Paul Ricard
Hi, everyone, and welcome to Oliver Wyman’s Reinventing Insurance podcast. I’m your host, Paul Ricard. Today, I’m really thrilled to welcome Drew Ostro, who is the co-founder and CEO of PolicyMe. Welcome, Drew.
Drew Ostro
Hi, it’s great to be here. Thanks for having me on the show.
Paul
By the way, do you go by Drew or Andrew these days?
Drew
A little bit of both. We can go with Drew to the show.
Paul
OK. All right. Well, we’ll do that. So, Drew, why don’t we start with a little intro? Tell us a little bit about yourself.
Drew
As you know, I’m an Oliver Wyman alumni. I left Oliver Wyman about three years ago to start this company, PolicyMe. Actually, I started my career as an actuary working at Towers Watson, and then jumped into management consulting, probably about 10 years ago now, working in the insurance practice. I was based in Canada, but primarily worked in the US. And then I started this company, PolicyMe, in March 2018. The general idea was we were looking for a way to help bring traditional offline distribution to an online channel, but not just focusing on the customer experience, really focusing on the advice aspect of the buying process and really making sure that customers were getting the products they needed and not being oversold.
Paul
Tell me a bit more about PolicyMe. First of all, where did the idea come from?
Drew
The idea came from just years of working in the industry and seeing what was going on, and as I said, really focusing on the advice. I was constantly being approached by friends and by family members who were being recommended certain insurance products, asking for my opinion on whether that was the right product. And I felt there was a big gap in the industry on the advice side, where the people selling the products were not necessarily deeply knowledgeable on the actual aspects of the products, on the risk-based pricing of the products, and really understanding how they’re built up. And I felt that by bringing that aspect to the advice, I could really help make sure people were getting the right product, so that’s really where it started.
And then from there it really became, OK, how do we scale up that portion of it? How do we take our advice algorithms and turn them into a business? And obviously, that fell into distribution and being a broker.
Paul
So, you’ve been at it for about three years now, is that right?
Drew
Yes, it’s been three years. When we started the company, we were a digital brokerage, so that meant we were tied in with various carriers and selling their term life insurance products on our platform.
But more recently, we actually launched our own products. We partnered with a global reinsurance company and a smaller insurance carrier in Canada to design a new term product designed exclusively for our platform that we launched about two months ago.
Paul
Moving into the insurtech world and starting a new venture, what were the biggest challenges that you’ve experienced?
Drew
The hardest part, I feel, about starting a company is that it’s very difficult to get validation. Coming from a world where I was working for a big company, had people that I was reporting to, had clients, you can generally tell how you’re doing, right? You get reviews, you get promotions, you get raises. You can get pretty regular feedback on your performance and understand what trajectory you’re on and the path you’re on. But when you build a business, it’s very, very difficult to get that feedback. It’s hard to tell whether what you’re doing is the right thing to be doing, whether there’s something better you should be doing, whether you’re building something that people want, that it’ll turn into success, or what the path looks like.
So being able to really operate in an environment where you don’t get that feedback and you don’t get that validation of what you’re doing is a very, very difficult thing. And I think for us, it really came down to searching for small ways to measure that, so looking for the small victories.
I’m not getting too far ahead of ourselves where we needed to be a year or two years or three years out, but taking it one week at a time, one month at a time, trying to create benchmarks, milestones, and measure against that to track our success.
Paul
Again, as someone who has seen both sides, are there particular things that you’ve seen or that you would consider to be steps that could help incumbents embrace that mindset further or get started at least?
Drew
Look, it’s easier said than done, but trying to recreate an environment where the people innovating or the people taking those risks and building those new products and new channels really are acting independently and are allowed to act in a world where there’s a complete disregard for the existing business.
And like I said: easier said than done, because it is easier said than done. And as much as an executive might want to act that way, it’s very hard when it’s a wholly owned subsidiary and there is a clear dependency in the relationship between the two entities. It’s hard to create that independence in strategy and decision-making. But the extent that is possible, and I don’t have the answer to how to do that, but that’s what I would say is probably the most important thing to do if you do want to innovate as an incumbent and you do want to compete with the startups coming up in your space.
Paul
And another piece you mentioned, you talked about testing and iterating often in big companies. I mean, to your point, you were saying oftentimes it’s we’re going to do the strategy, the business requirements, and then it’s a two, three, four-year build journey versus we put something out there.
So I’m curious – how have you experienced this at PolicyMe, and do you have a few more lessons from that?
Drew
It’s very much a test, learn, and build cycle that we have in our product roadmap. There’s something called the burnt pizza analogy, which I think is a really important piece to talk about because I think people overdo it in the sense of, OK, everything needs to be tested, let’s not spend any time designing, let’s just throw things out there, let’s see what sticks, and then let’s go from there.
And what ends up happening is, if you put something out there that isn’t thought out, you can’t tell if your test worked or not. In other words, if you create a new piece of pizza and you think this is maybe the next big thing, and it could taste great and it could do really well, if you burn it and then give it to someone to test, it doesn’t taste good, but it doesn’t mean it wasn’t good to begin with.
I think from that analogy, we really think about this all the time. We don’t want to go too far along the spectrum of just testing, testing, testing and make sure that we are putting thoughtful processes and ideas and time behind actually designing what we are testing. When we put that into the market and we get some feedback, it may not be fully fleshed out, but at least it’s to a point where we know we’re getting valuable feedback on whether it is indeed a good solution or not.
I think that incumbents and big companies tend to go the route of less testing and much longer design periods. And then startups go the other end of the spectrum, which is very quick testing, and I think it’s really somewhere in between where you need to be.
And I know there are certain companies that actually say, we’re not doing any AB testing, right? AB testing is all the rage these days. Everyone’s talking about, OK, that’s how you run things. You throw two versions out. They’re completely randomized, so there’s no bias in the customer base or the audience, and you see what’s better. And I’ve actually heard some really, really successful and smart CEOs and entrepreneurs say, we’re not doing any of that. We don’t want to A/B test anything, and we want to make sure we’re not focusing on the 1-2% incremental improvement. And we’re thinking much bigger in terms of design and on what can actually really move the needle and get us to the next level.
Paul
It’s more of an art than a science. And it’s not like you guys have figured out the perfect setup, but it seems like there’s been a lot of trial and error on that journey.
Drew
Yes, for sure. There is no perfect way to do it, and different strategies and different approaches will work for different companies.
Paul
Right.
Drew
For us, we try to work in the two-week sprint mentality, where we make sure that we’re costing out what it is we want to build in those sprints. We’re being honest with ourselves, in terms of engineering resourcing time and testing, and things from that perspective. And we’re very conscious of what it is that we’re testing, what parts of our funnel we’re looking to improve, and what the potential impact of that will be. Because as a startup, we’re very limited on resources in terms of what we can do. We have a laundry list of items we’d love to add to our product and to our platform, and we have to be very careful about where we invest our time.
Paul
Around metrics, KPIs, objectives, and key results, OPRs, whatever you want to call them, between the established player mindset and the venture mindset, I’m seeing quite a few differences. How do you approach that today? What kind of metrics do you look at? What matters to you and over what horizons?
Drew
Early on I would say throw it all out the door – it’s all completely irrelevant. When you’re building some sort of disruptive technology or anything like that, you’re looking for hyper growth, major impact, or nothing, right? This business was never going to turn into a for-profit business after a year or two and return some nice cash and just coast. It was always go big or nothing.
As easy and as fun as it is to get excited about sales and revenue and numbers like that early on, we really try to ignore it because it doesn’t tell the story at all. Maybe we found some quick marketing channel that is going to work well for a month, and that makes it look like we figured it out, but it really doesn’t, especially in our type of business. Selling life insurance is generally a transactional business. There’s certainly a relationship there, and you can certainly sell other products along the way, but people aren’t buying life insurance every day or every month or every year. You’re buying it maybe every five years, on average.
My point there is that doing well in one month doesn’t set you up to do well in the next month from a marketing perspective. It’s not like you have this recurring sale, or once you get the customer, you now have them forever, and you can keep on selling. From that respect, if we had gotten too caught up in revenue and sales, it would create bad behavior, right? Then our marketing team goes, OK, let’s chase down revenue this month, as opposed to what I want them doing is, let’s figure out how to build scalability into marketing. I don’t care whether we sell 500 policies or 400 this month. I care whether we’ve now set something up, and we’ve learned in a way that we can sell 1,000 in six months.
Paul
Historically, you and I both know the industry hasn’t always been known for being at the forefront when it comes to customer experience. What kind of breakthroughs, what kind of features, or what kind of services have you released that have made a difference when it comes to customer experience? And I would love to hear how you guys got there.
Drew
Honestly, I think the most important thing when it comes to customer experience in the life insurance process is just transparency. And it’s really lacking in the brokerage model because the customer’s dealing with the broker, the broker’s dealing with the new business rep at the insurance company, the new business rep is dealing with the underwriter, the underwriters may be dealing with the reinsurance company.
And there’s just so much information flowing through all these different people that it’s very unlikely for the customer to get real updates on what’s going on in a reasonable timeframe. And I think that people focus on underwriting time and time to approval, and it’s certainly important, but one of our key design considerations from day one is, we don’t need to auto-approve everyone. It’s OK that, for some people, and look, we try and auto-approve as many as we can, and it’s about 50% of people right now who get auto-approved. But for the people who don’t, the key there is just explaining what’s going on and keeping them updated. Immediately tell them why they weren’t auto-approved, what’s going on, what’s coming next, how long it’s going to take and provide continuous updates through that process.
And that’s enough to win in that space. And again, I think that’s not some secret sauce, so to speak, or some incredible breakthrough here. It’s almost common sense, but you’d be shocked at how difficult it is to create that transparency in this process.
Paul
As a whole, where do you see the industry heading? And in particular, there are a lot of different trends. What trends do you see accelerating, and which ones also do you feel are more of a fad than something real?
Drew
I see the entire term insurance market heading online. It’s only a matter of time. There will always be some people who need that human touch, but I think the online distributors now are starting to figure out how to build that into the process a little bit. You can still service people who don’t want a fully digital experience, but the days of small advisors selling small-term policies, in my opinion, are numbered. And then what’s left is you have the upper end of the agency of the distribution space, the independent brokers who are able to sell the permanent products to high-net-worth individuals. That’ll remain. That’ll never go away, in my opinion. That’ll stay, but the bottom end or the lower end of the advisor pool, in my opinion, will likely be wiped out in the next three to five years.
So if I’m thinking as an incumbent, I know it’s hard to canalize your distribution channel and move away from that strategy, but I think it’s time to bite the bullet and say, OK, this is where it’s heading and I need to do whatever I can to make sure that we’re still around and we’re still winning and have some market share when that occurs.
Paul
What about partnerships between insurtech and incumbents? And you did mention that you’ve had a variety of partnerships. I’m curious from your perspective, what makes a successful partnership from your perspective, but also of course from the incumbents?
Drew
In my opinion, it’s really an alignment of incentives, and that’s absolutely critical. I’ll give you the example that we went through. We were looking to, again, move away from the brokerage model and create our own term insurance product, but not just a product that we could sell – a product that we can own the entire operations of.
So, what does that mean for a partner? We need someone who, one, doesn’t have an existing term insurance product in the space, so we’re not competing with their products at all, or what we’d be building would be competing with their products. Two, we needed a partner who doesn’t distribute through the channels that we’re disrupting, so it doesn’t distribute through the traditional independent advisor model. And three, we needed a partner that was, I would say, small enough. Maybe small is the wrong word, but not too big in a way that this would be somewhat meaningless, right? With any sort of reasonable projections over the next few years, this would actually have an impact on their bottom line. If we can hit the projections we say we’re going to hit, we want this to be a very meaningful revenue stream for that company. Those are the three big criteria, and then there were a handful of others.
But I guess my point is that starting with laying out those criteria in advance as opposed to just jumping to, OK, let’s go call up and email and find every insurance company that I know, and hit my network up and get introductions, and start those conversations. No – let’s take a step back. Let’s figure out what it is we’re looking for.
Now let’s look at the available companies in our space. Let’s start mapping and figure out what the one or two or maybe three are that meet those criteria, and then figure out your network, who you can get in touch with and who you can call.
And that was so, so important for us when we started, and that allowed us to really find the best partner for what we needed. It’s a company called Canadian Premier in Canada. They’re owned by Securian Financial, and they’ve been an incredible partner for us to build this product. They’ve given us so much trust and a ton of credibility, and are really letting us do what we want to do to essentially produce the sales, and at the same time make sure that they’re aware that we’re protecting them as well.
Paul
Going back to PolicyMe, what’s the vision for the company?
Drew
We’ve built something really important here and really valuable in the sense that we now have this product that has better customer experience and cheaper prices – as I mentioned, the two differentiators. And we really feel like now is the time to build that brand around – and that’s what’s missing now – we need to become that household name. We need to be known as the insurance company in Canada that people go to when they’re looking for this product. So, I would say short-term, midterm, it’s around brand and marketing.
Obviously, there’s a lot to do on the product side to continue to increase conversions and optimize that piece, but I would say the brand and marketing is definitely our biggest challenge ahead. In the long-term vision, we want to dominate this space. We really feel like we can get a ton of market share here, and we can be the go-to solution for term life insurance in Canada. I would say right now we probably have 1% market share. I know that might sound small, but it’s a massive, massive market and it’s extremely.
Paul
The first 1% is the hardest, I guess.
Drew
Yes, and it’s extremely fragmented, the space, not just from a manufacturer perspective, but also from a distribution perspective. But I ask myself all the time, one out of 100 people who buy life insurance is buying from us. Why isn’t it five? Why isn’t it 10? We have a better product and a cheaper price for the same product. Why isn’t it 10? Why isn’t it 20? And so, we want to think really big. We think we could really allot a market share in a short period of time and really start to dominate this space.
Paul
What do you miss the most about consulting? Other than working with me every day?
Drew
Yeah. Well, it’s definitely not the traveling, I’ll tell you that much! It’s definitely nice to be grounded a little bit. I get to sleep in my bed every night and not have to be on an airplane.
But I definitely miss working for the company, having a lot of colleagues, especially at Oliver Wyman. There are so many really, really smart and extremely talented people. And just the topics that we cover and projects that we get into, and I’m certainly learning a ton now, it’s a different type of learning.
Paul
We always finish with a few final words of wisdom for our audience from our guests. What would be yours?
Drew
I think when it comes to life insurance, people always look at the P&C space and say, OK, there’s been way more success in that area in terms of bringing sales online. Why haven’t we replicated that in life insurance?
When it comes to life insurance, there’s no urgency. You don’t need it today; you might need it tomorrow. You can wait a month, or you can wait two months. There are a lot of decisions around your coverage amount, term length, and even permanent versus term that can really increase your price by 10 times. So, when you’re prompted with a decision you don’t necessarily need right now, and when what I’m being asked to choose has a big impact on my price, it’s very easy to stop and not complete. And I think that’s where people really need to focus, and that’s where we really focus.
And customer experience is absolutely critical to getting someone to convert, but it’s so much more than that. When it comes to life insurance, you really need to think about what the buying process is, what the decision-making process is, and how do I get that person over the line.
Paul
By the way, I’m hearing a few screams in the background. What’s the hardest: scaling a startup or becoming a dad?
Drew
Becoming a dad, for sure, for sure. That’s funny. It’s been about 11 weeks now. I haven’t slept in 11 weeks. Also, we launched the product right around the day my son was born. It was a crazy month in March, but it’s really been incredible.
Paul
Well, that’s really great to hear, and I wish you all the best, both on the startup front and on the fatherhood front. Drew, thank you so much for taking the time. It was great talking to you. I really appreciate it.
Drew
Yeah, thanks for having me on, anytime.
Paul
Well, that was Drew Ostro, co-founder and CEO of PolicyMe. For more information about our Reinventing Insurance series, please visit www.oliverwyman.com/reinventinginsurance. Thanks for listening, and I will see you next time.
This transcript has been edited for clarity.
