Insurtech CEO says knowledge and know-how ought to advance small business insurance in 2022 – S&P Germany
➤ Business interruption coverage is likely to remain a "fairly nascent" product until more data can better pinpoint pricing for severity and frequency, said Coterie's CEO.
➤ Coterie's top manager expects further advances in business interruption, a product that many business owners find difficult to afford.
A few years before the COVID-19 pandemic broke out, CEO David McFarland co-founded Coterie, an insurance company focused on small business insurance. The company recently closed a $ 50 million Series B financing round.
S&P Global Market Intelligence spoke with McFarland to discuss how small business insurance could perform in 2022, Coterie's future plans, and the impact COVID-19 will have on the company's products and operations.
S&P Global Market Intelligence: How did the pandemic lead to the further development of the products you offer?
Coterie CEO and Co-Founder David McFarland
David McFarland: Before the pandemic started, we were pretty much at the beginning of the product, selling general liability and business owner policies, and our product was a lot simpler.
COVID really forced us to expand into other areas because we weren't sure what was going to happen from a sales perspective. We could really buckle up and say, "Hey, we need to increase appetites quickly to make sure we are getting the appropriate amount of revenue and keep building more for these different distributors."
What is the capacity in the current market for your products?
So the capacity is not that bad at the moment. You know, limits of $ 1 million or $ 2 million aren't that hard to come by. What we are seeing, however, is that business is moving more towards unapproved than approved companies. That's not necessarily a bad thing, but we don't want to throw tons of business into the unapproved space.
We want to offer the insured an approved product that offers a little more protection than unapproved, only with the insurance supervisory authorities behind it. In relation to our products, we can offer some things that others cannot.
I would say we are more class hungry than most of the others. Where some people invest more in non-approved, we actually put that into the approved. We believe we have a pretty strong product for that.
In the future, will it be possible for small businesses to insure themselves against the risks that worry them most, such as business interruption?
Business interruption insurance is currently certainly not in the affordable category, at least due to a pandemic. I think we will probably see further progress there. At the moment we are dealing with a limited number of data points. The severity is ultra-high. So it's going to be a pretty young product for a while as we collect more data and try to figure out what to do from a pricing point of view. Frequency is another component, and figuring out the frequency behind these things will also be important. It's hard to say how long it will take the market to respond to such things.
How do you deal with the complex needs of small businesses?
The existing data is not just about an agent Enter a given Enter code into a search bar. What we can do now is pull data on these companies and specific addresses and say, "This is a place that serves food, has liquor, and has live music from 11 a.m. to 2 a.m." Businesses face different types of risks that we need to be aware of. If we understand them better, we can offer a product that is appropriate to the risks we take and that helps insured much more than just stuffing in different codes. We are very excited about the data currently available and will be releasing some products early next year that will make heavy use of this information.
What do you think are the key developments in small business insurance in 2022?
Data and technology will continue to be the key drivers of insurance development in the future. The different types of aggregators that agents and brokers can use, such as ValuePenguin and others, are becoming more widespread. People will check the pros and cons and find the best insurer. This will be an interesting chapter in the development of small commercial businesses.
Cyber will be an interesting part of 2022, as will the evolution of business interruption insurance. I can't say for sure where things will go in the event of a cyber or business interruption, but I think we will definitely see some development in these markets.