HousingWire sat down with Ross Diedrich, founder and CEO of Covered Insurance and a 2019 Rising Star, to talk about trends in digital insurance, the benefits of working with family, and the siren call of Sturgis.
Q: What are the biggest trends in digital insurance?
A: Right now, there are exciting big data and telematics plays in auto. Download an app, let it monitor your driving, and provide you with personalized, risk-based and usage-based coverage. There are also exciting trends in distribution, which is a major focus for Covered.
We're seeing major partnerships between startups and carriers. Insurance is incredibly difficult, and it takes industry collaboration to succeed. Carriers are starting incubation and innovation labs, and investing heavily in innovation across the entire value chain. Data, automation, personalization, and distribution are most exciting to me — and we are focused on them at Covered.
Q: How is Covered positioned to win?
A: First, we have an incredible team, including experienced industry executives with previous scale-up experience, brilliant technologists that have gone from startup to exit. We even have a rocket scientist on the team.
Second, we found a segment of the insurance market that enables us to have un-paralleled distribution through robust B2B2C channel partners.
Last, but certainly not least, we've focused heavily on building an award-winning customer experience. By building for the end user, and ensuring we have best-in-class technology for our end users and channel partners, we built a win-win-win solution for the market.
Q: What's the biggest mistake you made in the early days of Covered?
A. I'd say more of a learning than a mistake was the estimate of time and resources it would take to 1) build a consumer brand, 2) navigate the complexities of insurance, and 3) execute the slower channel partner sales cycles.
Additionally, we paused before bringing the product to market by prioritizing security, compliance, and a best-in-class partner implementation and account management process.
Q: Being born and raised in South Dakota, why did you launch Covered and why insurance?
A. South Dakota is a special place. I'm grateful for a humble upbringing in an area that has tremendous beauty, access to nature, and a genuinely kind and values-oriented community.
My brother and co-founder, Chris, and I have been brainstorming business ideas for decades — all the way back to our Kool-Aid stand when we were kids. Insurance was really intriguing as an industry to disrupt due to the sheer size of the industry. Plus, creating a business that sells a tangible product that provides benefit to people when they're in distress provided a strong sense of purpose. We're entrepreneurs who saw an opportunity and went all-in.
Q: Why the focus on the mortgage sector?
A. Chris and I both experienced the evolving digital mortgage experience at the same time. We shared our frustrations about the process, and observed many ways to create a more efficient, streamlined process. Home Insurance was something we both grappled with and, after plenty of late nights researching, realized could be automated and integrated into the process.
Selling a product you must have, seamlessly and automatically through the platform you're already using, at the precise time you need it, was an exciting concept and very large opportunity. We set the direction and never looked back.
Q: You picked Denver for the company's headquarters, why not Silicon Valley?
A. Denver was an obvious choice for many reasons. First and foremost, Chris and I love the mountains and being active outdoors. This is important not only to us, but to our employees. Denver provides a solid foundation for a high quality of life. Chris and I love beer and the craft brewery scene here is incredible. Cheers!
Plus, it's a city with a strong insurance industry. Many successful insurance entrepreneurs live in the greater Denver area. We also have a strong local mortgage presence.
Denver has great schools and excellent technical talent — without the competition and cost you find in the Valley. Fun fact: Denver Startup Week is the largest of its kind in the US!
Last, Denver's international airport is fantastic, and we can visit any of our partners via quick non-stop flights.
Q: The marketplace has seen significant investments and start-ups chasing the insurance category — Hippo, Matic, Young Alfred —why should any of our readers bet on you and Covered?
A. The industry is so large, antiquated, and fragmented, that it's no surprise there are billions of dollars flowing into the insurtech industry each year. The U.S. insurance industry has over $1 trillion in premiums written each year and nearly $5 trillion globally!
As cited by the prominent VC Sequoia in a recent presentation, consumer spending is a $40 trillion dollar market. The largest single segment? Housing.
In terms of financial markets, we see a lot of big deals in the payments industry. Globally, the insurance market is over two times the size of payments! Let that sink in.
We'll start to see more and more big insurance deals. With new technology and access to data, we're seeing startups tackle all segments of the insurance value chain. Some will take longer to realize than others. We're fans of what Hippo, Matic, and Young Alfred are doing. We have similarities, but are very different.
Q: Why bet on Covered?
A. Simple. We deliver an amazing customer experience, an unbiased marketplace that promotes choice and transparency, with automation and a digital platform modern consumers expect. We're delivering a valuable product to partners and consumers at the right time, in a big market, and we're just getting started.
The traditional insurance agency is a two-step distribution model designed to market and sell insurance on a commission basis — it's an expensive relic of the past. The cost of this two-step distribution, useless endorsements, and non-customized policies, means consumers pay for things they don’t need. It's important to distribute, important to educate, important to meet consumers where they want, but this mechanism is broken.
Covered has retained the best element of agency model: a licensed agent to advocate for the customer.
Plus, we're giving the busy customer an opportunity to shop multiple carriers seamlessly and more efficiently than ever, to find the best option for them and promote transparency, online, when they need it, as part of their loan origination or servicing process. We’re a neutral process — we just want to find the consumer the best coverage and the best price.
Q: You've mentioned starting the business with your brother, what have you learned in picking your management team?
A. Startups are hard. The highs are high and the lows are low. Working with my brother has been an incredible experience. We have a deep trust and mutual respect for each other, and we can have frank, direct, and free-flowing conversations with each other. I
'm extremely fortunate to have a highly intelligent, capable brother as a friend and co-founder. Very few have this luxury.
In terms of picking a management team, we've learned that shared values are incredibly important. Company culture is incredibly important. Naturally, we look for the most talented and capable individuals to join our management team, but they have to be a cultural fit.
We've also learned the importance of trust, diversity, and perspective. Chris and I think very differently, and it adds value. We trust each other and respect each other's perspectives.
I'll quote one of our early investors, whom I admire very much. She has a saying with her executive team that "1 + 1 = 11". They've accomplished so much by hiring high-caliber, high-quality people who work as a team and trust each other. We strive to do the same.
Q: Launching and running a start-up can be all consuming. Outside of work, you have a passion for motorcycles. Tell us a bit more.
A. Yes! I'm an adrenaline junkie. I love speed, cars, airplanes, motorcycles, all of it.
South Dakota is home of the Sturgis Rally, the most well-known and largest motorcycle rally in the world. My father had motorcycles as long as I can remember. I'll never forget the first time he let me ride along. I felt like I was flying.
It was exhilarating — the feeling of wind in my face, the unusual tranquility and peace I felt paired with the loud rumble of the engine under me commanding attention, nervously leaning through corners, and being exposed to the road and landscape around me. I had to have one.
I got my motorcycle license when I was 14. I started mowing lawns, saved my money, and bought my first motorcycle in high school. I've had one ever since.