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The Voice of Insurance
Ep241 Ben Hubbard Parsyl: In the business of rewarding the best clients
00:51:19
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- [00:03]
Mark Geogan
I'm Mark Geogan and you're listening to the Voice of Insurance podcast, produced in association with Advantage Go, enabling an enterprise view of exposure. I'd like you to cast your mind back to 2016, when the insurtech phenomenon really started to emerge. It was a very exciting time as tech entrepreneurs and venture capitalists had finally spotted the huge opportunities that would become available if they started to use their skill and financial wherewithal to help transform the way the global insurance industry goes about its business. The task was daunting, but the possibilities seemed endless. That year, Ben Hubbard co founded Parcel, the business he still heads today. The firm made it into the first cohort of the Lloyds Lab and hasn't looked back. Now in 2025, Parcel has come through its adolescence and has made an impact in a niche segment of the cargo market where it has first been able to use its tech savvy to give itself a sustainable competitive edge. Now, eight years into the project, I'd argue that the excitement is now greater because Parcel is only just getting going and is poised to move into new lines of business parcels and short tech peers that didn't make it usually failed because they were tech companies that didn't know if they wanted to completely disrupt or collaborate with the incumbent insurance market. And it also turned out that many of them fundamentally underestimated how hard insurance can be to execute well and and at the right scale. Parcel is still here and thriving because it embedded itself in an entrepreneurial corner of the Lloyds market and has taken the best it has to offer while adding its own extraordinary, almost alien layer of technological understanding on top. It's a best of both worlds philosophy. So often we hear or read about the future of underwriting as if it's something that hasn't quite arrived yet, but will come eventually if only we can be a little more patient. Well, the wait's over. What Parcel has built has fulfilled the promise of 2016 and then some. Ben and I met face to face on a stormy London afternoon in winter and the conversation fairly crackled along. I defy you not to be enthused by Ben's affable and easy to digest philosophy on how to make insurance better, more relevant to clients and more profitable for its capital backers. Just to give you a taste, this is a business that already runs 100% of its submissions through AI, constantly revamps its products over rolling two week cycles, and updates its models from experience and new third party data every four months. For incumbents, this is jaw dropping stuff. Luckily for us Ben is a friendly face who can help make this revolution palatable and easy to understand. The future's already here, so listen on to get yourself up to date. Enjoy the podcast.
- [02:44]
Ben Hubbard
Ben, welcome back to the Voice of Insurance.
- [02:46]
Unnamed Speaker
Well, it's great to be back two years later and doing it live in person here.
- [02:51]
Ben Hubbard
Yes, the last was on a Zoom call and it is so much better. We were having a chat earlier. It's so much better to do things live, face to face. I don't know what it is, but technology is never quite going to get us there. There's always some kind of latent delay. It's still a bit like being on a walkie talkie almost saying over and Roger or something to each other. I'm sure technology will get closer and closer. There'll be less delay, less latency and less and less and less. But there's always going to be. I think by definition there has to be some latency, doesn't there?
- [03:18]
Unnamed Speaker
Yes, well, I've done a few podcasts now in my career and this is the first in person one I've done, so.
- [03:23]
Ben Hubbard
Oh, fantastic. Well, I'm glad because we're doing it in London. London is the king of face to face. So anyway, back to the point. Two years is a long time in a young business like parcels life. What's happened in the last couple of years? Fill me in on where parcels got to in that time.
- [03:41]
Unnamed Speaker
Yeah, well, it has been two years and we are a young business, so a lot has happened in that period of time. First thing is we've grown quite a bit, proud to say, and done so profitably.
- [03:50]
Ben Hubbard
Did you launch the syndicate? I can't remember if you just were about to announce the launching of the syndicate.
- [03:55]
Unnamed Speaker
I think we probably had just gotten started on our syndicate at the time, but since then it's been growing the business using the foundation that we established. So we've grown quite a bit, 100% per year on average over the last few years. We're underwriting profitably. We launched a consortium at Lloyd's 18 months ago and we've put 60 million of premium through that since its debut.
- [04:16]
Ben Hubbard
That's impressive.
- [04:17]
Unnamed Speaker
Really proud of that. We spun off our IoT business, our monitoring suite, as a way to focus on our scaling insurance business. We've expanded our appetite in terms of the types of commodities that we're open to insuring beyond just the perishables and essential goods that we were originally focused on. We're doing lots of R and D right now around new products that we can bring to market to support our customers and the array of supply chain risks that they're now facing. And we just raised a growth round of capital. A series C is what they call it from a great investor perspective.
- [04:49]
Ben Hubbard
C just means it's the third one in the Alphabet, isn't it? Third big one. But for people who don't understand venture capital fundraising, if you're from Silicon Valley, everyone knows they teach you this in elementary school, don't they? But for anybody else you raise, maybe you have angel funding from people, small amounts of funding and then you have sort of pre seed funding and seed funding funding. And then when it gets really serious, once you have a business that has a product that sells product that starts probably making a small amount of profit on that product, or at least has a very clear pathway to probability, you start bringing the Alphabet and so it starts becoming quite serious. So C means this is like the third really big grown up round of funding.
- [05:23]
Unnamed Speaker
Yeah, more or less. We've done more than three. But you move from someone backing a person and an idea, more non financial metrics. And over time you seek to prove your product market fit. You start to get some traction and then over time the metrics become much more around financial metrics. So we're in the growth stage and we're really proud of that. It means we've hit some important milestones in business.
- [05:45]
Ben Hubbard
Well, it means, I think it just means you've gone through all the hurdles that are fatal to many.
- [05:50]
Unnamed Speaker
Yes, we're still standing and you know, it's a high risk asset class to invest in. There's a high rate of failure. So yeah, making it this far, we're really proud of that.
- [05:58]
Ben Hubbard
In fact, you've run through a list of so many things which is great. That's going to be most of the podcast unpicking all of those different things. So in terms of gross written premium for Parcel's own account, where are you at now?
- [06:07]
Unnamed Speaker
The amount of premium we control, that we underwrite and lead on is significantly more than what flows down sort of net into the syndicate. And that's because we are a capital light player. We're using facilitized things like the consortium binders.
- [06:22]
Ben Hubbard
So really it's not about the capital for you. Is that right then? And obviously when I ask you what that series C funding is for, believe me, it's not to say, hey, we need to capitalize a huge insurance business balance sheet.
- [06:34]
Unnamed Speaker
That's right.
- [06:34]
Ben Hubbard
That's not what it's for. It's for people. Technology, distribution.
- [06:38]
Unnamed Speaker
Yeah, and it's important to point that out because we are in the business of being a specialized innovator in our space. Our space being supply chain and the way we're capitalized with venture capital. Our mandate is to innovate and find fundamentally better ways of doing the business. And it's not necessarily to put that capital at risk in terms of underwriting capital and put it at risk from a risk transfer perspective. So it means that the way we run our syndicate, the way we run our business model is different than your traditional multi class Lloyd syndicate.
- [07:15]
Ben Hubbard
So really the way you've ended up being structured is because this is the best way you've found of doing this business. And having a small amount of capital in the game is helpful. It helps you bring other people around you within a consortium or in a stack of your own capital. So what you're saying is that it's not running a balance sheet business that really matters to you, it's the underwriting.
- [07:34]
Unnamed Speaker
Yeah, the underwriting result ultimately is what matters to everybody, including us. And we do put our own capital at risk, to be clear, and it's significant to us. But as we've grown our ability to back ourselves in terms of posting our own capital against the exposures we're writing, we've exceeded our ability to do that. And that's a sign of success. What the Lloyd's market allows us to do, not only can we build capacity through consortiums and the like, we can bring in third party capital. So we'd call it funds at Lloyd's third party capital investors, for those who know the lingo, but what it means is we can be very focused and specialized in our area, which is more rare, I'd say in this market. You have kind of more generalists. We are not diversified as a result of that. So we're very capital inefficient, but we're very diversifying to the market. So if you're a third party capital investor, you can back part of our book, our year of account and not only are we profitable, we're non correlating, we're short tail, we're limited cat. And so that's actually a great solution for us as an innovator. Right. Because we don't want to be all things to everyone or mile wide, inch deep. We want to be really deep, really specialized and really good at what we do.
- [08:44]
Ben Hubbard
This is the great thing about cargo, isn't it? The good thing and the bad thing about cargo is it's moving and so you can bash into things and it can go wrong. And, you know, your bananas could ripen on the way because they've been stuck in customs somewhere or whatever. The refrigerator broke down and all the things that we know can happen. But also, that's also the good thing about cargo, isn't it? It gets out of the way of things. If you can see a hurricane come and you drive your ship in the opposite direction, it's not like a building that just has to sit there on its foundations because there's nothing you can do about it.
- [09:11]
Unnamed Speaker
Yeah, it is constantly changing and moving and the exposures, even if they're static, are changing, you know, by the hour. So it makes it interesting all the things you mentioned happened last year, you know, bananas, you know, sitting delays. So it's always interesting and endlessly fascinating. We have taken to thinking about supply chain and complex supply chains broadly beyond just cargo stock throughput, beyond, in Lloyd's parlance, the V risk code. That is one way to look at supply chain. And it is our bread and butter. So it is core to what we do. I think what we want to start doing is looking more horizontally at the supply chain. And there's so many risks that are impacting shippers and anyone trying to move product around the world now. Geopolitics, climate, different regulations, esg. Obviously there's a new political regime in the US that has some changes in store on the trade side.
- [10:06]
Ben Hubbard
Who knows if it's. Suddenly we wouldn't need to know all the rules of origin of all the products that are inside that container.
- [10:13]
Unnamed Speaker
Absolutely.
- [10:13]
Ben Hubbard
Otherwise you're not coming in.
- [10:15]
Unnamed Speaker
And that's happening now. And it's actually something companies are really trying to mitigate from a risk standpoint. Uyghur Force Labor Protection act is a big deal. And I think there's an equivalent law in the eu.
- [10:28]
Ben Hubbard
Yeah. Because it could be really serious. When you see some of these sort of global, sort of fast fashion chains always being kind of held up, that product could be stopped at any time and then be accused of using forced labor or that kind of thing. Who knows? I suppose, unless you can document that and you've got the data and the platform that could prove your case at that point of delivery where it really needs to be proven and really quickly, then you're going to be in trouble, aren't you?
- [10:52]
Unnamed Speaker
Well, that's always the challenge insurers have had, because how do you underwrite that risk?
- [10:58]
Ben Hubbard
It'd be good if you could, wouldn't it?
- [10:59]
Unnamed Speaker
Yes, it would be good if you could. But to do it you need to have that level of visibility. What's the data source you have, what's the technology you have to understand it. And I think that's what is so exciting about where we're sitting right now is because there are all these new players and data sources and solutions out there that maybe weren't necessarily developed for an insurance application. But because we are a peer in terms of a technology peer to many of these companies, we can see the potential of what they might be doing that could unlock something on the insurance side. And so, yeah, we're looking more broadly now. Nothing to report on yet, but there's certainly opportunity, sure, additional classes, but even between classes of business, business and some of that gray area, certainly supply chain.
- [11:44]
Ben Hubbard
Has been a massive gray area for the whole of insurance. We're talking about often in the context of business interruption. But here, if you're a holistic kind of player who understands that there is a continuum of things and if that continuum is broken, I. E. I have a load of frozen fish and now they're not frozen, now they're rotten fish. The same happens. We discovered a huge amount during the Thai floods of about 12 years ago in the Mekong River. We only found out afterwards how much of the world's manufacturing supply chain had been outsourced to relatively low cost manufacturing locations in Thailand. And then they were all underwater. And you suddenly realized that actually there was a place that made critical component for most of the printers that we use, you know, you know, kind of office printers, that kind of sort of rubber band or a widget. And no one really knew until it was underwater. And then suddenly there was a massive shortage of these things and people had to try and find alternative components. And it turns out there weren't any. And no one had ever done that research because it was not necessary because normally it just works. So it sounds like the sort of thing that you could be good at in terms of if you're looking for adjacent uses of your skill.
- [12:45]
Unnamed Speaker
Exactly, yeah. And I think that's where we're pointed and it's not necessarily us becoming the expert in that particular data source. I think one of my co founders says we're in the business of turning over rocks and looking for new interesting data sources that can help us better understand risk. So increasingly looking to do some of our work through partnership, I think the number of innovators I've talked to who've walked around the Lloyd's market, day one, so exciting. Everyone's really excited about our solution. So much support for it. A year later, everyone's still really supportive and excited, but nothing's happened. Two years later, I've wasted so much of my time and I don't think anyone's stringing them along. I think people are genuinely excited about many of these different innovations. Where I would say incumbent players, insurance players struggle is how to then take that journey from. This is really interesting solution. How do we take it through a product development cycle and bring it to market and get it distributed? They have all the capabilities to do it, but you're a big company, right, and you need a lot of different skill sets and you need a lot of collaboration.
- [13:47]
Ben Hubbard
This way they could come in your capital stack of your own syndicate, they could be in a consortium with you or they could be reinsuring you.
- [13:54]
Unnamed Speaker
Well, we launched a data partner program, which is how we get a lot of our monitoring data for temperature applications or theft, so sensors riding with the cargo. So we work with and pre integrate with a number of existing partners. We've expanded that to include a company called Lineage Logistics. They're the largest cold storage provider in the world. Gives us a dynamic view into a company's inventory patterns and behaviors, which is really interesting. So we're now adding more partners to this program, again to unlock underwriting insights, potentially to unlock new products and coverages. And we become the translator from pure tech and data into insurance product.
- [14:36]
Ben Hubbard
So it's not like necessarily owning that data. It sounds like you're more interested in finding the right data wherever it is. And then we really add the values when you blend it all together and make it something that's useful, kind of tasty, rather than something that's not.
- [14:50]
Unnamed Speaker
Look, it's the hard part. We have to be scrappy because we're new and so we need to be a lot better at things than other people to make a dentist. And so that's the thing we uniquely bring. There's a classic innovators dilemma. Right in the middle of the market, everyone's making money, why change? It's working really well. Great, right. But I think we have to be scrappy. We're thinking about where are we going to be in five, 10 years, how can we be investing today for that differentiation tomorrow? And it's a different mindset, right? We have a different kind of organization at Parcel in terms of how we're structured. Who works here? I'd say we're equal parts technology organization and equal parts insurance organization. The org chart looks very different at Parcel than it does at any other syndicate you'd see around here.
- [15:34]
Ben Hubbard
Just in terms of actually headcount. How many Parcel employees are there now?
- [15:38]
Unnamed Speaker
Yeah, so we're right around 40. I will say we don't really measure our progress in terms of headcount. For a company that's very focused on.
- [15:46]
Ben Hubbard
That means you have to organize a Christmas party. Whereas before it could have been you could have just gone down to the pub or something.
- [15:51]
Unnamed Speaker
Yeah, we can almost fit in a room. The smaller the better. But really for us it is how do we grow, grow premium in the company in a non linear way to headcount that our investments right now, especially in Genai, is all about reducing the need for overhead and headcount. And I think that's actually one of the most exciting ways to build a profitable insurance business today is investing in that.
- [16:15]
Ben Hubbard
Well, goodness, we're going to have to talk about all that. Go back to that Series C. So the money is for all the R and D, the people now the AI. That's what it's all about. That's what that money's for from the crc.
- [16:26]
Unnamed Speaker
It's for a few things. So the money is for growing our underwriting operation. So put aside what I just said, we actually still need to hire people and we still believe in human underwriters.
- [16:36]
Ben Hubbard
Someone's got to put a line down, haven't they've? Got to put that consortium down.
- [16:39]
Unnamed Speaker
Well, I mean machines can put a line down. I think what we need humans to do is the human touch. Right. It's obviously developing the business, it's the network, it's the judgment.
- [16:47]
Ben Hubbard
Probably need to know who the top perishable cargo brokers are in the world and have them on speed dial and probably, you know, actually humanly interact with them.
- [16:56]
Unnamed Speaker
Yeah. And for us, ironically, as a US company with Lloyd's presence, we actually have very light underwriting footprint in the U.S. most of our footprint in the U.S. is product engineering and operations. So we want to grow our US presence. Obviously more ground to cover there, a lot more brokers to cover. So we'll be doing some hiring across the us Definitely investing in the technology and data capabilities. You know those foundations are there. Like I said, this is a around. What more can we bring to the table in terms of other partners and data sources? Genai has been a big investment for us. I think we were an early mover on it. We're seeing huge rewards. We want to keep that up. It's one of the things I find myself surprisingly excited about.
- [17:38]
Ben Hubbard
Let's talk about it now that it's out there because obviously it's been on my list of things to ask people ever since. Probably we did our last podcast and exploded on the scene at the beginning of that year, just after we'd done the podcast, where suddenly ChatGPT was everywhere and it was in every newspaper and it was in every store and permeated at every insurance conference ever since. So where are you finding the best applications for Genai in what you're doing within the value chain of underwriting? Yeah.
- [18:03]
Unnamed Speaker
So I mean our technology and data investments are broadly targeted at two areas, so predictive modeling and efficiency and productivity. I'd say Genai plays across both of those, but we see huge benefits on the productivity and efficiency side. There's so much hype around Gen AI and then there's the profoundly exciting, there's the scary.
- [18:25]
Ben Hubbard
Just kind of getting a quote out really fast, that kind of thing.
- [18:28]
Unnamed Speaker
Well, yeah. So I think we see the boring as like it's the perfect use case for Gen AI is taking these really boring administrative tasks that we fill buildings up in London, we fill them full of people to do all this administrative work. It's 80% of the activities of an insurance operation. It's quite boring is the admin. And so I'd say early on we were early to move on this. The rate of and the pace of change and how fast these models are changing. It's really exciting. And so we release product internally every two weeks. We follow product methodologies from technology. So you're constantly iterating and updating and releasing. We will have to completely update the models every four months just because that's how fast the underlying large language models change. But it's great because then the accuracy gets better, everything gets better.
- [19:17]
Ben Hubbard
So there's the kind of boring admin side of getting your paperwork done, getting your quotes out quickly, as fast as you possibly can to the brokers. But there's also this predictive modeling. It's helping a lot. Is it because it's just the AI is looking at that data and coming up with new insights all the time and saying did you know every time that this happens that correlates with the loss happening or that the temperature then goes to your.
- [19:38]
Unnamed Speaker
There's some of that. I would say it's the interplay between the two. So right now when someone sends us a submission, 100% of our submissions go through our internal AI underwriting agent. 100%. So that system. We've named him Chauncey. It was the most British sounding name our team could come up with. I have yet to Meet a Brit named Chauncey, by the way.
- [19:59]
Ben Hubbard
I don't think there are. Anyways, it's one of those AI fantasies that we hear about.
- [20:04]
Unnamed Speaker
Yes, but anyone who's in insurance knows you get a submission from a broker and from a unstructured data standpoint, it's a dumpster fire. It's just a bunch of unstructured data. There's a number of attachments, there's a spreadsheet.
- [20:17]
Ben Hubbard
There's a spreadsheet and there's many documents and there's the content of the email.
- [20:20]
Unnamed Speaker
Itself, of course, the contents email. The spreadsheet itself has a bunch of different tabs that say different things. Some of it's totally irrelevant to the risks. Sometimes they just attach something that's just.
- [20:30]
Ben Hubbard
Well, they might just give you the annual report just in case. Just in case you ask for it.
- [20:34]
Unnamed Speaker
Right. So then someone has to parse through all that. So that's all been taken away. A machine now can read the emails, it can read all the attachments. We log that into our CRM, we read the SOVs, we put it into our exposure management system, we map it, we can pull our Ms. Scores automatically. So basically everything is set up for the underwriter within a couple minutes. Go get a cup of tea and you come back and it's ready to be underwritten. But it's all structured and so now we're capturing all the data which most of the time that doesn't actually get captured, it gets structured. That can now feed into our predictive models. As we underwrite and policies go live, we get performance data that feeds back into the model. And we get this because one of.
- [21:16]
Ben Hubbard
The nice things about being short tail, isn't it that you get the feedback pretty quickly. Was there a loss? Was there not precisely successful shipments?
- [21:23]
Unnamed Speaker
Yeah, well as I say, it's. It's both lost data when claims happen, but it's also some of the IoT data we get. Right. So we can see what was in your Ms. Kind of. What's the general performance of shipments overall?
- [21:33]
Ben Hubbard
When you're underwriting, you're always linked to that Internet of things device, the kind of mobile temperature gauge.
- [21:39]
Unnamed Speaker
It's really depends on the client. So we can do it without. We can do it without. And some clients don't opt into the program. We always require some type of device. There's certain, from the digital standpoint, ones that are real time, the data is more actionable and accessible. That is an opt in. So some number of our customers opt.
- [21:56]
Ben Hubbard
Into that and we presumably it's better for them anyway. They could probably get a better premium. Right.
- [21:59]
Unnamed Speaker
We reward them so you get savings and incentives when you do that. The thing for us is those solution providers are providing a control tower visibility. So it tells us from a self selection standpoint this client cares about risk management. They're acting and using data in a proactive way.
- [22:17]
Ben Hubbard
Your business is freight and someone's offering you a way of knowing exactly what's happened to every container that you've got and where it is and what temperature it is and what other bits of data you can tell about it. Why wouldn't you want to know? Because you're bound to want to know and if you're a good manager, you want to. Well, now I can manage this. Now I can find out more stuff about why things go wrong.
- [22:33]
Unnamed Speaker
Yeah, I'd say the good companies want to do that and get better and reduce their losses and reduce waste.
- [22:38]
Ben Hubbard
They'll want to insure with you and that's. We want to reward them.
- [22:41]
Unnamed Speaker
We want to reward those customers. It's good for us. I'd say it's good for sustainability and just creates general value for the world. And that's what we're about. We have this concept of underwriting for impact and for us that is taking the targeted insights that data and technology can provide, using insurance to package it up and create an incentive structure for companies and reward companies who are actually doing that already or ones who would want to do it. We can help nudge them and push them on.
- [23:06]
Ben Hubbard
Chucking expensive, highly manufactured things away because they've gone off whatever it is, organic material, it's bad. Throwing things away unnecessarily is crazy, isn't it?
- [23:15]
Unnamed Speaker
30% of food gets lost in the distribution chain. So that's inherently not a sustainable proposition. And some of that can certainly be avoided. A lot of it can. I mean certainly a lot of what we see can be avoided in terms.
- [23:30]
Ben Hubbard
Of that gen AI. What about the return on investment from a money perspective? Is it paying off? I mean how expensive is it to do that?
- [23:38]
Unnamed Speaker
So for us it's probably different because.
- [23:40]
Ben Hubbard
I suppose because at least you've already got the people who understand this.
- [23:43]
Unnamed Speaker
We have such a profound advantage because we don't have legacy. We have an advantage because our origins as a technology company we have the data pipeline and the data foundations and the data governance and the master data management and all of those pieces that have to be there in order to seize the opportunity. We have an internal data science team and capability that can work with these Tools.
- [24:04]
Ben Hubbard
So when you get it in, you can really see it.
- [24:06]
Unnamed Speaker
Right. So I'd say from the time we first started to work with these different models to prototyping to doing our first production release was probably three or four months. Now, obviously we've been doing this for 18 months and it was. First versions of that were lousy and we've iterated them. It's certainly an investment, don't get me wrong. But it's not like we have an army of people developing this. It's a pretty lean team. And then the impact we have reduced underwriting time. So as in time spent from submission through to quoting by 80%. Think about that. It's huge.
- [24:37]
Ben Hubbard
I mean, that means just physically an underwriter can underwrite more stuff.
- [24:41]
Unnamed Speaker
They can underwrite more stuff and. Or spend their time developing business and doing the higher value parts of the job. I would say doing the enjoyable parts of the job. Because no one really wants to spend a third of their day. I mean, I ask underwriters all the time, how much of your day, not hours, but others, how much your day do you spend on administrative activities? And I hear anywhere from like 30 to 50%, some even beyond that. And they're not the cheapest people on the payroll. So you want them doing higher order, higher value work and this allows them to do that?
- [25:14]
Ben Hubbard
Yes, I suppose it's not just admin, of course, it's the reporting and the compliance in insurance. Being a regulated industry is not enough just to be really great at what you do. You have to also be great at proving that you're great at what you do. To everybody who asks and including the rating agency and your regulator and anybody else who might want to know. Yeah.
- [25:31]
Unnamed Speaker
And I'd say we're now going to invest in terms of some of our proceeds and just priorities this year. It's really that similar level of investment that we've made on the pre bind, quoting side of it into the post bind process. And that's where we get into reporting and compliance.
- [25:45]
Ben Hubbard
Sounds like it could be very useful for that kind of thing. So say, hey, I need to do my FCA return. Boom. Will the Genai do it for me?
- [25:52]
Unnamed Speaker
It can do it. I think the bigger challenge we have on the technology side post bind is just the partners we have to work with. Right. We're interfacing with archaic technology systems. The ECF from a claims standpoint is a great example of it.
- [26:03]
Ben Hubbard
Yes. It was originally described, I remember, as a glorified PDF and I think it is a glorified PDF. But it's pretty damn useful. Better than an actual just print off of a piece of paper. And it's technology from 25 years ago. Not cutting edge.
- [26:15]
Unnamed Speaker
Yeah. And that just makes it harder to integrate with when you've got a modern system. So the claim system for Lloyd's turns off every night. It's a piece of technology that has a closed sign at a certain hour.
- [26:26]
Ben Hubbard
That's unexpected, it's unhelpful.
- [26:29]
Unnamed Speaker
And I think we can do better.
- [26:31]
Ben Hubbard
Yes. Because ships do sink when the machines turn off, don't they? And things actually happen while we're all sleeping. Or of course, while we're all sleeping. Other are awake. The syndicate. So going just coming up to what you said about Capital Light, it sounds like you're running it in quite a lean way. Often when we talk about Lloyd startups, there's some kind of imperative that the income on the cynic has to get to a certain amount for it to become genuinely viable, to keep that expense ratio down. And you do that by increasing your volume. Sounds like are you able to do it in a way that could still run very, very light, incredibly light without having a 200% expense ratio, that kind of thing.
- [27:07]
Unnamed Speaker
So, yeah, the syndicate itself is a sustainable proposition. Now. I think we still want to grow it into a mature.
- [27:13]
Ben Hubbard
I know you made a profit then the last available accounts, which was 2023, but it was modest profit. I'm sure that it's likely to be better now.
- [27:22]
Unnamed Speaker
Yeah. I think the syndicate results and certainly whatever gets reported publicly, I mean, it doesn't capture what we do. So I think the bigger question is at the group level, what does payback look like? And for that we are Capital Light. We're investing heavily in innovations in R and D today for payoff tomorrow. So how you fund that for us? Because we live off more of management fee than underwriting profit.
- [27:45]
Ben Hubbard
Yeah.
- [27:45]
Unnamed Speaker
There's a certain scale you want to achieve just to get enough fee off of that income to pay for everything. So I think from that vantage point, we're getting close. Inc will be nearly there there by the end of the year. From the syndicate standpoint. Yeah, it's a sustainable proposition. Now, like I was saying earlier, we control a lot of premium in terms of business. We lead and underwrite. We distribute that to our consortium partners. What we retain, we distribute to a panel of reinsurers. And then there's the bit left over for us and then we take a piece of it and then we have third party capital. So it's distributed a lot along the way, if we were a traditional underwriting company where we could back ourselves with our own capital, obviously a lot more of that income could flow through to the syndicate. So that to me is a strategic choice, how much income we bring down into the syndicate.
- [28:34]
Ben Hubbard
You're not tempted to go that way because you can show yourself, particularly after you have a decent track record. You can prove that you're a better than average underwriter and that that capital will be well looked after. Even though of course it's very modern line and it's not diversifying in that sense. It's diversified for a person providing you the capital. But of course it would be reliant on more traditional protection. Like you'd probably have to buy more insurance than most unless you're able to diversify into adjacent lines and other things.
- [28:58]
Unnamed Speaker
Yeah, believe me, when you post really good underwriting years, it's frustrating when you're giving away all your profits to partners.
- [29:05]
Ben Hubbard
Should be my money, but it makes.
- [29:06]
Unnamed Speaker
The partners very happy. But here's the reality. So even if I would like to do that, the nature of our business is we're specialized, we're not diversified, we're not capital efficient to bring in underwriting capital. That's private equity. Private equity likes capital efficiency. So private equity backs diversified scaled multi line syndicates. They don't back monoline, specialized, non diversified syndicates. That is just the reality of building a business at Lloyds. And I think it can be a harsh one for an innovator because the whole Solvency 2, the Lloyd's Market, all the rules and regulations are designed for scale diversification. It's the law of large numbers. And it makes sense. Right. It leads to capital efficiency.
- [29:51]
Ben Hubbard
It works.
- [29:52]
Unnamed Speaker
Yeah, yeah. And that's why private equity loves Lloyds. So that is the incentive structure. That is the way the rules are. Governance. So what Lloyds has tried to do with the syndicate in a box program, what everyone's tried to do is like, how do we bring innovators into the market? Okay, not every innovator needs to become a syndicate. In fact, most probably don't. But some people and some innovators want to go the distance. We certainly have. And others should consider it because it comes with a number of strategic advantages. And I think it's a good thing for the Lloyd's market to bring that innovation in. But what's the best way to do it? Right. Because there are some harsh realities when you are building, when you're capitalized with venture capital, when your mandate is specialization and innovation versus the Traditional Lloyd's model, which I would say is more insurance entrepreneurship. Right. This is a playground for insurance entrepreneurs. You're the well connected insurance pro with the ability to attract some private equity and talent. You see some market opportunity or dislocation and you go out and create a syndicate to go pursue that opportunity. Private equity likes that. It delivers pretty good returns. That's going to keep happening. We should broaden access to that opportunity. But I think Lloyd's is already pretty good at that. I think where there's a good conversation to have is what can be done to create a pathway that's a little easier for innovators who may not have that kind of business model, but who are doing some things that are really, really positive for the insurance industry in terms of its ability to modernize and stay relevant.
- [31:18]
Ben Hubbard
It sounds like for me then you'd probably have to diversify naturally by finding other classes of business where you can apply your skill, your technological skill and your non legacy in all that skill and the analytical capability. Well, if you've suddenly found that you could be really good at general aviation, whatever it is, I don't know, it could be anything. If you found you could get an edge in another series of classes and of course you'd naturally become more diversified and then you could probably handle having a few hundred million of capital of your own by then. But that would be in 10 years time.
- [31:49]
Unnamed Speaker
Well, yeah. And so diversification will come for us over time, but it's for us, it's like we're going to go into lines of business where we can bring something unique and lead in a way that others can't. So that's the measure for us. A good investor or board member of any kind of early stage venture backed company. The message is focus. They aren't saying early on go diversify. Right. But that is how you build a traditional lloyd's business.
- [32:14]
Ben Hubbard
Yeah, you don't want to diversify it.
- [32:16]
Unnamed Speaker
I like that.
- [32:17]
Ben Hubbard
Yeah, I think that's. Yes. Vijay Dowling, the famous investment banker is the guy who coined that phrase. And it's a very good one. Yeah. So yeah, don't do that.
- [32:26]
Unnamed Speaker
So I think there's something to learn from banking. Banks were the be all end all. They had all the products and services and so Fintech came along and they took out the payments piece and then it was people to People payments and B2B they did consumer lending and remittances and so all these discrete pieces of product offering that a bank offered, you had innovators coming in and doing it differently and better. And we have seen less of that in insurance. I mean, MGAs do it to some degree, right? I think that's largely where innovation, traditionally you set up an MGA to do that, I would say, like Lloyd's, relatively, can be somewhat cumbersome in terms of creating a cover holder relative to other options that an innovator has. And now, of course, the trend is to set up a fronting company and go straight to reinsurance if you're an MGA innovator. So I think it's important for the Lloyd's market to make sure those innovations don't bypass it, just because it's not an easy place to come and operate as an innovator, whether it's as an MGA or a syndicate or otherwise. And that we're encouraging specialization. Of course, this market is known to be specialized, but I think the very definition of specialization is going to start to change as technology starts to get much more verticalized around the specialty tasks that one needs to do to underwrite a discrete class of business better. I mean, we're a good example of that. We're building tools that are bespoke to the cargo that we underwrite and the unique way that submissions come in and the data that we collect to be able to underwrite.
- [33:54]
Ben Hubbard
Well, in terms of its diversification, any projects on, are there any lines, we think you could build a similar edge and have that confidence that you're doing something that other people can't do.
- [34:04]
Unnamed Speaker
It's definitely an area of active exploration for us and we'll be able to bring something to market this year. I think we're also just looking at just basic extensions to our policy. Any ways you can differentiate?
- [34:16]
Ben Hubbard
I suppose, let's face it, cargo is big enough. It's still a big enough ocean for you to go and swim in, isn't it? That's not a world you've conquered yet, is it?
- [34:24]
Unnamed Speaker
No, hardly.
- [34:25]
Ben Hubbard
Sort of Alexander the Great syndrome here.
- [34:27]
Unnamed Speaker
Hardly. Honestly, we're scratching the surface and I think it's less that we're looking at other things because we feel like we've tapped out the opportunity.
- [34:35]
Ben Hubbard
You're just getting going, right?
- [34:36]
Unnamed Speaker
We're just getting going. And so that's going to be our bread and butter that will drive most of our income. But I think we just see these other opportunities and we see this thing we have to offer the market in terms of what we figured out, turning data and technology into insurance product.
- [34:50]
Ben Hubbard
And on the cargo, how much of an edge do you think do you feel You've got within that marketplace. And do you feel that is that edge being eroded? Obviously it's competitive. Marketplace betters are never standing still. You had a running start because you're more agile, more nimble and able to do a lot of these new things. But others can catch up and when they do, they've got big resources. Are they catching up?
- [35:08]
Unnamed Speaker
I mean, in all humility, I don't think so. Look, I think anyone can throw out a price.
- [35:14]
Ben Hubbard
I mean, naturally an edge will always be eroded. But if you've got gen AI and you're re underwriting and you're remodeling every three or four months, that's pretty impressive. So you're kind of happy with your odds of keeping ahead.
- [35:25]
Unnamed Speaker
Yes. And I would say as a general matter, we want the industry to embrace these tools just like we have. I think that's a rising tide that lifts all boats and makes the whole industry work better. On any given day someone can throw out a price and a policy and beat us. Right. That doesn't mean it's a sustainable advantage. I look at sustainable, sustainable long term differentiation and yeah, we've got lots of incredible tech and tools that we're building. But the core of our differentiation is the organization we've built. So our org chart is different. We have a CTO Chief Technology Officer and a chief Product Officer in the company. We don't have an IT department. They don't spend their time doing RFPs to buy kind of outsourced technology and integrate it. We build our own solutions. If we can buy something off the shelf that does the job, absolutely, we'll do that too. But the way we build product, the way we collaborate as a company follows methodologies that are much more akin to a technology company than an insurance company. And so there's an equality. The data engineers and the data scientists have the same standing as an underwriter. And it's that kind of equality that creates creative friction, that creates better outcomes and better solutions.
- [36:37]
Ben Hubbard
Most organizations, the IT department, these people that you never see except when everything's broken or you know they're going to give you a reason why whatever it is you want to happen can't happen for another eight months or without more budget or that kind of, they tend to be quite isolated from everybody else. With here you're completely integrated, very integrated.
- [36:55]
Unnamed Speaker
And so that culture, that collaboration just looks very different. And I think that is ultimately what drives our differentiation. I mean again, banking. So you look at Neobanks and some of the successful, I'd say Modern banks versus okay, so you had banks who would like they were bankers and then they hired some tech people to kind of layer on top and they didn't really get fundamentally better. But you had some of these newer neo banks and it was really like let's take the best of technology and banking and data science and take the best parts of each and do it collaboratively. They created really elegant differentiated products. So I think it does come down to not to say that like the only way to compete is to kind of wholesale re engineer your organization. But I do think some of this is built ground up in terms of how you got started, what your DNA is, how do you think about solving problems. And in that regard there's very few like us certainly in our line of business. And I would say now having been living in London in the Lloyd's market for six months, I don't think there's a lot like that in the London market.
- [37:56]
Ben Hubbard
Yeah. And in terms of how's the market, obviously a slightly softer market than we have had the last couple of years. Does that really affect you? Do you feel kind of chill winds of a softer market or does it not matter so much?
- [38:08]
Unnamed Speaker
We're definitely seeing some rate coming off. I just got back from the us it's definitely happening there. The one nice thing is because we're pretty niche focused. Most of our book is perishables, food.
- [38:18]
Ben Hubbard
Pharma, you really know where the burning cost is so you know you can't get too close to it. And that's just the end of it, isn't it?
- [38:24]
Unnamed Speaker
Yeah, there's some stuff we just, you know, we won't compete with stupid and there's some stupid stuff out there. But actually I'd say that niche of the market, it's underserved still. And so we find that there's limited options for clients and rate is coming off less so in the essential perishable supply chains.
- [38:42]
Ben Hubbard
I suppose if you're providing a genuinely added value service there for these people and they're going to appreciate that and I suppose I also think they appreciate.
- [38:50]
Unnamed Speaker
That we were there when no one wanted to write this business. So we went into a part of the cargo market again, that being perishables, that was traditionally considered distressed and higher risk and not performative. And since we started at runnerwriting, we've been quite profitable on our underwriting since we started. And the critics will say it's luck or it's a hard market, could be those things. But I also think there's something to what we're doing and the way we're able to select risk, I think the way we're able to get clients to self select to work with us in terms of what we ask from them in terms of risk management. And so far that's borne out positively. But yeah, we'll definitely be facing some headwinds on the rating side. But there's so much opportunity for growth and I think we find other pockets and places where we can find profitable growth. Leveraging the Lloyds global network, we kind of access corners of the market that would be hard to do anywhere else.
- [39:39]
Ben Hubbard
You mentioned before about. Yes, it was a couple of years ago, you had your own Internet of things devices, you know, kind of little kind of coin size things that you could put in with a shipment which would be telling you what was going on. You said that you had, you spun that off.
- [39:51]
Unnamed Speaker
Yeah. So about a year ago we made a strategic decision to divest our monitoring suite. And really there's a number of reasons that kind of went into it. I think fundamentally it had grown into a separate business and one that was very different than our insurance business. So our global health product and portfolio, which, you know, that's our OG business, that's our founding story.
- [40:13]
Ben Hubbard
Vaccines.
- [40:13]
Unnamed Speaker
The vaccines, it's how many people know us had grown really significantly and providing full visibility across a dozen or more African countries. So significantly reducing vaccine wastage and just having a huge impact. As that grew and our insurance business was growing, they both just needed time and attention and resource and we had to really kind of focus on one. So working with global health institutions and African governments, it's just a world away from selling insurance in the Lloyd's marketplace. And that was our first order business was building our insurance companies. So we found a great partner that we divested to who's specialized in that space and is better positioned to give it the resource and attention so it can scale even further and have a bigger impact. The other thing was that I think just feedback from the market is getting insured clients to switch from one solution to ours created friction in the buying experience.
- [41:10]
Ben Hubbard
Right. You don't want to think that it's a tied thing. Oh, you. We want to ensure with us you have to buy this other thing that goes with it. And what's that? And then people start being suspicious straight away, don't they?
- [41:18]
Unnamed Speaker
Yeah.
- [41:19]
Ben Hubbard
How they make the money, they don't make money off insurance.
- [41:21]
Unnamed Speaker
And the thing is for us, it was costing us time too. So actually it wasn't necessarily a money maker for us on the insurance Side.
- [41:26]
Ben Hubbard
There are other solutions out there that you can plug into and you can get the data you need.
- [41:30]
Unnamed Speaker
And that's all certainly on the shipping side. What we did I think was differentiated and great, but less differentiated when we're just talking about devices and shipments. Whereas Global health there really was nothing and is nothing like it today. So it was easier to turn to what were our competitors and say, hey listen, we're getting out of monitoring these. We can work with you in your digital solutions and get clients using it. That's fine. Because for us, devices were a means to getting data. So it wasn't around selling a little device at a margin never was. So we launched this data partner program where we've pre integrated with six of the leading solutions out there that can track temperature and lots of other things, but help us manage spoilage and theft. And so a customer just has to opt in and then they get rewarded for what they're currently doing and then we can give them incentives to expand utilization of the solution. And I think that's not something you really see out there as insurers proactively rewarding clients. And we leave money on the table by doing that, but we think longer term.
- [42:31]
Ben Hubbard
So you do almost got into that device business almost out of frustration that just you thought, well, we need to show people that you can do this. And now what? The market's moved on. That there are plenty more literally that.
- [42:41]
Unnamed Speaker
You said it out of frustration. Actually, I remember the day, it was a long time ago now and we're like, we just have to build this ourselves because we couldn't find anything that would do the job. And again, we were looking at a Global health application at the time and then started using it for insurance. So yeah, but we've always said it's a means to an end. And because part of this was selling a piece of embedded tech hardware at a margin, it just was never a business model I was excited about. What was exciting was data and analytics. What's the best way to get it? Well, we need something to collect the data. And so devices were a means to that end. If we can find a more cost efficient way of doing it with less friction for the customer, which is what we found, then, hooray, that's a win.
- [43:21]
Ben Hubbard
You'd probably imagine that people who manufactured containers would eventually just build all this stuff into, wouldn't they? Couldn't it be part of the container?
- [43:28]
Unnamed Speaker
Well, they already are.
- [43:30]
Ben Hubbard
They are.
- [43:30]
Unnamed Speaker
And actually we use that data too, I think. But goods are somewhere before they're in the container. And they're somewhere after they're in the container.
- [43:36]
Ben Hubbard
You were literally right down into a few boxes, weren't you?
- [43:39]
Unnamed Speaker
Yeah, well, yeah, and you go down to the unit level. But actually that's where a lot of problems happen is actually when stuff's getting transferred between modes of transit. So it is helpful to have something tracking goods.
- [43:49]
Ben Hubbard
Certainly that's where things tend to disappear in terms of theft, don't they?
- [43:53]
Unnamed Speaker
But yeah, exactly.
- [43:55]
Ben Hubbard
I've got a nice box of prawns over there. I'm going to take that one. But what I see, for example, in cyber is a transition to almost a full service. The cyber insurer is saying, well, actually I'm now your kind of cyber fire brigade to stop the fire breaking out in the first place. The insurance is there for everything goes wrong because things go wrong in ways that we haven't yet imagined. And they're always doing that. And the world has a way of making that and things just break anyway, don't they? How much do you view what you're doing as being kind of full service for a cargo solution?
- [44:24]
Unnamed Speaker
I think cyber is pretty unique in that way.
- [44:26]
Ben Hubbard
Yeah, because it's easier to do that because cyber's everywhere all the time, because.
- [44:30]
Unnamed Speaker
It'S virtual and digital, 100% digital. Someday would we like to have a risk engineering offering maybe that's a slightly more modern version than what you see.
- [44:40]
Ben Hubbard
That's what a broker can do for you anyway, isn't it?
- [44:43]
Unnamed Speaker
I think what we've tried to do is what is the kind of lightest digital version of that and what's the data like really? As a supply chain insurer, you want eyes on the goods. That's what you are. At least right now, that is what we're insuring. Physical damage. So what happened to the cargo? And so Iot is an important way to do that. We obviously use a lot of different data now. We try to share back to clients what we are seeing in terms of risk so that they're aware of it, what's driving price, so they can do something about it. And that's something we want to do more and more of. I think we can do more is turn the mirror around, right? This is kind of how we're rating it. And we want you to get better. We actually want to lower your price. This is what we need to see.
- [45:25]
Ben Hubbard
This is almost like the sort of would tend to be for young, recently qualified drivers who've got very high insurance premiums on their. On their car insurance. That kind of almost because hey, if you don't accelerate so briskly, we can give you a discount. If you break more carefully, you can discount. And if you don't drive after 11 o'clock at night with all your friends in the car on a Saturday night, then you can probably also. That's going to cost you as well. Are you a bit like that almost saying, hey, freight company, the way you unpack? We've noticed something happens, there is anything you can do about it?
- [45:53]
Unnamed Speaker
Yeah, I mean I certainly. And we've taken a lot of inspiration from consumer side and Cartelmatics for example. And I think part of this new approach for us when we're not owning the monitoring part of it is doing it through partnership. So when we're less direct with the customer, we need to rely on those partners more. So an IoT provider to the company, they have a control tower and a dashboard, they have a response team that's able to alert those clients to a deviation in the route and work with law enforcement. So those are value added things. We want to again, as the insurer, partner with solution providers, incentivize clients to use them. That is part of the risk management offering fundamentally. And we should reward, we should be in the business of rewarding clients who are taking those measures, not trying to squeeze as much premium as we can with as little coverage as we can offer. And that fundamentally is for us elevating the traditional, more cynical approach to insurance to like, actually there's something bigger we're trying to accomplish here. And insurers are in this really unique, privileged position to incentivize companies to improve their supply chain practices, to help them become more adaptable to climate change, to these disruptions. What can we do about it? There are limits, right, to what we can do. We work with a lot of different companies, so it's, the scale is great. So we need to find partners who can then be that hands on partner and work with clients. So we do that through partnership.
- [47:17]
Ben Hubbard
My last question would be yourselves as founders and the founding investors, what's your kind of philosophy in terms of obviously there is series C and then there's more letters of the Alphabet to come maybe. Do you have a sort of feeling of any exit strategy, that kind of thing? Or are you just so involved in everything you just want to keep going forever?
- [47:34]
Unnamed Speaker
A little bit of both. I think we have a plan and we're loving what we're doing and I don't really want to be doing anything else and hope this ride never ends. And I think actually everyone feels that way. So we have a business plan at some point. Will there be a liquidity event?
- [47:49]
Ben Hubbard
Yes, I suppose there just has to be, doesn't there? For original investors, you can't just look at this piece of paper saying we're now a digital number going up and it's not real money until you can actually spend it.
- [48:00]
Unnamed Speaker
Exactly. So we want to return capital. Yeah, that can happen all the traditional ways. Right. You trade sale recap with a private equity company ipo. Those are all options that exist. So we're focused on hitting our plan. And I do believe the rest kind of takes care of itself that's gotten us this far is just heads down, focus on execution, execute a really good strategy, bring in really good talent and partners, and believe in what you're building. And as one of our earliest investors said, Ben, if you want a differentiated outcome, you need differentiated thinking. And that still guides us today.
- [48:36]
Ben Hubbard
Yes, you are one of the original gangsters of insurtech. As far as I can remember. Was it the first cohort of the Lloyd's Lab?
- [48:42]
Unnamed Speaker
Very first.
- [48:42]
Ben Hubbard
It was the very first. You see, right in very, very early. When I remember I was the editor of Insurance Insider at the time, and we suddenly. It just. Things went crazy. We thought we better do an insuretech event, but we don't know anybody. Well, maybe it's this guy. I've heard of him. He seems really interesting. Someone who'd been down to the Lloyd's Lab and the launch and so, yeah, you've been around since the very early days. So we'll be looking out for parcel launching into a new class of business or new classes of business at some point in the next 12 months, that kind of thing.
- [49:12]
Unnamed Speaker
That's the hope.
- [49:13]
Ben Hubbard
That's the hope, yeah. Because obviously.
- [49:14]
Unnamed Speaker
But we'll see.
- [49:15]
Ben Hubbard
It's hard, right? Well, we'll see.
- [49:16]
Unnamed Speaker
And if it, you know, if it doesn't make sense, we won't do it. But anyways, it's. It's great to be here. I thank you for giving us a voice on the Voice of Insurance.
- [49:23]
Ben Hubbard
No, thanks very much for. No, but it's really, really good. Yes. You should listen back to the old episode. It's 10 times better when you're face to face. I mean, it was a horrible day.
- [49:30]
Unnamed Speaker
I really enjoyed this. I could keep going.
- [49:33]
Ben Hubbard
Ben, thank you so much. I've really, really enjoyed chatting and. Yeah. Anything else occurs to you that we should have spoken about that? We haven't. It's one of those funny conversations. Sometimes you just go. Normally it takes a while to get warmed up. Normally I wouldn't ask anyone about Gen until we really kind of got you warmed up and then you were straight in there. So thank you very much for that. You're already running hot. Yeah. Which is bad, isn't it? That's bad for you. You'd be running cool. Running cool, but getting straight to the point. Thanks very much.
- [49:57]
Unnamed Speaker
Yeah, thank you. Appreciate it.
- [49:59]
Mark Geogan
Well, I hope you enjoyed today's episode. If you did, don't forget to subscribe or leave a like or a review or recommendation on whatever podcast platform you used to access this program. These really help get the word out. Before we go, just a quick reminder that advertising slots are available here and in other places in the Voice of Insurance. Podcasts Podcasting is the fastest growing medium and attracts a high quality audience of key decision makers. It's also an intimate medium where you, the listener are right in the room with me and the interview subjects. Needless to say, that means it's a great way of getting your message out directly to an audience because you know you've got their full attention. It's also very cost effective, so get in touch with mark@the voiceofinsurance.com to find out how you could be speaking directly to the industry. The Voice of Insurance is produced in association with Advantage Go. Release your underwriters to underwrite with Advantage Go's underwriting platform.
- [51:01]
Ben Hubbard
Voice of Insurance is produced by me, Mark Gagan.
- [51:04]
Mark Geogan
Music was written by Anna Gegen and.
- [51:05]
Ben Hubbard
Produced by Carlos Geogan.
- [51:07]
Mark Geogan
Check out more podcasts and written comment pieces@www.thevoiceofinsurance.com.