Oddly-named Pie Insurance took an initial step toward entering the workers’ compensation insurance market at the InsureTech Connect conference in Las Vegas by introducing an interactive pricing tool for small and medium-sized businesses. The pricing tool is the first step in Pie’s larger plan to begin selling its own workers’ compensation policies in 2018 and make buying the coverage “as easy as pie.”
Pie recently closed a $4.3 million seed round of funding. Investors include Sirius Group, a global specialty insurer and reinsurer; Moxley Holdings, an early stage venture capital firm for data-enabled businesses; and Elefund, an early stage venture firm with seed investments in fintech businesses.
Pie’s launch is being driven by John Swigart, CEO, who was part of the executive team that led Esurance from a start-up to a $1.3 billion in premium online agency that was sold to Allstate for $1 billion in 2011. Swigart has been joined by Brian Buvinghaus, systems architect, also from Esurance; Kevin Philpott, previously at GEICO; and Marcia Benshoof, previously with Pinnacol Assurance.
The pitch from Pie includes the claim, based on research from its partner Valen Analytics, that a majority of business owners are overcharged for workers’ compensation.
“The SMB market is often overcharged and underserved when it comes to meeting their commercial insurance needs,” said Swigart. “The traditional high-touch approach agents and underwriters use in commercial lines lead to high prices and a protracted customer experience. Yet, the profitability in this sector indicates that small accounts are subsidizing larger accounts at most insurance companies. By focusing exclusively on small businesses with a digitally enabled solution, Pie will solve this problem at scale.”
The insurtech says its “Price Protector” tool allows small and medium businesses to see the range they should be paying for workers’ compensation and the market average based on their risk profile, quotes that are generated from answers to just five questions. The proprietary pricing algorithms are driven by Valen Analytics, an Insurity company, drawing on its InsureRight Platform and its $59 billion in insurance premium and claims data.
Pie Insurance, which will operate as a managing general agency, plans to begin offering its own insurance policies direct to customers (targeting businesses with premiums under $25,000) in the second quarter of next year. Swigart said the company will begin selling in Illinois.
“We will write up to $25,000 a year of annual premium but our sweet spot is going to be $5,000 and below. We’re actually going to be quite a broad underwriter,” Swigart told Insurance Journal, adding that Pie will be willing to write about 80 percent of all the classes of these small businesses.
He said one of the biggest opportunities for Pie includes start-up offices, low risk businesses that any carrier will write but where the owner just wants to “get it done and get it done quickly and at a good price.”
Another opportunity is riskier businesses that are struggling to get insurance today and may be placed into the wholesale market. “Many of those businesses, they’re actually quite good businesses from an underwriting risk standpoint, and we will deliver them, relative to a wholesale market experience, a dramatically better experience at a much better price,” he said.
Until the time that Pie is selling its own policies, businesses using the Price Protector tool will be given the opportunity to buy policies from AP Intego, a national insurance agency with offices in New York and Massachusetts.
In most of the businesses being targeted by Pie, the owners are doing the purchasing, and they often do it off-hours at night or on weekends, according to Swigart, who believes Pie will appeal to these owners as well as to the growing number of younger business owners who prefer to buy online.
“By 2020, 60 percent of all small businesses are going to be owned by millennials and gen-xers. That population of people is much more inclined to transact not only visually but to do things in sort of a self-service way. They feel like they can educate themselves and have access to transparent information then they’ll feel comfortable, going ahead and transacting,” said Swigart.
Swigart thinks that many smaller businesses that generate a $2,000 a year premium for a three person account and have no other insurance have difficulty getting served. “I don’t want to say that every customer can go buy direct. It’s not the end of the agent,” he said. “But we think there is a meaningful need that’s not being fulfilled.”
Pie’s insurance backer Sirius is owned by the Singapore-based division of China Minsheng Investment Corp. Lctd., run by private investors, which bought it from Bermuda-based financial services holding company White Mountains Insurance Group in 2016 for $2.6 billion.
Why the name Pie Insurance? “Pie comes from a combination of the mathematical constant Pi, and the expression ‘as easy as pie,’” explained Swigart.