The Reminger Report: Emerging Technologies

Disrupting the Insurance Industry by Focusing on the Communal Good with Melanie Irvin (Part 2)

August 26, 2021 Reminger Co., LPA
The Reminger Report: Emerging Technologies
Disrupting the Insurance Industry by Focusing on the Communal Good with Melanie Irvin (Part 2)
Show Notes Transcript

Zachary is once again joined by Melanie Irvin, Counsel at Branch Insurance, a new and quickly-growing insurance company based in Columbus, Ohio. 

In part two of their conversation, Melanie and Zachary discuss how Branch stands out among the wave of insurtech companies. Aside from providing a frictionless and efficient buying process, Branch is also public benefit corporation in process of becoming a Certified B Corp. Melanie reviews Branch's 501(c)(3), SafetyNest, which provides financial assistance to people who are un- or underinsured. Finally, they discuss Branch's research partnership with The Ohio State University.

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ZBP -   Zachary B. Pyers, Esq.

MI       Melanie Irvin, Esq., Branch Insurance

ZBP

            I want switch gears just a little bit, obviously still talking about Branch, but one of the things that you said earlier was that Branch isn’t necessarily seeking to totally disrupt the insurance market or the insurance scheme, but is making it better and is seeking to improve it and essentially take it back to what it was at the beginning, which is helping each other and getting people’s backs.  You also told us that Branch is using a lot of technology to make that process more efficient, more cost-effective, to then pass those savings on to the customers.  If you could contrast a little bit, one of the things that we’ve seen in the insurance industry over the last ten years is a rise of insurtechs or insurance companies that are seeking to utilize technology to truly disrupt the insurance marketplace.  If you could, contrast what Branch is doing, and I’m not necessarily looking for you to compare one company to another, but just in a larger sense and the rest of the insurance tech companies, how do you see those contrasts play out?

 

MI

            One of the main differences between us and other insurtechs, or I should say one of the most obvious differences, is that we’re the only one that allows someone to buy a truly bundled home and auto product, so that offers convenience and pricing benefits to our customer.  We’re also different in that we don’t currently use things like artificial intelligence to sell policies or handle claims.  We’re super proud of the technology that we have built and it allows some people to have a truly online process if they want it, but we also understand that a lot of people are looking for a more personal touch, and so we do offer that.  We also don’t require that you participate in a telematics program.  We don’t offer a purely usage-based or rated product, so that means that we don’t require that we track or record your drives.  Instead, we still rate partly based on your driving history just like other traditional carriers would in a more traditional way; however, in many states, including Ohio, we do offer an optional community drive discount where if you opt in and turn it on in the app, we do track and record drives and assign points and offer feedback on driving opportunities such as hard braking and my favorite, speeding, and you do get a discount at renewal if you are able to  achieve and maintain a good score during the course of your term, but if you don’t, we don’t increase your rates or anything.  It’s simply a tool to help you lower your rate and encourage safer driving habits, so those are just a couple of the ways that we are different.

 

ZBP

            Your work with the regulators, which I know you’ve already alluded to, have you encountered or have you seen any difficulties in trying to explain how Branch is different from some of the other, I don’t want to say traditional insurtechs because by definition that’s almost an oxymoron, but some of the other insurtechs that exist out there?

 

MI

            That’s a really great question, Zach, because we’re not the first.  We’re not going to say that we are the first insurtech.  Some regulators, we have found, are skeptical of newer entrants and newer technology, and in many ways I can’t blame them.  I mean, it’s an immense responsibility to protect consumers and make sure that insurance companies are going to be financially stable and able to pay claims, even if there is a catastrophe or two.  That’s the whole point, but growing companies have the added challenge of trying to grow quickly so you can prove your worth to investors and get the money that you need so that you can continue to grow, and some regulators think that companies are growing and expanding too quickly, and I’ve heard this from  regulators, and the results are not always the best because some companies may be sacrificing underwriting results in favor of faster growth and that scares regulators, but since we underwrite and rate more like a traditional insurer and we have built a team of very experienced insurance professionals.  We say we have more than 100 years of experience among us.  We are proud to say that we are focused primarily on building a financially stable and strong company, and we have expanded in a more slow and measured way, but it’s super challenging to try to convince regulators that not only are you not like the legacy carriers but you’re also not like the other insurtechs either.

 

ZBP

            One of the things that seems to be an ongoing theme in this podcast is that no matter what the technology is, the regulators are always playing catch-up, and it’s not a knock on the regulators by any stretch of the imagination, it’s just that oftentimes what we see is the regulators and the legislatures, whether it’s city council or a state legislature, they oftentimes are reacting rather than being proactive because sometimes they can’t predict the technology that’s coming or how quickly it’s going to come, and sometimes it catches them off guard.  Sometimes they should have seen it coming, but more often than not, I think sometimes they’re playing catch-up just because the technology is advancing so quickly, so it doesn’t surprise me that you’re seeing the same thing in the insurance phase as well with the insurance regulators, and you’re right.  It is a huge responsibility when you’re dealing with the solvency of an insurance company.  I mean, we’ve seen historically some insurance companies who have not remained solvent and it’s a huge burden, not only on the states that underwrite them but on the individual insureds who put their faith and trust in those insurance carriers, so I totally get that.  One of the other things that I know that Branch is doing or has worked with is that you kind of have a, and I don’t know that I’m going to get the term right, whether it’s a charitable arm or how it functions, but SafetyNest.  Tell us a little bit about SafetyNest and that entity.

 

MI

            SafetyNest is its own 501(c)(3) non-profit entity.  It was designed and funded exclusively by Branch, and the purpose of SafetyNest is to provide financial assistance to people who are un- or underinsured and have suffered a financial loss resulting from having no or too little coverage.  As an example, last year, we gave a grant to somebody who had liability-only coverage on her car and ended up under water on her loan, and so she was able to pay off the loan with her insurance proceeds, or actually I think she had, she just didn’t have gap coverage I think was the situation, so she wasn’t able to actually get a new car or anything like that, and then because of that, she was at risk of losing her job, so she was super close of kind of falling down that spiral, and we were able to help her out.  During COVID, we actually had a program where people who had suffered financial hardship specifically due to COVID could apply and we would help them pay their auto insurance premiums to a variety of carriers to just simply bridge that gap and help them stay insured so essentially they would not become one of the 28,000,000 Americans who are driving around without insurance.

 

ZBP

            The first example that you just were talking about, the woman without the gap coverage not being able to afford a new car and then losing her job, it’s actually a topic that we had covered in a previous podcast with one of our prior guests, Ryan McManus, who is the CEO and founder of SHARE Mobility, about the relationship between reliable transportation and employment and about how it’s so necessary to have that, and once you lose the reliable transportation or if you don’t have it to begin with, how difficult it is to gain employment, and it becomes kind of a vicious cycle because if you don’t have reliable transportation, you can’t have reliable employment and you’re just stuck in this kind of downward spiral.  So it’s interesting the scenario you describe as I’m thinking back to the conversation that we had on a prior episode of the podcast.  It’s interesting and wonderful to see Branch through a safety net taking those steps to help to prevent that, not just for that individual but really larger as a societal benefit.  I know SafetyNest is also working with Ohio State on researching insurance, and tell us about what that research is and why they’re doing the research and what it’s showing or seeing.

 

MI

            This is super exciting news that we went public with just recently.  SafetyNest has partnered with the Risk Institute at The Ohio State University Fisher College of Business to help research the problem of un-insurance in the United States.

 

ZBP

            You said it was just a recent announcement.  I’m assuming they haven’t fully undertaken the research yet, so we haven’t yet seen any results?

 

MI

            We do have some preliminary results, and I’ll just back up to say that the reason why we decided to pursue this research is because we quickly realized that this problem was probably larger than something that we could just keep throwing a few bandaids on.  We were really trying to find out the root causes of why people don’t have insurance, and the preliminary results, actually I found to be quite shocking because I had just assumed it was, I can’t afford insurance or I lost my job and now I don’t have insurance, but a large proportion of the uninsured people that have been surveyed already stated that they didn’t have insurance because they did not know how to get insurance, so I suspect that we are going to learn that there is just a huge education gap in knowing what kind of insurance you need, where to get it, how to get it, and education is likely going to be part of the SafetyNest program in the future based on these results.

 

ZBP

            That’s a little surprising to me.  It’s a little surprising to me that people might not know about insurance or the need for insurance.  I think when you think about it or at least when I think about it and reflect on it, I’m not sure that it’s something that’s necessarily taught in the public school system.  It’s not something that like a lot of other personal financial issues, it may not be necessarily discussed around the dinner table at night by a lot of people, and so I think that I have an unfair advantage, probably like you do working in the insurance industry in some capacity, you see the need for it almost on a daily basis.  I always joke with people that I’m so paranoid, I’ve got insurance on everything.  I’ve got my kids’ scooter insured just because you never know where those risks lie, but I think it’s interesting that maybe I take that knowledge for granted that other people may not necessarily have.

 

MI

            Me, too.  I mean, I grew up in a household where when I wanted to drive, I had to pay for the car and I also had to pay for the insurance, so I became acutely aware of the existence of insurance and how my driving habits affected the price of that insurance, and I’ve always taken for granted the fact that a lot of people don’t have that.

 

ZBP

            Was there anything that drove the decision by SafetyNest to engage in this research?

 

MI

            It was just Charlie’s project; I can’t take the credit.  My colleague who I mentioned, he’s also the President of SafetyNest, so he sort of spearheads all of the SafetyNest efforts, and just like with anything in our business, we’re always looking for data to figure out really what is going on.  We don’t make a lot of decisions without data, and so after rolling out a few pilot programs with SafetyNest, we decided that we really just needed more data to help us build out the best programs possible.

 

ZBP

            One of the other things I wanted to talk about to you is, my understanding is that Branch is also a Delaware public benefits corporation and it is pursing B Lab certification.  Can you tell us what that means and what the process looks like?

 

MI

            We are currently in the assessment process to become a certified B Corp, and that’s offered through a non-profit called B Labs.  It’s a pretty intense assessment.  Part of it requires that you actually go through the legal process, if it is available in your state, of domicile to become a public benefit corporation, so the corporation under which we operate is a Delaware corporation.  We just recently had our shareholders approve the move to amend our Articles and become a public benefit corporation.  It was a pretty straightforward process; it just required that we amend our Articles to add a stated public benefit, and ours is simply to make insurance more accessible to more people.

 

ZBP

            For those who may not be familiar with what a public benefits corporation is, how does that differ from a traditional corporation?

 

MI

            The main difference is that there is an added stakeholder in the mix.  Our board has to act in the best interests of not only the corporation but has to balance those with stakeholders, shareholders and that public benefit, and we’re actually held accountable to that by the shareholders.  Shareholders can bring a derivative action if they don’t think that you are living into your public benefit purpose.

 

ZBP

            That’s interesting.  I think that we throughout history have heard about complaints about corporations, whether it’s dating back to the cases that I read from 100-plus years ago in law school where corporations were being sued, whether they really should be benefitting society or whether they should be benefitting the shareholders, one of the things I know that we read about is this conflict, that you really only can serve one, and most often than not, the person that the corporations are supposed to be serving was themselves or, i.e., their shareholders, so it’s interesting that Branch is adding in this other stakeholder now to say we’re also responsible to them as well.  Can you tell me what drove the decision to pursue that public benefits corporation designation and/or the B Lab certification?

 

MI

            We always set out for Branch to be good and to do good by our members and our community, but after we learned about the B Corp process, we decided that it would be a great thing to do just to help us codify our mission and to hold ourselves accountable.

 

ZBP

            We may have already talked about this.  Are there any specific benefits to Branch by undertaking this additional obligation?

 

MI

            We think there will be several benefits from undergoing this formal process.  One important thing is that it allows us to network and build relationships with other B Corps.  There are a lot of corporations that are taking this step, some of whom also may only be interested in working with other B Corps, and so in a way it sort of expands our network for partnership opportunities and growth.  It will help us attract talent, we think, that will buy right into our community-focused mission.  I’m a geriatric millennial apparently, but younger millennials and Gen C, they’re always looking for something that differentiates one company from another, and we believe that this is something that people might find fulfilling to be a part of our mission that we have now codified, and it does hold us accountable as I mentioned, and it will motivate us to just continually improve the impact that we’re making.  It’s not something that we could just list as a goal one year and then abandon.  It’s very hard to not be a PBC anymore under Delaware law.  It requires, I think, more than two-thirds approval or something to actually undo the PBC.  The B Corp certification, once we do get certified, I believe we’ll be re-certified every year or every few years, and that’s something that you can probably abandon, but it might be quite painful once you’ve already sort of bought into it and invested your time and resources into that and have received some of the benefits, and so we believe that codifying our mission in this way and becoming a certified B Corp will hold us accountable and prove our impact and also protect our mission into the future, like 100 years from now when I’m certainly not around.

 

ZBP

            Well, that’s wonderful.  Melanie, I want to thank you for taking the time to come to speak with us today about Branch Insurance and all the wonderful things that you’re doing for them and that Branch Insurance is just doing in general, so thank you for taking the time to come speak with us.

 

MI

            You’re welcome, Zach,  Thanks for having me.