Episode 17-18 Transcript

June 15, 2021

Episode 18 - USAA's Devi Mohanty on Fostering Innovation in Insurance

Laura Drabik   Welcome to InsurTalk. My name is Laura Drabik and I am the Chief Evangelist at Guidewire. In this episode, I have the privilege of interviewing Devi Mohanty, Head of New Product Development and Innovation at USAA. Devi is a seasoned executive with an impressive background in strategy. Formerly at the Hartford, another great Guidewire customer, he was the head of enterprise strategy, innovation and strategic ventures. The focus of today's discussion will be on fostering innovation in insurance. Hello, Devi, thank you for joining my podcast.

Devi Mohanty   Hey Laura. Great to connect with you and looking forward to our conversation today.

Laura Drabik   Wonderful. Hey Devi, tell our listeners about USAA and your role there.

Devi Mohanty   USAA is about a hundred year old company that started as a financial services company for military members, people who have served this great country. And the history of USAA is innovation. This was in 1920s and military members were having a hard time finding insurance products for their families. And a few officers got together and formed USAA as a company that would serve military members and their families. Today USAA is essentially a diversified financial services company. We have a bank, a life insurance business, and a property and casualty insurance business. We are the fifth largest PNC company in the country. And our mission is to ensure the financial security of our members.

Laura Drabik   So I had the privilege of working with the USAA team during your evaluation of Guidewire. I vividly remember your leadership team taking the time to describe to me the unique challenges of USAA members and how those challenges differ from policy holders insured by other carriers. So they described a telephone call from a member in a war zone. You could hear the explosions in the background. The member was calling the member service rep just to make a simple policy change. Can you describe the unique challenges your members face and how are you developing new product innovations to address those unique challenges?

Devi Mohanty   Yeah, that's a great question. And as I mentioned in my opening remarks, our history goes back to the fact that we got started as a company which was trying to meet the unique challenges of military members. And in those days, the members of the military were considered higher risk and had a hard time getting insurance products from the carriers of those days. So kind of the DNA of the company is thinking about the uniqueness of this group of members. And by the way, we call USAA customers members because they are part of the family. So the DNA of the company is to think about what are the unique needs of our members and how do we solve for those? So one of the things that you all probably nowadays use is when you get a physical check, which is becoming a rarer and rarer thing, you can deposit that by just taking a picture of it.

That technology was developed at USAA. A lot of people don't know this. We actually licensed that technology to the banks around the world. And it was developed because, to your point, when somebody is deployed in the field, there is no ATM machine to go and deposit that check. Or they're deployed somewhere, even in the US, ATM machines were not that easily available. So we did develop the technology around the photo capture of checks. On the insurance side, another example. So we have this program today where we do behavior based insurance. So your insurance policy pricing is tied to how you drive and the time of day you drive and all of that kind of stuff. But we recognize that our members don't have control on some of the elements of those, such as for example regular customers like you and I probably don't drive at 2:00 AM. And we know that people driving at odd times of the year are higher risk, and therefore the prices could be different.

So when we were developing this product, we actually took that factor out from our pricing because we knew our members did not have control on that factor. There is a third aspect around telematics data privacy. We are much more focused on the privacy, given again, the uniqueness of our members and the location tracking and all of that that is enabled there. And we try to do certain things there that can mask that. So we are absolutely focused on figuring out what our member needs are and how we can design the product in such a way that takes into account the uniqueness of our membership.

Laura Drabik   So the overall mandate for USAA system modernization initiative was to better serve your members. So going above for those who have gone beyond. How do you incorporate member input into your new product initiatives to ensure you're delivering what they need?

Devi Mohanty   Tthe way I would describe it as the standard techniques around research and member surveys and all of that. But I think we do things much more beyond what the standard research and member surveys do. We have what is called an innovation lab. And the reason I'm calling that out is one of the things that innovation lab maintains is employee's ideas. So number one, our employee base is like our membership, meaning we draw a lot from the veteran population and military families. So our membership and our employee base are matched in terms of understanding each other. In fact, I know on our team right now somebody is deployed. So we understand number one, what he is going through, what his family is going through, what they need. So there is a strong affinity with the membership, with our employees that we can understand what each of us goes through, that we can incorporate into our product development.

The other thing we do for all our new employees when they come in is we actually have a full three-day session where you are immersed in the military culture. You understand how the military operates, how the families operate, stories from the front line. The other thing we do on an annual basis is for our leaders. We have what is called military acumen events, where we actually go and participate in exercises with branches of the military.

For example, I spent a day and a half at Fort Bragg, interacting with the military members, going through their training, going for dinner and lunch with them, talking about different things, eating MREs with them. So I understand the life of a soldier or understand what the life feels like in the front line. So there's a lot of these things we do besides the standard member research and member survey kind of stuff. And as you know, probably, we are seen as the gold standard in terms of member services. Our NPS, I think it is highest in terms of our member satisfaction. And our retention is high in the nineties. Hopefully it gives you a sense of how we incorporate member feedback.

Laura Drabik   No, that's super helpful. And regarding your NPS score, I think what really resonated and what's helping to deliver that high score is the employee base is the veteran member base. So there is an instant understanding of the member's situation. Thank you for sharing that, Devi. So there isn't a department called sales at USAA. Growth is not your key focus. You cross sell, you upsell to ensure the member is fully covered. With that in mind, how do you measure the success of your new product initiatives?

Devi Mohanty   Yeah, so I think there's a couple of things we look at. In our mission we talk about enabling the financial security of our members. And we look at things like number of members served, NPS retention, all of those things. Where the prick is in new products gets a little tricky. You are starting out and you have to look at whether the hypothesis you have about a new product that members needed and wanted is going to work out. So starting out with brand new products, I know we'll talk about small business, which we launched this year. We are looking measuring that in terms of the number of policies sold and the number of member owned businesses that we are serving. But we are very focused on digital conversion, member satisfaction, the stories that we hear from our members. I love the idea of my businesses now, besides my car and my home being secured by USAA, I also have my business, which is a large part of my future financial security being served by USAA. So we definitely look at much more than just the financial metrics of sales and profits.

Laura Drabik   USAA is renowned for fostering innovation in-house. Last time I looked, you have 800 patents and several hundred employees dedicated to innovation. You've done a tremendous job of creating an innovation culture by facilitating a bottom up approach to employee ideas. Can you describe this process to our listeners and how it helps your team generate viable new ideas?

Devi Mohanty   So we do have a platform where employees can suggest ideas. Going back to your point which you eloquently made from my point around, employees are our members also and they live that life so they can understand what our members are going through. So that employee platform is a valuable source of new ideas. We of course do a lot of member research. When you think about new product ideas, we do a lot of work around strategy and kind of our future visions of what we call disruption coming to the industry and what we think where that disruption will end up. So kind of a version of scenario planning and saying, "What does the world look like a few years from today? And how do we think the member will be interacting with us, our product, what will be their needs? Where do we think our membership is going? Where do we think technology is going? Where do we think USAA should be?" so that we can start future-proofing from now.

So bring all of that together as inputs, and then obviously once we have some ideas doing some quick MVPs and testing in different states and cities to then decide what the right product would be before we launch something. The other source of idea for us, we have an agency, so for products that we do not manufacture ourselves we do use the agency to broker to other carriers. So the agency is a full-fledged agency, like any independent agency would be. That gives us some input as to what member needs are also. If we don't have a product today, we use the agency to place it with carriers. We say, "Oh, members are looking for XYZ product now, and we need a partner." We do that. But if that takes off, we say, "Okay, is this something we should bring in-house and manufacture ourselves?" And then we do the classic build, buy, ally kind of conversation to decide what we want to build versus what we want to broker through the agency.

Laura Drabik   This is such great information. Before we continue, listeners, if you're enjoying this podcast, be sure to subscribe to InsurTalk on Amazon, Apple Podcasts, Stitcher, or wherever you get your podcasts. Now this is Laura Drabik, and let's get back to our conversation. I'm talking with Devi Mohanty, Head of Product Innovation at USAA. Okay. Congratulations on your small business insurance or SBI Go Live with Guidewire.

Devi Mohanty   Yeah. It's an exciting product that we've launched. Again, just to give you some context it's the first new product in over 30 years at USAA.

Laura Drabik   First new product in 30 years. Congratulations. So can you talk to us about what was the business strategy behind introducing a main street America commercial line product to your members?

Devi Mohanty   Yeah. Early 2018, we had a strategy offsite with our board where we had a conversation about what the next 10 years looks like for businesses. And three years ago, if you remember, there was a lot of conversation around autonomous cars and how it might change auto insurance and the overall insurance business. And we presented a slide to the board where we said we don't know exactly how the world will play out in what quarter and what year. But we think as technology changes, number one, the auto insurance business, which is the main business that USAA has, is probably going to decline as a business in the long run. Second thing we said is member needs are changing how they interact with our products, how they buy our products, what their product needs are. A classic case maybe, we have cell phones that we need to protect. Before, we may not have had cell phones that we wanted to protect.

So member needs are changing. More and more the economy is going towards a world where a lot of people are becoming sole proprietors. And we were seeing a lot of businesses being started by veterans. So as we looked at that strategy, we committed to the board that we need to launch some new products to future proof USAA from the potential decline in auto insurance, but also meet our member needs. And what we saw from when you looked at the second point around member needs, we saw a lot of members starting their own businesses, either they were driving for Uber or Lyft or they were doing Etsy and other things. Or they were actually doing bigger businesses and just sole proprietors. And we didn't have a product for that. And we also saw that in our agency a lot of members were coming in and buying small business insurance products.

We said, "Look, this is a great opportunity for us to get a new product into the market." Our members were telling us that we do like the idea that you provide a small business insurance solution, but we do not like the idea that it is provided by a third party carrier. We would rather have a USAA product, a USAA claim service, a USAA insurance card, so to speak. So that was the strategy of saying, "Okay, we have a small business insurance need. Our members are asking for it. We see it in the agency growth. We see it as a future proofing for a potential decline in auto insurance." And that's how basically we decided to kind of bring a small business insurance product for our membership.

Laura Drabik   Future-proofing USAA from a decline in auto and also meeting member needs. Well done. So with small business insurance, you took a Greenfield approach, no legacy systems, no legacy code. Why did you take this strategic approach with this new line?

Devi Mohanty   Number one, it was a new product. So we didn't have actually the technology to do the product the way we wanted it. USAA has no experience doing commercial products. And so therefore even mundane aspects like how you set up a commercial product, which is very different than an auto insurance product, was different. So we knew that we needed a new way of thinking and a new technology platform. On top of that, we wanted to have as much of a digital experience as possible. We knew commercial business is less digital than personal lines. It requires more consultation, so to speak, with agents. But we wanted a much more streamlined digital experience for simple risks. We wanted more agility so we could change things and we wanted speed. And I think the agility point and the speed point are as important as the digital point. Think one of the things as an innovation leader, my goal is to get to market as quickly as possible.

I have a hunch that members would like something, I have a hunch that the market will be receptive to the idea I have, but that hunch maybe 80% right, it might be born out by the research, but until I get to market, until I hit the wallet of my member, I have no clue if I've done it right. So the quicker you get to market, the quicker you can make sure that a member is experiencing the product and is actually giving you real feedback, the better it is. Because then you can quickly get feedback and it's not a survey question. Because I feel like there is a huge gap between what people say on a survey and what they actually do when they have to pull out their wallet or their credit card. A follow-up point on that would be that once your idea hits the wall off of the wallet and meet some resistance, you want agility to be able to change things.

So you want a platform that can be quickly adapted to take that feedback from the member and say, "Okay, I thought X, Y, Z was going to work, member has given me feedback that X doesn't work and Y and Z works but I want to add A." I want the agility of being able to change that quickly. It was important for us to have a Greenfield approach so we could preserve a technology platform which is flexible, which can get to market quickly and meet our member needs and get feedback from the members as quickly as possible.

Laura Drabik   So to get to market quickly, you took a minimum viable product approach or MVP. It's a product with enough features to attract early adopter customers and validate a product idea. Can you talk about the benefits of taking this approach with your new product initiatives?

Devi Mohanty   We number one want to get to the market quickly. So the simple product is the easy way to get out so you don't add a lot of complexity and do a lot of programming. Two, as a company, we do not have a lot of experience on the commercial side. So you want to get out with a simple one so you can learn. And third, we want to actually as we develop this product, we want to get to a product which is actually unique for our membership. But we don't know what are the needs of our members from that uniqueness aspect. So we wanted to get to market with an MVP quickly. We use a ISO based product, which meant that we basically took a product that is standard in the marketplace that can be easily approved by all of our states. As you know, insurance is regulated at the state level, so you have to get state by state approval. So again, going with the speed, and if you could get a product that was already approved in a state that made it easy.

But then get quick feedback from our members. And our going forward approach would be to think about how do we modify this product to make it unique to our membership, whether it is the types of businesses our members may be starting, because maybe our members over-index in the photography business versus a real estate business. And then the type of things that they do within that business for us to create customizations that would be saying, "Okay, as a veteran or a military member or a member of USAA, we are going to give you this extra feature that no other carrier in the insurance industry does, which is tied to the fact that you are a veteran and you do X, Y, Z," whatever that is. So the advantage of going with an MVP was, again, speed, lack of experience on our side, getting into markets as quickly as possible, easier to get our states approved. And then now the fun part begins where we get that feedback. And then we go to a more robust, fully loaded product.

Laura Drabik   USAA takes a mobile first approach on many initiatives and often doesn't end up building a website presence. Devi, how does mobile factor into what you do and your new product initiatives?

Devi Mohanty   Yeah, it is a big factor in some of our new products. So one of the big products we've launched in the last 18 months is what we call a behavior based insurance product, which is on the auto insurance side you can get discounts based on how you drive. And so it takes into account your speed, your harsh braking, cornering, and all of that kind of stuff and gives you a discount if you're obviously a fairly safer driver, you get a better price. That program is totally digital. You download an app, you give the permissions and when you get into your car and drive, we can give you a score at the end of every drive. It allows us to actually with that mobile app to engage more intimately with our members in the sense that we can give you feedback after every drive. This driver was great, you sped on so-and-so corner, or whatever. So there is a coaching element to it. And then we are working on testing some things with that digital lab to now see if we can automatically detect crashes.

So when a claim happens, God forbid, hopefully it does not, but if it does happen, then we can proactively reach out to you, make sure that you're okay, and actually in fact, start populating your claims. Which actually we're using your Guidewire technology in the claim center to say, "How do we digitally submit a claim?" So no more calling into a 1-800 number and giving all the details. We have most of the details in terms of the location of the claim, the time of day, all of that. So mobile is becoming more and more an important way to interact with our members, both from the product and our claims side and the entire value chain actually, including sales and service.

Laura Drabik   We need to take another break. If you're enjoying this podcast and would like to review more of my thought leadership, please see evangelist.guidewire.com. Now let's get back to our conversation with Devi Mohanty. It's estimated that half of the American workforce will be freelancers or part of the gig economy by 2028. How are you positioning innovation and product initiatives to ensure your members are covered in this new economy?

Devi Mohanty   The telematics product that we just talked about is tied to how you drive and what you drive for. A lot of our insurance businesses is now going towards where in some portion you're driving for your personal reasons, meaning you're going to work or you're going to a movie theater, which is covered by your traditional standard auto insurance policy. But in then some portions you might be doing Uber or Lyft or DoorDash or something. That portion is actually a commercial activity and should be priced differently. And we're beginning to develop some products using the telematics data. You can turn on and turn off your insurance product, depending on what you're doing.

So if you're doing Uber, it's more a commercial activity, the insurance products should be slightly different. And we would use the telematics data to say, "Okay, maybe for $10 extra, you can just do this Uber coverage at this time." We have not launched that product yet, but that's where we are going towards, to say, "In the gig economy, using the telematics data, we can now meet the needs of the member depending on how they're using that product." So that's a great example of thinking about where the world is going, our member needs are changing and how our products need to meet their needs.

Laura Drabik   Last year, 2020, even with the pandemic, global insurtech investment was around $6 billion. That's significant. How are you integrating insurtechs into your initiative?

Devi Mohanty   There was a great quote I heard recently. We look at startups and we all say, "Hey, we can do that too." Except we don't have the speed agility and what I would say patience or intellectual perseverance to get that done in a big company. And then we obviously have a lot of legacy technology systems that we have to overcome. But we are constantly engaged with insurtechs either on a one-on-one basis or as part of consortiums around accelerators or with VCs. Also at USAA, I have a big VC fund that invests in startups. So we are constantly evaluating and looking at pitch books from startups, both from a financial investment perspective and from enabling some business activities growth.

We are an investor in Snapsheet, which is a claims efficiency, enablement technology. And we use them in some of our claims processes.

So that's another way we do things. And then an exciting thing, this is hot off the press. We just recently announced an acquisition of an insurtech called Noblr, which is a usage-based auto insurance company started by ex Metromile and e-surance alumni. But this was a classic case of that process of thinking of what our member needs and engaging with our insurtech partners and looking at some of the startups and saying, "Do we want to partner with them? Do we want to acquire them? Do we want to build something through the agency with them?" So we announced this acquisition. We are planning to essentially after close, think about how we will launch the Noblr usage-based insurance products. This would be an insurance policy in the auto side, your pricing will be dependent on how much you drive and how you drive.

And it's a fixed and variable pricing model where you pay a fixed price for your type of car and where you live, and the variable pricing is tied to how and how much you drive. Linking it back to our membership, it's a great product because if you think about a young enlisted members who are on base, have a car to just drive during the weekend or are deployed and have a family, and they have two cars and one of the cars is sitting in the garage when they're deployed. This product will be excellent for them. It's a great example of where we are leveraging insurtech value proposition to drive better product, a better member service, a better experience using telematics and all of those things.

Laura Drabik   So the industry's average retention rate is 84%. Contrast that to USAA's retention rate of a whopping 98%. That is so impressive. Devi, what is your secret to retaining customers? Is it the one-stop shopping for all financial investments or delivering outstanding member service? How do you maintain such high retention rates?

Devi Mohanty   Yeah. This is absolutely an astounding number. Even before I came to USAA, in my life as a consultant or at The Hartford, when we used to look at a chart of NPS and retention and all of those things, we would have this dot in the top right corner which we would say, "Let's ignore that because that's USAA. None of us can match that." Let's compare ourselves to the rest of the industry who was clustered on the left-hand side. I think the secrets there is not the one-stop shop, in my view. It is about delivering outstanding member service. And throughout this podcast, we've talked about a lot of the elements of that. Having members and employees who share the same values and understand each other, doing the little things, right, making sure that we all understand the mission of the company, understand what does it take to deliver on that mission and making sure we instrumented our measurement systems internally to look at that on a very regular basis.

We have a process that essentially manages towards this, meaning we are looking at the retention, we're looking at the NPS. We're looking at the metrics below that. Everything you can think of, meaning the product pricing, the product features, the member contacts, how those conversations are going. How can we find tune those things? For example, if you did come and listen to our calls, or you looked at the metrics we measure... The rest of the industry, for example, on just the call center metrics looks at a lot of things like average handle time. And the theory being that the lower handle time you have, the more efficient you are and therefore the expenses are lower. We don't look at that as much. We are much more focused on making sure the call met the needs of our members. And if you listen to that, you'll see a lot of the conversation starts out by saying, "Thank you for your service," understanding where you're coming from before you even get to the product and their questions.

Now, obviously I'm not saying all those conversations happen exactly the same way, but our member service reps and our claims reps are trained to make sure that that happens. Even today, for me who has been here for a couple of years, if I'm on a plane and I need somebody who says, "Who do you work for?" And I say USAA, and they say, "Well, great. I'm a member." My first instinct, and this is becoming part of my habit is a thank you for your membership and thank you for your service. So it's part of the culture that has been developed over the years that leads to this high member satisfaction. And then you have to do the product side right. The features, how you treat your members when a claim happens. That's when you know your promise and your reality meet head to head. And we are absolutely laser focused on NPS and retention.

Laura Drabik   Devi, thank you very much for your time today and for being a wonderful Guidewire customer. You have showed us it's not just about ideas, it's about making ideas happen.

Devi Mohanty   Thank you, Laura.


Episode 17 - Buckle’s Marty Young on the Gig Economy, Rideshare Coverage, and the Future of the Industry

Laura Drabik   Welcome to InsurTalk. My name is Laura Drabik, and I am the Chief Evangelist at Guidewire. In this episode, I have the privilege of interviewing Marty Young, co-founder and CEO of Buckle, an inclusive tech-enabled provider of insurance coverage for drivers who turn their personal vehicles into ridesharing and delivery assets. Marty is an experienced operational leader in both the public and private sectors with a proven track record of success in management and finance roles. The focus of today's discussion will be on the gig economy, rideshare coverage, delivery, and a glimpse into the future of our industry. Hello Marty, thank you for joining my podcast.

Marty Young   Hello Laura, thank you for having me.

Laura Drabik   Tell our listeners about Buckle, and your role there.

Marty Young   Thank you, Laura. We founded Buckle to provide comprehensive financial services to both gig economy workers and the platforms they work for. We are the only financial services company solely focused on this new customer segment and ecosystem. As CEO, I am leading simultaneous strategies of fintech, insurtech, and mergers and acquisitions to achieve our vision of helping the steep subprime yet emerging middle class, achieve economic freedom. All of our strategies start and end on a foundation of advocacy for our members. As a result, we are an impact company through and through.

Laura Drabik   So targeted at rideshare and delivery drivers, Buckle offers commercial and personal coverage in one policy. It doesn't matter who's in your car or whether the rideshare app is on or off. There's no gap in coverage. I think that is very cool. But what matters is what Lyft, Uber Eats, or Amazon Flex drivers think. What has been their response, and what's your market penetration?

Marty Young   So within insurance, the key isn't a commoditized insurance product that is one-size-fits-all, but a portfolio of products that match the needs of each Buckle member. To service, rideshare and delivery drivers requires a number of different products. Currently we offer three. The one you walked through just now is our signature hybrid auto product on that buckleup.com. But we also offer personal non-standard auto as well as commercial black car and taxi products.       

The basic theme of all these different insurance products today is none of them use credit score. So basically if you use your car to deliver anything, people, food, groceries, or packages, we have the right product for you. The average penetration or win rate on any of these given insurance products ranges from 20 to 40%, depending on dozens of factors. However, if you don't fit one of these products, you may fit an alternative product that we offer.

Laura Drabik   You mentioned not using credit scores. And as you know, there is an initiative by 31 civil rights, consumer, and community organizations urging the National Association of Insurance Commissioners to recommend that credit information no longer be used to determine eligibility for, or the cost of auto or home insurance. Because it's believed to reflect racial disparities and reinforce historic discrimination. You don't use credit checks to determine coverage. Can you tell us why and how you determine rates?

Marty Young   I testified to the Special Committee on Race in Insurance Underwriting of the National Council of Insurance Commissioners on this issue. To be clear, credit score is a powerful factor in automotive insurance underwriting. And I understand why actuaries and insurers use it, because it works in scale.          

However, it is part of the problem of systemic disadvantage for those who are left behind due to automation and globalization, or for those disadvantaged minorities and immigrants who never got a fair start. Our insight is that most of the folks with low credit scores don't pay all their bills. This is why they have poor credit.          

As a result, our members who are predominantly subprime live in an almost parallel financial universe to mainstream banks and insurance companies, and have to live in a world where they're exploited by high interest rates, exorbitant insurance costs and perpetual fees.         

It is there that we must meet and serve them, but we aren't another subprime lender or non-standard auto carrier trying to exploit them, but rather trying to help them breaking into the middle-class. This is an enormous undertaking for a population with a mean credit score in deep subprime. And yes, our insurance experience matches non-standard auto with as much as half the book, late paying each month and high non-pay cancellation rates. But we make it easy for them to come back. We don't penalize them, and they almost always do.        

After all when insurance is 10 to 15% of your take-home pay, we understand there are a lot of things that need to come first, the cell phone bill, food, rent, car payment, et cetera. Insurance, isn't always going to get paid until those other things do. And when it does, we want to make sure we have a product available that it's the most attractive option given their circumstances.

Laura Drabik   That's a really powerful statement, Marty, that you started with credit scores, potentially reinforcing systemic discrimination for those left behind. That's really, really powerful. And I appreciate that you make it easier or facilitate the way back for consumers that weren't actually able to make their payment that particular month. Well done. How do you distribute policies at Buckle? How would a rideshare driver go about purchasing your coverage?

Marty Young   So our signature hybrid auto product, it's only sold through our website or through one of our partners, such as Lyft, or Gopuff. You must be a transportation network company or delivery network company driver or we won't write you for our hybrid auto product. We distribute our specially personal non-standard auto and commercial auto products through traditional agency models. There are a lot of different ways of buying our products, both through traditional, as well as insurtech strategies.

Laura Drabik   This is such great information. Before we continue, listeners, if you're enjoying this podcast, be sure to subscribe to InsurTalk on Amazon, Apple Podcast, Stitcher, or wherever you get your podcasts. Now this is Laura Drabik and let's get back to our conversation. I'm talking with Marty Young, co-founder and CEO of Buckle. So Marty, according to Statista, by 2028, it's estimated that half of the American workforce will be freelancers or part of the gig economy. What positions Buckle for success in this new economy?

Marty Young   We don't have serious competition. It's not because people didn't try, but those who went into this with just credit failed miserably. Everybody who went into this with just insurance have also failed. It's a broken market, but no less broken than other credit and insurance markets due to antiquated paradigms focused on maximizing exploitation of the poor.         

The only way to serve this steep subprime yet emerging middle-class is via a model similar to USAA, which is all in on military members who all start off as deep subprime. For the subprime auto insurance isn't the most serious pain point where they pay 50 to 100% more for their automotive insurance, as awful as it is. But actually credit, where they pay 1000% more in interest in fees.          

We've always viewed that our credit platform will be the bigger, more profitable business, because it's the bigger problem. Rejecting credit score and underwriting puts us in a place of unique competitive advantage in both insurance and credit. But when we put them together, we have a tremendous advantage in both markets. USAA and Buckle were ESG impact for the beginning and always will be. We're all about helping people from all walks of life, achieve economic freedom, not through some get rich scheme, but providing the financial infrastructure to enable them to work when they want, doing what they want for whom they want and for how much they want.

Laura Drabik   I'm almost afraid to ask, but our rideshare and delivery driver loss is similar to personal auto and non fleet, commercial auto losses. How are they the same? How are they different? And any unique losses you can share with our listeners?

Marty Young   The complexity is that how you understand where to attribute the loss is really the trick. And until you can understand how to do that and aligning the interests, the losses are awful, but to give you some perspective, rideshare delivery and other gig workers are the most non-standard of the non-standard in both consumer and commercial terms.          

In the last 12 months, we've had an insured murdered while driving for Uber. Another driver beaten, hospitalized by a passenger. And another where we paid a claim on bullet holes due to the summer riots. These are tragedies, and unfortunately they happen more frequently than you expect. Uber and Lyft have been working the issue of driver and rider safety for years. And while a lot of progress has been made, there is still a ways to go. And we're actively considering how we can contribute to the solution.         

Our mission is to enable our members to break free of the credit score trap, and achieve economic freedom to do this, we have to solve a whole host of problems for this emerging middle class. And safety is one of those problems that's currently top of mind.

Laura Drabik   I read that Buckle wants to identify new data sources for underwriting risk, which believes will help the company reinvent the insurance model. Can you elaborate on what those new data sources are, and how they will help you reinvent insurance?

Marty Young   We collect thousands of different data points on drivers, including things like tips, star rating, driving times, et cetera, are the key to employee data. It's less about underwriting and more matching the coverages to our P&C partners without duplication or a gap.          

For example, what Lyft, Uber, DoorDash, and GoPuff want are completely different from one another. And so, the Buckle coverage has changed from activity to activity. So this is not about better underwriting, but rather better indemnity management using data. The way I think about it, reinsurers take all the underwriting profit, and Buckle should earn fees in arranging and managing the risks between the various parties as this is our highest value add.

Laura Drabik   You served in the U.S. military. Thank you. And as an army chaplain and infantry officer, how did your military experience drive your approach with Buckle, and pardon the use of the word drive there?

Marty Young   Sure. From these experiences, I'm both a theologian and systems thinker. Buckle was in part created by my doctor of ministry paper, where I began to understand how systems of exploitation, even while intentioned create perpetual disadvantage and oppression of the poor. If you actually look at what we're doing at Buckle, and you look at how the salvation army came about, the parallels are pretty stunning. I saw USA transform the lives of enlisted service members over the last 20 years and realized that we needed to do the same thing for the emerging middle class in the gig economy

Laura Drabik   Half of Buckles workforce is made up of USAA insurance members. And 10% of the company is made up of former junior military officers. What are you trying to achieve by hiring for this unique experience?

Marty Young   So actually most of our employees are USAA members. USAA members immediately understand what we are trying to do. I'm convinced that most banks and insurance company executives still have no idea what USA does and almost none know how they do it. Most of our executive team are seasoned USAA executives from both the insurance company and the bank. We also have a cadre of former USAA leadership behind the scenes supporting from the insurance team.

About 10% of the company are former junior military officers. And of course, USAA members. And we are proud that these veterans are the center of gravity of the Buckle culture. They are folks that operate with a can-do attitude with tremendous work ethics and really amazing attention to detail.

Laura Drabik   We need to take another break. If you're enjoying this podcast and would like to review more of my thought leadership, please see evangelists.guidewire.com. Now let's get back to our conversation with Marty Young. Are you an insurance company? If not, what are you, and what's your business strategy?

Marty Young   Within our insurance business, we own four insurance carriers, several MGAs, a claims administrator in the form of a licensed TPA, an agency. These different companies are useful for different things. To succeed in the $15 billion gain economy insurance market requires about a dozen different approaches across at least we believe 30 or 40 different segments. The insurance business lives alongside our credit and the advocacy platforms, which look like a credit business. The overall strategy is very similar to USA, but depending on what we were trying to do, credit or advocacy may take the lead, not insurance.

Laura Drabik   In a previous life, you were involved in the restructuring of Sears. What was the hardest message you had to deliver? And can carriers learn something from this that's applicable to their business?

Marty Young   I've executed dozens of court supervise restructurings, restructuring over 30 billion in debt. The starting point for any restructuring diagnostic is always the same. Does this company deserve to exist or not? And if so, what are we going to do to create a sustainable company that deserves to exist the next five years. In my experience this often means large reductions of customers, staff, suppliers, and infrastructure, to a profitable core, and then rebuilding for relevancy.       

Can insurers learn from this? I believe so. Ask yourself why your insurance company deserves to exist. What value are you uniquely delivering in the market? If you don't have a good answer for that, it probably does not. Many companies do not deserve to exist the next five years, at least as they are today. Given there are 2,000 insurance carriers in the United States insurance industry, I think that most folks within the insurance industry itself would be pretty certain that a number of those carriers don't deserve to exist.

And if that is the case, then half those employed by the industry as well. If we can eliminate half the companies and half the jobs, imagine the value that will be delivered to insurers and the reductions to loss cost multiplier. And that is the ultimate goal of any restructuring of a company or an industry delivering enduring value to customers.

Laura Drabik   Marty, thank you very much for your time today and for being a great Guidewire customer. You have showed us, it's not just about ideas, it's about making ideas happen.

Marty Young   Laura, thank you for having me. And we're very pleased to use the Guidewire ClaimCenter to power our automotive claims. It is really one of the best in class systems in the industry. Thank you.