This interview first appeared on Agency Checklists on March 6, 2018. With the start-up in the midst of officially launching and appearing at Insurtech Boston tonight, Agency Checklists thought we would refresh our readers memories by reprinting our interview with Openly here.
An interview with Ty Harris, one of the co-founders of Openly
Openly is a Boston-based Insurtech startup focused initially on providing homeowners insurance products. Openly’s business model and marketing focus contradicts the accepted wisdom of most Insurtech startups that technology will disrupt, if not destroy, the independent agency system. Instead, Openly banks on independent agents being the disrupters and not the “disruptees” of the insurance marketplace of the future.
The co-founders of Openly both have impressive credentials in the financial services and insurance industry. Mr. Harris is an actuary who worked for Liberty Mutual for twelve years. In his last position, he was the Chief Product Officer for Liberty Mutual’s personal lines globally. Ty’s co-founder, Matt Wielbut, was a vice president for technology at Goldman Sachs before leaving to answer the call of entrepreneurship.
Independent agents interested in assisting an Insurtech startup focused on helping, rather than hurting agents, may assist Openly’s efforts to launch its platform by signing up for its agency pilot program. Readers can find these links in the interview.
What drew you to the idea of creating an Insurtech startup not aimed at disrupting the independent agency system but capitalizing on this distribution channel?
We are contrarians, if not heretics—we believe agency models are destined to gain rather than lose market share as Insurtech disrupts the industry.
I do not say this because I do or do not want it to happen. I say it because of the economic realities of insurance marketing. Everyone pays with sweat or money for the right to interact with a prospective customer. If the person doing the interacting can offer customized choice and convert twice as many sales with higher retention, that is just going to win in the long run. It is going to end up being lower cost in the end. And we want to back the winning horse, as it were.
In other words, we see the future with independent insurance agents as the disruptors, rather than the disrupted.
Since so many new Insurtech’s are focusing on direct marketing channels, what advantages about the independent agency marketing channel do you see these startups overlooking?
That is easy. Through my career, I have seen insurance sold through all the different channels, and I could recite the economic pros and cons of each. I talked a second ago about my contrarian view of that. But here is a real litmus test: When a family member asks me how to shop for insurance, I tell them without hesitation to find a good independent agent. Agents are not perfect and certainly are not all the same, but I would bet every day on the combination of choice, expertise, and independent advice. And from a selfish perspective and my experience, I believe consumer demand for convenient choice will tilt the scales toward, not away from, agents. That means we need to position our company to compete in, rather than hide from, choice. We are betting it is the channel of the future.
What is Openly going to offer and how is it going to offer it?
We are about to launch a new insurer platform selling innovative, modern products through independent agents—starting with a homeowners product. We want to help agents shine in the areas where they add real value vs. direct carriers (coverage expertise and advice, choice, finding high-value customers) while improving significantly in the areas where they lag (modern speed and convenience, operational cost).
Could you tell us about the background that you and your co-founder have that led you to come up with the idea of Openly?
I am an actuary who spent the first twelve years of my career at Liberty Mutual/Safeco—starting as a junior analyst and ultimately as Chief Product Officer for their personal lines globally—unbelievable company, awesome job, I would recommend it to anyone.
Over that twelve years, working with teams of various sizes, I got to create and launch multiple new products. I dealt with everything—from the mathematical aspect of predicting insurance losses using dozens of rating variables, to the very human (and humbling!) experience of getting beaten up by agents because something that seemed great in theory just did not work in practice. I have worked with regulators to push forward innovative product ideas while respecting their objectives. I have seen and managed insurance products sold through every channel there is—from pure online fulfillment to call centers to captive agents to independent agents to non-traditional partnerships.
I have even gotten the perspective of seeing how insurance operates in eighteen different countries around the world. In some ways, it is like having access to a time machine. While there are many long-term differences across countries, there is also a sense that every country is at a different stage of the same march, with the U.S. in the middle of the pack. Looking “back” in time, you have some very highly regulated and purely paper-driven countries that are evolving toward more of a U.S. type model. Then looking forward, you see countries like the UK or Spain, where there is less regulation, the barriers to entry are much lower, and you see some innovative stuff that will likely arrive here in 10 years.
The UK, in particular, has helped to inspire our belief that consumer choice will win the day. There you have these online aggregators that rule. There are structural reasons why we do not believe it will take shape exactly that way in the U.S., and there are real consumer cons in purely commoditized nature of that model. But we do glean from it this lesson about the value of choice, and when we look for where choice lives in the U.S., it is in the independent agency channel.
Anyway, I left that great job this past summer because I saw the opportunity to create something that I just was not sure could be given full justice within any large incumbent carrier, no matter how innovative.
I teamed up with Matt Wielbut, whom I have known for over ten years. Matt was a vice president of technology at Goldman Sachs before leaving a few years ago to start a couple of businesses. Most recently, he co-founded from scratch an independent agency here in Boston (elementsinsured.com). His goal with that was to run a technology-heavy agency that streamlined the customer experience.
I think he would say that he partially succeeded. Elements is a successful business now being run and grown by his co-founder, as Matt focuses full time on Openly. However, what Matt learned with Elements was that there are parts of the customer experience that the agency controls, and parts that the carriers control. I will not disparage any carriers, and of course, I spent 12 years at a carrier. I will just say that there are a lot of great, innovative customer experiences that agencies could create if their carriers were more modern and accessible and, above all, simpler.
So anyhow, between the two of us, Matt and I have seen these problems from every angle—agency, carrier, technology. We know what the problems are, and we know what is possible. And we are excited to fix the problems.
I should mention that I even hear about this stuff at home! My super-talented wife Yana (who I met on the MIT ballroom dance team, in case you like irony) is also an insurance nerd and the real brains in the family (MIT math, BU MBA, full actuary when she was like 12). She left her corporate job four years ago and was Matt’s co-founder in the Boston agency. So, we are a little family of insurance nerds and do not tend to talk about much else.
Specifically, what is your main value proposition for agents—why should they sign up to Openly and how do you envision helping them?
Not all agents will weigh these equally, but we offer three basic advantages. First is comprehensive and innovative coverage, and I can talk more about that if we want. The second advantage is radically simplified and more intuitive processes and technology—from onboarding to quoting to binding to service. Agents will spend far, far less time asking underwriting and pricing questions, re-writing policies when closing dates change, etc. Third, our pricing will sometimes allow the agent to sell a customer luxury coverage at a rate that beats the direct competitors. And we are kidding ourselves if we say price never matters. Give us some at-bats, and you will see what we can do.
I should also say that we will have trained, empathetic human beings providing outstanding service to agents and end customers. That should be par for the course rather than a differentiator, but some of the startups forget how frustrating it can be for an agent to try to call the carrier and get an answering service or someone who is not knowledgeable. Agents know insurance, and if they call it is because either your system is illogical or there is a question requiring insurance expertise.
How do you see Openly capitalizing on the inefficiencies you see in the present insurance market?
First, operational expenses are way too high, with 40% of industry premium paying for what is in effect an administrative fee. Consumers will not put up with that ten years from now. It needs to fall by half—not all at once, but over time. A percentage drop like that probably terrifies agents, but we think we can help them not just survive but win in this new world.
Second, consumers and agents waste ridiculous quantities of time dealing with arcane procedures and technology. Beyond wasted time, this often means insurance is so opaque that consumers are not even aware of life-changing coverage needs, such as umbrella liability and flood. We must simplify it and make it more transparent. And Silicon Valley cannot fix this. We need industry insiders who know how to throw out the bathwater but keep the baby.
Openly will unfold in multiple stages over a period of years. Stage one is this great homeowners product that will immediately start to attack problems, but stage one will not on its own be the full solution. We cannot go into detail at this time but I believe over time Openly will change the industry in fundamental ways that will surprise people.
You’ve launched Openly’s website–when did it officially go live and are you now fully operational? Or is this just a first step?
We have been building quietly for a while, working with a small group of agents to help inform our product. We launched our public website just a week ago. We are not yet live selling policies, but our goal with the site is to involve a broader group of agents in helping put the finishing touches on the product. We will start selling policies later this year.
What are you envisioning for the first year and what goals would you like to achieve within this time frame?
In my prior life, I designed, built, and launched many insurance products. I can say from experience that it is never perfect out of the gates. You get the rate level wrong at first. Or this great feature turns out to be an impediment.
Our first six months live will be a period of intense learning and listening. We will listen to the data and our agents and their insureds—we will fix as needed (being careful to do so in a way that does not unnecessarily dislocate renewing customers), and then we will be off to the races.
For those agents who might be interested in using Openly, how does it work, how do you go about appointing agents and is there a cost for them joining?
We are not yet ready to formally appoint agents. When we are ready, it will be sort of like normal carrier appointments, but with two significant differences. First, we believe that like most other insurance processes, the appointment process today is overly complicated, opaque, and slow. We will ask for some basic agency information in a convenient format, make a quick decision, and go from there. Think hours or days, not months. Second, onboarding and training will be more like using a new toaster and less like getting qualified to land a 747. Our coverages allow agents tons of flexibility, but the interface is so simple that a consumer probably could use it if we let them, and there is no proprietary jargon.
What do you envision as your target market for your homeowner product?
High quality—leaning toward affluent. Our premium coverage should resonate best with this market initially. We will also work well with agency customers who value their time and do not want to spend it answering 100 questions about their home’s wiring and Fido’s genealogy. However, we have no particular geographical niche one way or the other.
Could you explain the commission structure mentioned on your website: “Competitive market rate commissions, automatic commission ‘kickers’ and profit sharing for qualifying agencies?”
We will be quite in line with other preferred carriers, and the standard for that varies a bit by region of the country. Beyond that, though, we will offer a bonus for customers who we frankly really want. This bonus signals the agent about what risks we are seeking. And it will be 100% transparent if the agency principal wants it to be—a number right there beside the quote, just like everything else we do, such as eligibility. No need to remember some set of rules on a sticky note.
Also, what about the website’s reference to: “Unique contract/coverage terms that will appeal to customers who care about coverage?”
Earlier I talked about the stages of Openly, and our coverage innovations are a good example of where we will start around the edges and get more disruptive over time. But when we launch, we will start with a premium HO-5-style contract. The agent can turn on typically complicated additions (like umbrella and flood) with one click. And you can use the same form for owner-occupied or rented to others, again with one click. And then we layer on several truly first-in-industry innovations that I will talk more about closer to launch.
The website also cryptically states Openly’s, “Pricing and underwriting is somewhat “contrarian” relative to many other carriers.” Could you explain what that will mean in practice?
Maybe this is controversial, but if you are an agent and need to understand the inner workings of our pricing, we are not the right carrier for you. It is quite a black box under the hood. It starts with what is the current state of the art at the best direct carriers and then goes a step further.
So it will not always be in line with other carriers’ pricing—especially not other independent agency carriers. This pricing might sometimes worry agents, but I would argue it is great news. It means our pricing will we broaden their overall sweet spot, rather than just duplicating what they already have. This is precisely why choice is such a valuable weapon for them, so take advantage of it.
And to say it is complicated under the hood is not to say it is complicated for the agent or consumer. Quite the opposite. You get to a bindable quote quickly with just a few questions and can decide if we are competitive or not. You just cannot take it personally if we are not competitive in a particular case because you will drive yourself crazy trying to reverse-engineer the logic behind our pricing.
What insurer(s) will the agent see on policies issued through Openly?
I am glad you reminded me to clarify this. Openly will do most of the operations of an insurance carrier but will be backed behind the scenes by the risk capital of an established partner carrier. We are not yet ready to disclose the partner, except to say that they will have an A.M. Best A- rating or better. Stay tuned for updates here!
What are the policy forms that Openly is planning to use?
It is safe to say that our core form is close to an HO-5, but with some meaningful enhancements. On a scale of one to ten, with one meaning no enhancement and ten meaning we tore up the contract and started over, we are launching at about a four and will progress to eleven over time.
If possible, could you tell us anything about the underwriting engine and what sets Openly apart from other online homeowners insurance platforms?
I talked a little about this concerning the contrarian pricing. I will not get into technical details. But I will just add that we have a legitimately unique team and opportunity. On the one hand, we are a startup that can build our products from scratch with modern technology. Until you have spent time at a large carrier, you just cannot understand what an enormous advantage it is not to have that legacy technological and process debt.
But unlike other Insurtech startups, we bring world-class experience across personal lines insurance, actuarial science, machine learning, enterprise technology, and design. Too many of the startups you see have one or two of those, but insurance is wildly complex, and you need all of them to win against the goliaths.
Is Openly planning to specialize in homeowners or do you have plans to go into other areas in the future?
Insurers (and therefore agents) have historically carved up products the way they see the world. But that is not how consumers see the world. “Wait, tell me again why I need liability coverage in three separate places. And flood is somehow a separate policy even though hurricane is not? And I need to talk to this other person about life insurance, and go through this whole other process?” So no, we do not plan to stick just with home insurance, and in fact, we will ultimately create some products that do not exist today. That is part of what I meant about the stages of Openly unfolding over time.
How do agents, and others, find out more about more about Openly?
The first place to look is on our website: https://openlyinsured.com/.
For independent agents interested in getting updates as we launch or for agents who want to consider assisting by joining our pilot program or participate on our Developmental Advisory Board they can sign up from this link: https://openlyinsured.com/for-agents/
Thank you so much for taking the time to tell our readers about Openly
It was my pleasure. And thanks to Agency Checklists more generally for putting together such in-depth features throughout the year. What you all do is a huge benefit for the whole community.