller than $200 million, right, not like the big behemoth that have raised $5 billion. You know, if you have a billion dollar outcome and someone owns 10% man, you kind of either return to your fund or you kind of return half of your fund, which is amazing. So if you have a couple of those, that's great. But obviously, you know, when you look at these niche markets, most of them are maybe $10 billion, some of them are $20 billion, but the good thing here is compared to like the $80 billion market and home insurance, the way I look at it is like if you operate in this $20 billion market where nobody really has technology, where nobody is really trying to innovate on the product side, where you know in comments are still, you know, doing their thing and think they're working, and actually in some of those markets you have, some of those markets are very underserved as well, meaning customers want insurance but they don't. They can get it or you know it's hard to get for them. If you can get like 10% of that market or 20% of that market, which would be $2 to $4 billion, and the outcome of your startup could be around that, it's way more lucrative than going for like the $80 billion $90 billion market, which is highly saturated, like incumbents are basically dominating it. There is no nobody's underserved there. Like maybe a very tiny percentage of consumers cannot get insurance and your digital product will not really make that big of a difference because going to a state firm and getting your home insurance will take maybe two hours or maybe a day and then getting your home insurance to an app might take three minutes. You know it doesn't make really that much of a difference because the price will not make a difference. So you invest in companies that are going for these markets and I have 10%, maybe 15% ownership and that company exits for like a billion, a billion, two billion. You know I have a great outcome and that's totally fine for me, right? I think? Going back to your question and this is always the this has been kind of something that went through my mind. I was thinking about a lot and maybe people will challenge me on that. I feel like there's no way to have $50 billion exit like a Databricks or whatever you want to call it, snowflake, whatever all of these SaaS enterprise software companies that exit for a huge amount of money. I don't feel we will see any $50 billion in short tech outcome. I mean I would be surprised because think about it. Look at, like, going back to the incumbents, right. I mean look at progressive, like state firm, whatever their book of business. I think they're writing whatever $40 billion in premium, $50 billion, very diversified book of business, right? They have home auto renters and all sorts of like other stuff. What's their market value? What's their market cap?

Ali Safavi:

I would say it's one to one to two depends on how good it is like a book.

Amir Kabir:

Correct, Correct, yeah, yeah. So one thing, one other, I think kind of, and it goes back to like the version one and like the niche kind of businesses, right. I think the best kind of comparison here is it's Kinsel. You heard about Kinsel Capital Group, right? I mean, they're kind of focused very much on like the niche commercial market and specialized insurance and their market cap right now is at around $7.6 billion.

Ali Safavi:

So I think you know that is a commercial risk right Like that is large commercial niche risk Correct.

Amir Kabir:

But still niche and specialized right.

Ali Safavi:

So the reason I'm saying that is because to me that's not a tech outcome as much as it is, because maybe it's like the tech out here is the thing that goes back to like.

Amir Kabir:

That goes back to like insurance has to play a fundamental role and tech will enable it. Right, so you can't be like, oh, I'm a tech, I'm insured tech and I want to be that was another thing Like, people value these companies that you know, tech companies, comparables and SaaS companies. I don't think you can do that. So that's why you know, if you specifically operate in the, in the so-called challenger world of insured tech meaning those who go after risk, after product and distribution the first thing that matters there is the insurance fundamentals. The second thing is that the book of business that you're valued on and how profitable it is. And I think third is that if you have a lot of good technology that enables you to have this good book of business, because you're better in Underwriting, then you can be like, hey, this is the added value I have. But just saying, hey, because I have digital underwriting, I have a great app and you know I just you group this product. That's why I'm a tech company, insurance and insured tech. I feel like that's. That's hard to justify.

Ali Safavi:

There's definitely a line or there's no line. Maybe I think that's that's. That's another point which between where does a company, where's a company called a startup and what is a company just called a company? That is like small business.

Amir Kabir:

Sure.

Ali Safavi:

Because if we're talking about very large commercial niche, these are usually capital plays right, like, like companies that, like the one they mentioned, they're typically companies that are backed by like a huge balance shooter, like a big PE, that are just taking very large risks and they usually, you know, find themselves in their underwriting skills to be able to, like, take on those risks when other people can go to a Lloyd's Crescent or whatever. That is the idea here, from what I understand, is that these companies that have always existed, if they use more technology in their underwriting, we think it might give them an edge to better underwriting this one off risks. But these one off risks in a lot of cases are not repeatable businesses. These are like one off risks, like a Lloyd model, right? So if we're talking about repeatable risks that you could create a better AI engine, that I'm very repeatable, it keeps doing it then I wonder how many markets are like that out there to say, like we're going to create, like a better insurance for X and it's a market that customers are looking for. It's not a market they have to push it down to the throat and it's a large enough market. I just don't know how many are there, unless we just go for, like these, niche applications that are like I'm just gonna set up a capital group and use technology to better write every individual risk that comes to my door.

Amir Kabir:

I mean that goes back to like also when you look at the article about the next wave. I think what you're saying touches base on what I think is like the opportunity in embedded insurance. Right, this is like a kind of has been a hot topic for quite some years and I feel the embedded technology can enable you know a bigger outcome here. If you have the right tool sets, because you know, if you have kind of an embedded play and you're able to, you know, get a ton of like input from a data perspective and underwrite better, you can maybe, you know, win also in those kind of flow businesses, right, the whole model, renters, and kind of have a bigger outcome there. But I feel like, honestly, like you know, I know that venture investors and we ourselves too, obviously we always want the bigger, you know markets. But I give you, I give an example RPA, right, robotic process automation. Six, seven years ago when I looked into that, the market size was five billion, I mean. Now look at UI path, right, I mean, and so I think in every like startup that had or has or had a big outcome. Even Uber, right, look at Uber. I mean they started as a black car business in San Francisco where the market size is 100 million, and if you would have said, okay, this is it right, I mean there would be a hard, hard, hard to come to justify. But eventually they kind of went into different kind of you know categories around you know transportation, and I think it's the same case here with those niche insurance businesses, right. As an example, I invested in Covertree. They're focusing on home insurance for manufactured homes, right, and it's a complete like. It's a different kind of underwriting there, different risk. The market size, if you look at that from the premium perspective, just for manufactured homes, is around 10 billion a year, right, which I think is still great, but which is great here there's a lot of like adjacent other insurance categories that fall into place that you can, you know, play in as well. If you're Covertree, right, because if you look at the demographic that lives in, you know, in manufactured homes, most of them have an RV, most of them have a motorbike, some of them have a boat, right. So if you look at those kind of three sectors in total with, like, manufactured homes, you basically are now at around, I think, 50 billion market size, right. So that's, I think, where you can play and where, if you win one category and you can apply your technology, you're underwriting whatever you have into others and your distribution. You can make a bigger outcome.

Ali Safavi:

So this is an example a 10 billion dollar market. If a company set up as an MGA and doesn't carry a risk, that means they're probably are taking their revenue be around 20% off it or less.

Amir Kabir:

It depends 20 to 30, depends on how you you know what they negotiate.

Ali Safavi:

Party is like, then the market size is only two or three billion from a revenue perspective, unless they carry the full risk. So we're talking about two or three billion dollars in entire market if they captured in total market. And but then you have to really bet or prove that you could sell adjacent markets to those customers, which goes back to the initial problem that it's seen, which is a lot of people already have other insurance and then getting them to move over the things that you already have is going to be hard. That's why I keep wondering, like how many big opportunities are out there on paper? I mean, it's indefinite, because you could always create a better company, but, as you said, it's very hard to move people from very incumbent carriers.

Amir Kabir:

Yeah. And so, going going back to this, I think yes, if you just look at it from the MGA perspective, I think it's will be really, really hard to IPO and MGA Right. So the intermediate outcome would be here that an incumbent that you know is already servicing in that space comes and buys the startup because it sees the technology and can plug it into their ecosystem. Right. And yeah, yeah, exactly. The outcome will probably not be in the billions but maybe in the upper 100 million or more. But I think, from my perspective and the companies that I've bet on, my goal is, with these companies, if it works out on the MGA side and we've seen it in the version one, two, you know most of them become risk bearing entities right and become eventually carriers of some sort and can take risks themselves, and so that's where the or you think that should be part of the insurance workup. And only and only. I feel, if you have figured it out and I think that was also, I feel, a learning from version one a lot of these insured texts might have pivoted quickly to become a carrier or even started out as a carrier. I mean, look at Root, right. I mean they started as a carrier. And I mean, if you look at the market size and market care, I mean the outcome is not great. Sure, they went public for whatever six billion, but if you look at it right now that the market value is less than 100, I think. So I feel like you can only become a carrier if you gradually move into that, right? Because, again, why do you become a carrier? Is that, hey, I have the data, I have the underwriting skills and I've operated into that market, so I know what could risk look like, and that's why I wanna take risk myself rather than like, hey, I wanna start as a carrier. I think I know what underwriting works looks like, I have this great data set and let me do it right. So I have another company I invested in which is actually a full-stack carrier. Right, they're a full-stack carrier operating in the Latin American market and selling life insurance. The reason there, why I was excited and I think that's the best way to go is because the team has done this twice before. They had the data, they had the learnings from the way they did it before, and so for them it makes the most sense to do that. And again, latin America is way different, too, in terms of the market. So they're the first kind of digital life insurance product that exists more or less in the Latin American market, and they distribute it through agents and agencies and brokerages rather than, like, going back to consumer.

Ali Safavi:

I think a part of the thesis that I'm very much agreeing with you on is that you can't I think a big learning, I agree which is as an investor I learned the hard way and then as an operator also. Again, you can't just go to a market that exists and compete with auto insurance and say I'm just digital, so I'm better, because just being digital is not value on its own, apart from answering why and the wise are typically not the right wise when people pitch them. So I'm there with you. I think if we're truly to innovate, we'll probably have to innovate on distribution, or you have to innovate on unwriting, just being more profitable, or one thing that is becoming a bigger thing, which I saw in your notes as well, which is around risk management. How do we create a complete solution that manages risk, as opposed to just selling insurance? Cyber is a good example, where we have cybersecurity and risk and all that. Tell me everything about the risk management component as part of the future MGA routes or future of insurance as a whole.

Amir Kabir:

Yeah, again, I mean that also depends on what market you're operating in, right? I think cyber is a good example, risk management is a big component of that and I mean I think IoT was kind of like the forerunner here, where you would use sensor data to risk mitigate and then also do insurance and one market actually going back to insured that. Wave two, which I also mentioned in my article, is medical malpractice, right, medical malpractice, you know, in an old market, highly unprofitable. If you look at all the carriers there, there's only one or two carriers that are really doing good risk, or maybe like a handful, and the rest is just like losing entities and again, nobody there, or like very few players have some sort of a technological advantage and the market they also. I think medical malpractice is around $15 billion, which includes physicians, physician assistants, nurses and, like you know, big hospitals. It's around $15 billion. But going back to risk management, I think you can apply a lot of technology there to you know, analyze how risk or assess risk within, like you know, physicians' offices or hospitals and therefore be able to provide better insurance or mitigate. You know claims, right. So it really depends, I think, on the market when you think about risk management associated with that. I mean on a personal side, as you probably know as well. You know having these dongles in the cars and like data around the cars, kind of like the risk management component as well. But interesting enough I don't know if you saw that today I was reading about that Tesla is obviously, like you know, on the forefront here with selling insurance to their customers and basically saying, hey, given that we have all the data we have like real time visibility and the computer that you're driving, we can give you better insurance. But here apparently, you know, there's still a lot of learnings to do, because a couple of customers are suing actually Tesla because the Tesla kind of like wrongfully assess the data around their driving behavior basically inflated car insurance premiums based on misleading collision warnings and not actual driving behavior, right, so that's kind of interesting.

Ali Safavi:

And you were like look at that and thought about that, yeah. So last thing that I'm also really curious to hear your thoughts on is what about all this LLM AI stuff? What are you excited about? Do you feel like they're gonna make a big change and what are you thinking gonna happen? And just wanna impact them.

Amir Kabir:

Yeah, I think, like I mean, ai is first of all, nothing new, right, I mean it has been around for decades. I think what kind of now changed a lot of things is that it's chat, gpt, and I think that's where, like everybody's like, oh my God, like there's so much opportunity here because like we finally can talk to a computer and we get like real time answers. I think, from the insurance perspective and again, as I outlined also in my article, there's so many other problems that we have to solve first, that now saying that AI and ML will solve this all for us is this kind of far fetched, right? I mean, where this technology can play a role, I think is definitely on the claims side, right, you know, on a claims part, I feel AI and ML and data can play a huge role in streamlining the claims process and making it more smooth, which, again, if you do that, you will have better and more satisfied customers and so you will have better retention when it comes down to customers. But in terms of, like, the sales process, you know you can probably embed some AI and ML there too. But again, learning, I think, from version one was as well that, depending on which market you operate in and the higher the premium volume is, the higher the likelihood that someone wants to talk to someone right? So fully digitalizing an insurance process and the sale and servicing and the aftermath, I think is maybe doable and very easily insurable risk right, but not like in the risk categories that are associated with like bigger premiums.

Ali Safavi:

And last question for you if you were to start a company today in insurance, what company would you start or what idea would you want to work with?

Amir Kabir:

Again, I'm very much interested in you know products and distribution and how you can better create an insurance product for a specific market right, because most of these products have been old or like have been around for a long time and I've looked in depth into you know medical medical practice and I feel like that's a very, very interesting space and there's a lot of opportunity and there's actually one company that is doing exactly what I was thinking of doing and hopefully that's successful and hopefully maybe I can be part of that from a venture perspective.

Ali Safavi:

Cool. Well, Amir, I took a lot of your time. I appreciate you being on the podcast and Thanks, man. That was good I appreciate it. Thanks for listening and enjoy the rest of your day.

Amir Kabir:

Thanks so much. Thanks for having me Talk to you soon. Thank you.

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