Bought By Many is a digital insurance broker which uses big data to identify and serve niche customer groups.
In the year to March 2018 the company arranged £20m of premium with revenue close to £5m; GWP has doubled every year since inception nearly six years ago. The team announced a £15m Series B fundraise earlier this month from investors including Marsh.
Bought By Many has built technology to identify unmet demand. This might be pet insurance for owners of terriers with pre-existing conditions or motor insurance for drivers of ex company cars. Once it identifies enough demand, the company builds bespoke products in conjunction with its insurer panel.
Where the company has its own policy (e.g. pet insurance) it functions as what Co-Founder and CEO Steven Mendel describes as a “full-service broker”. Key to this proposition is the ability to design policy features and customer services. Capacity providers – Munich Re (Great Lakes) and Allianz for personal lines, and MGA Mutual (an MGA) for SME insurance – must therefore be “open to challenging the status quo on the insurance product”.
Where it doesn’t have a policy, the company helps its members (the company’s term for customers) understand what to look for in a policy and refers them to a range of offers it has negotiated with other insurers.
This is all part of a strategy to create a better customer experience anchored around a sense of community. Apart from insurance content, the company also publishes extensively on its blog (for example a piece on why dogs eat grass) and its staff look after social media feeds.
This has two benefits beyond high customer satisfaction (Net Promoter Score of 77 and Feefo star rating of 4.8/5.0). First, customer engagement allows the company to learn about its customers’ unmet needs – what are they searching for, what are they asking. This allows Bought By Many to determine where to build products in the future. Second, there is a marketing benefit as both organic and paid lead generation becomes cheaper.
Bought By Many will use its most recent fundraise to extend its product range and accelerate its expansion into Sweden, where it recently launched a pet insurance product. According to Steven, Sweden has the highest penetration of pet insurance anywhere in the world.
THE OXBOW PARTNERS VIEW
Bought By Many is one of only a handful of Distribution InsurTechs to have gained traction in the market.
The company is interesting as it started off as a ‘thin’ layer in the value chain – effectively generating leads (based on its analytics technology) and handing over all admin to its insurers. Over the last two years it has taken ownership of an increasing share of the value chain, for example claims (handled both inhouse and by TPAs).
Does this indicate a progression towards becoming a ‘full stack’ InsurTech, like Lemonade, Metromile and Root in the USA or WeFox/ONE, Ottonova and Coya in Germany?
Steven does not rule this out, but also adds “as long as we can find insurers who want to write the risks we want to take on, I can see no reason for taking on the capital requirements of becoming an insurer. If it changes and tightens, as it already is in some large scale commercial B2B lines, then we might reconsider.”
We think that there are two main strategic drivers of whether it makes sense for InsurTechs to own their capacity. The first is the InsurTech’s product strategy. If its strategy is to significantly and quickly innovate the product, then there might be compelling reasons to be ‘full stack’. Operating as an insurer (or at least controlling an insurer like WeFox) allows the InsurTech to build and launch products faster, reporting financial information to reinsurers after the event. As MGAs or brokers, InsurTechs generally need their capacity to sign off operationally (e.g. on pricing), which slows things down.
The second driver is financial performance. Whilst any insurance business will find that their access to capacity dries up if underwriting losses mount, insurers will generally be given longer to survive. This is at least partly true because they are accessing reinsurers who have a longer-term view of profitability, whereas insurers have a shorter horizon.
It will be interesting to see to what extent Bought By Many can execute its current strategy as a broker, or whether its focus on proposition innovation pushes it down the full stack route.