Episode 241 Summary: Ben Hubbard of Parcel – In the Business of Rewarding the Best Clients

Podcast: The Voice of Insurance
Host: Mark Geoghegan
Guest: Ben Hubbard, Co-founder and CEO of Parcel
Release Date: February 11, 2025

In Episode 241 of "The Voice of Insurance," host Mark Geoghegan engages in a comprehensive discussion with Ben Hubbard, co-founder and CEO of Parcel. The conversation delves into Parcel's evolution within the insurtech landscape, highlighting its innovative approach to cargo insurance, strategic use of artificial intelligence, and commitment to rewarding high-performing clients. This summary captures the essence of their dialogue, emphasizing key points, notable quotes, and insightful conclusions.

Introduction: The Emergence of Parcel

Mark Geoghegan sets the stage by reflecting on the insurtech boom that began in 2016. He introduces Parcel as a trailblazer in this movement, co-founded by Ben Hubbard. From its inception, Parcel aimed to revolutionize the insurance industry by integrating technology to create a sustainable competitive advantage.

Mark Geoghegan [00:02]: "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."

Growth and Milestones

Over the past eight years, Parcel has experienced substantial growth, averaging a 100% increase in premium underwriting annually. The company successfully launched a syndicate at Lloyd's 18 months prior to the interview, channeling $60 million in premiums since its inception. This achievement underscores Parcel's effective capital-light model and robust underwriting capabilities.

Ben Hubbard [03:40]: "We've grown quite a bit, 100% per year on average over the last few years. We're underwriting profitably."

Key milestones discussed include:

• Syndicate Launch: Establishing a syndicate within the Lloyd's market has allowed Parcel to scale without the traditional capital burdens associated with insurance operations.

• Capital-Light Approach: Utilizing consortium binders enables Parcel to manage substantial premiums without the need for a large internal capital reserve.

• Profitability: Despite operating in high-risk segments, Parcel has maintained consistent profitability, a testament to its meticulous underwriting and risk management strategies.

Ben Hubbard [05:49]: "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."

Leveraging Artificial Intelligence (AI) and GenAI

A significant portion of the conversation centers on Parcel's strategic implementation of AI to streamline operations and enhance underwriting precision.

Chauncey: The AI Underwriting Agent

Parcel employs an AI system named Chauncey to process 100% of its insurance submissions. This system efficiently parses unstructured data from emails, attachments, and spreadsheets, converting them into structured information ready for underwriting in minutes.

Ben Hubbard [19:38]: "When someone sends us a submission, 100% of our submissions go through our internal AI underwriting agent."

Key functionalities of Chauncey include:

• Data Parsing: Chauncey extracts relevant information from various document formats, reducing manual data entry and minimizing errors.

• Integration: The AI seamlessly integrates with Parcel's CRM and exposure management systems, ensuring a smooth workflow for underwriters.

Ben Hubbard [20:20]: "A machine now can read the emails, it can read all the attachments... everything is set up for the underwriter within a couple minutes."

Generative AI (GenAI) Applications

Beyond Chauncey, Parcel integrates Generative AI (GenAI) to enhance both predictive modeling and operational efficiency. This dual application allows Parcel to not only process data faster but also derive deeper insights into risk factors and loss prevention.

Ben Hubbard [18:02]: "Our technology and data investments are broadly targeted at two areas, so predictive modeling and efficiency and productivity."

Benefits of GenAI integration include:

• Underwriting Efficiency: GenAI reduces the time from submission to quoting by 80%, enabling underwriters to focus on higher-value tasks such as business development and complex risk assessments.

• Predictive Insights: Continuous updates and model refinements allow Parcel to adapt swiftly to emerging risks and market dynamics.

Ben Hubbard [24:37]: "It is paying off... reduced underwriting time, so your underwriter can underwrite more stuff."

Business Model and Sustainability

Parcel operates on a capital-light model, emphasizing efficient underwriting over maintaining a large insurance balance sheet. This approach is supported by strategic partnerships and the utilization of consortium binders, allowing Parcel to manage significant premiums without extensive capital reserves.

Ben Hubbard [07:14]: "We're in the business of being a specialized innovator in our space... the way we run our syndicate, the way we run our business model is different than your traditional multi-class Lloyd's syndicate."

Series C Funding and Strategic Investments

Parcel recently secured a Series C funding round, aimed at scaling operations, expanding its U.S. presence, and advancing its technological capabilities. The funds are allocated towards:

• Underwriting Expansion: Increasing the capacity to underwrite more premiums and enter new markets.

• Talent Acquisition: Hiring skilled personnel to support growth and technological innovation.

• Technological Advancements: Investing in GenAI and other AI tools to maintain a competitive edge.

Ben Hubbard [16:15]: "We actually still need to hire people and we still believe in human underwriters."

Capital Efficiency and Profitability

Parcel's focus on operational efficiency and technological integration allows it to maintain profitability even in challenging market conditions. The company's capital-efficient model ensures that it can sustain growth without overextending financially.

Ben Hubbard [27:07]: "The syndicate itself is a sustainable proposition... we are capital light."

Strategic Partnerships and Data Integration

Parcel emphasizes the importance of partnerships to enhance its data capabilities and underwriting insights. By collaborating with leading IoT providers and logistics companies, Parcel gains access to comprehensive real-time data, which is crucial for accurate risk assessment and loss prevention.

Ben Hubbard [14:35]: "We have taken to thinking about supply chain and complex supply chains broadly beyond just cargo stock throughput."

Notable Partnerships

• Lineage Logistics: As the world's largest cold storage provider, this partnership provides Parcel with dynamic insights into inventory patterns and behaviors.

• Data Partner Program: Parcel collaborates with various monitoring solutions to integrate temperature tracking, theft prevention, and other critical data sources into its underwriting process.

Ben Hubbard [36:36]: "We're building our own solutions... because we have awesome partners."

Data-Driven Underwriting

By utilizing data from partners, Parcel enhances its understanding of supply chain risks, allowing for more accurate underwriting and tailored insurance products. This data-driven approach not only improves risk assessment but also enables Parcel to offer incentives to clients who adopt advanced risk management practices.

Ben Hubbard [22:37]: "We have such a profound advantage because we don't have legacy... we have the data pipeline and the data foundations."

Innovation and Future Directions

Parcel is committed to continuous innovation, aiming to expand its product offerings and enter new lines of business within the supply chain sector. The company's focus on technology ensures that it remains at the forefront of insurtech advancements.

Expansion into New Lines of Business

Parcel plans to explore adjacent markets where its technological expertise can be leveraged to offer specialized insurance products. This strategic diversification is approached with caution to maintain focus and depth in each new area.

Ben Hubbard [34:04]: "We're looking at how we can do a few things that moment would have guessed years ago... things that are way ahead of anyone else."

Enhancing Risk Management Offerings

Parcel aims to not only provide insurance but also offer risk management solutions that help clients minimize losses and optimize their supply chains. This holistic approach positions Parcel as a partner rather than just an insurer.

Ben Hubbard [45:25]: "We want to reward those customers. It's good for us... it's good for sustainability and just creates general value for the world."

Overcoming Challenges

While Parcel has achieved significant milestones, it faces challenges inherent in the insurtech landscape, including integrating with legacy systems and navigating a softening insurance market.

Ben Hubbard [26:03]: "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."

Navigating Legacy Systems

Integration with outdated insurance systems poses technical challenges, limiting the seamless flow of data and hindering operational efficiency. Parcel addresses this by developing bespoke solutions and working closely with partners to bridge technological gaps.

Ben Hubbard [25:45]: "We're facing some headwinds on the rating side. But there's so much opportunity for growth..."

Adapting to Market Conditions

The shifting dynamics of the insurance market require Parcel to remain agile and responsive. By maintaining a niche focus and leveraging technological innovations, Parcel continues to thrive despite broader market softness.

Ben Hubbard [38:07]: "We're pretty niche focused. Most of our book is perishables, food."

Organizational Structure and Culture

Parcel's organizational structure is a blend of technology and insurance expertise, fostering a culture of collaboration and innovation. This unique structure allows Parcel to develop sophisticated insurance products tailored to specific market needs.

Ben Hubbard [36:54]: "Our org chart is different... we have a CTO Chief Technology Officer and a chief Product Officer in the company."

Emphasizing Equal Standing

At Parcel, data engineers and data scientists hold equal standing with underwriters, promoting creative friction and better solutions. This egalitarian approach ensures that technological and insurance perspectives are equally valued in product development.

Ben Hubbard [35:24]: "We have lots of incredible tech and tools that we're building. But the core of our differentiation is the organization we've built."

Investment in Talent and Technology

Parcel invests heavily in recruiting top talent and advancing its technological capabilities, ensuring that the company remains at the cutting edge of insurtech innovation.

Ben Hubbard [34:49]: "What's getting 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."

Market Position and Competitive Advantage

Parcel holds a strong position in the niche segment of perishable and essential goods insurance. Its specialized focus allows it to offer highly tailored products that meet the unique needs of its clients, setting it apart from generalist insurers.

Ben Hubbard [38:23]: "There's some stuff we just won't compete with stupidly and there's some stupid stuff out there. But actual, our niche of the market, it's underserved still."

Sustainable Competitive Edge

By continuously iterating its AI models every four months, Parcel ensures that its underwriting remains accurate and ahead of market trends. This proactive approach to technology integration provides a sustainable competitive advantage.

Ben Hubbard [35:08]: "But the core of our differentiation is the organization we've built... following methodologies that are much more akin to a technology company than an insurance company."

Client-Centric Approach

Parcel's commitment to rewarding clients for proactive risk management fosters long-term relationships and client loyalty. This client-centric philosophy not only benefits Parcel but also contributes to the overall sustainability of the supply chain ecosystem.

Ben Hubbard [23:05]: "We want to reward clients who are taking those measures, not trying to squeeze as much premium as we can with as little coverage as we can offer."

Future Outlook and Exit Strategy

As Parcel continues to grow, the company remains focused on executing its strategic plan while being open to various exit strategies. Ben Hubbard expresses a balanced outlook, combining long-term commitment with strategic planning for potential liquidity events.

Ben Hubbard [47:34]: "We have a business plan at some point. Will there be a liquidity event?... it's about focusing on execution, executing a really good strategy, bringing in really good talent and partners, and believing in what you're building."

Potential Exit Strategies

Parcel is considering traditional exit options such as trade sales, recapitalizations with private equity firms, and initial public offerings (IPOs). The decision will hinge on Parcel's continued growth, market conditions, and strategic objectives.

Ben Hubbard [47:59]: "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."

Long-Term Vision

Ben Hubbard conveys Parcel's dedication to long-term success, emphasizing a focus on execution, strategic partnerships, and technological innovation as pillars supporting the company's enduring growth and industry impact.

Ben Hubbard [48:35]: "If you want a differentiated outcome, you need differentiated thinking. And that still guides us today."

Conclusion: Innovating the Future of Insurance

Episode 241 of "The Voice of Insurance" offers a deep dive into how Parcel, under Ben Hubbard's leadership, is redefining cargo insurance through technology and a client-focused approach. By leveraging AI, fostering strategic partnerships, and maintaining a nimble organizational structure, Parcel stands as a model for innovation in the insurance industry.

Mark Geoghegan [49:11]: "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."

The conversation underscores the importance of embracing technological advancements and maintaining a specialized focus to navigate and thrive in the complex landscape of modern insurance.

Notable Quotes

• Mark Geoghegan [00:02]: "Don't get lost. Insurance is a maze."

• Ben Hubbard [03:40]: "100% per year on average over the last few years. We're underwriting profitably."

• Ben Hubbard [19:38]: "100% of our submissions go through our internal AI underwriting agent."

• Ben Hubbard [24:37]: "Reduced underwriting time by 80%. Think about that. It's huge."

• Ben Hubbard [38:23]: "Our niche of the market, it's underserved still."

Final Thoughts

Ben Hubbard's insights reveal Parcel's strategic maneuvers within the insurtech space, emphasizing the synergy between technology and specialized insurance practices. As Parcel continues to evolve, its commitment to innovation and client-centric solutions positions it well for sustained impact and growth in the global insurance and reinsurance industry.

For more detailed discussions and updates on Parcel's journey, listeners are encouraged to subscribe to "The Voice of Insurance" and stay tuned for future episodes that explore the dynamic intersection of technology and insurance.