Digital company Pie Insurance has begun selling its lower-priced small business workers' compensation insurance policies online in Louisiana, as well as Colorado and Texas. The insurtech now sells in seven states.
Pie markets itself by its ease of use and its claim that up to 80 percent of small businesses overpay for workers' comp. Media reports indicate that Pie's “sweet spot” is businesses with premiums under $25,000, with many insureds in the $5,000 range.
Jeff Albright, Chief Executive Officer of the Independent Insurance Agents & Brokers of Louisiana (IIABL) expressed skepticism that Pie can offer more competitive pricing in Louisiana compared to the traditional market.
“The Louisiana workers' compensation market is very healthy, which may have attracted Pie,” Albright said. “However, workers' comp pricing has been very competitive, and I don't think that they are going to find that ‘80 percent overpay for workers' compensation insurance by up to 30 percent.'”
That figure comes from the company's Pie Price Predictor, powered by Valen Analytics, a data analytics company powered by Insurity Inc., and Pie co-founder and CEO John Swigart has made no secret of his distaste for traditional models
“We had a clear but aggressive goal for Pie: stand up a complete insurance operation in under 12 months,” Swigart said in a press release about the Louisiana expansion. “Within 11 months, Pie's seasoned team of insurance experts effectively navigated state regulatory environments and surpassed our goal, and we'll continue to expand rapidly.” That aggressive strategy is underscored by Swigart's resume. Prior to founding Pie, he served on the Esurance executive team for 13 years, where he initially led all the financial functions and then became the company's first chief marketing officer.
According to a public information officer with the Louisiana Department of Insurance, “An entity with the name ‘Pie Insurance Services' was licensed in Louisiana as a non-resident producer on March 8th, 2018. As a non-resident producer, the license was issued on a reciprocal basis due to licensure in the resident state of Colorado. The application was approved the same day as submitted. The entity is licensed, but has no current appointments with insurers.”
Insurance offered by Pie is supported by Sirius Group, which has earned an A rating from A.M Best. In aggregate, Pie's seven launched states represent more than 12 million employed in small businesses, according to the U.S. Small Business Association.
The main threat that insurtechs like Pie pose to agents is its direct writing and streamlining, but Albright is waiting to see how it plays out in practice. “It is interesting that they are marketing direct to businesses and cutting out agents, but claim to have ‘strong interest in the partner channel.' It will be interesting to see if they can develop two different competing distribution channels.”
Mark Tullis, Administrator of LCI Workers' Comp, also warned against eliminating agents in a line like workers' comp, which can see catastrophic claims worth millions of dollars. “The attempted commoditization of workers' compensation coverage is not unexpected, seeing what has transpired in the automobile lines,” Tullis explained. “But there is a huge difference in how carriers service accounts. Just ask any business owner who has had an employee suffer a serious disabling injury. Buying insurance based solely on price and because the process is all online, without the expertise of an agent, can lead to less than desired results.”
In a recent A.M. BestTV episode chronicling the 2018 Insurance Accounting & Systems Association Conference in Nashville, Meg Green spoke to insurtech leaders to determine what challenges insurtechs have in the traditional, relationship-driven insurance industry. Roland Chan, with FindBob explained, “It's no surprise that when you're approaching one of these monolithic institutions that have been around for a hundred years, innovation is hard.” Beyond the difficulty, Matt Manzella, of Arity, emphasized the need for a sense of urgency among insurers because “change is happening all around us.”
As that change happens, it will be up to carriers to play to their strengths in order to keep up with the speed and convenience of online options, especially as Pie seeks to assert itself in a range of industries. Construction, restuarants, manufacturing, retail, offices, and healthcare are all listed on the company's websites as small businesses they serve.
For Tullis, a carrier's strength lies in its local roots. “Louisiana has a mature and very competitive workers' compensation market. This market has endured many out of state carriers who come in, offer low pricing, try to cherry-pick the best accounts, then think better of it once the claims start rolling in,” Tullis explained. “Louisiana has a highly litigious environment for workers' comp. It is only for the fully committed carrier with offices in Louisiana that can develop the proper in-house claims administration that can hope to compete in that environment.”
Interested in insurtechs? Comp Blog's new tech symposium Spotlight on Solutions on June 15th in New Orleans will have a session about trends in the sector. Full info and registration here.
Editor's Note: LCI Workers' Comp is the sole sponsor of Louisiana Comp Blog.
ABOUT THE AUTHOR
Nina Luckman is the writer and editor of New Orleans-based Louisiana Comp Blog, which launched in 2014 and is sponsored by LCI Workers' Comp. She is originally from Pennsylvania but lived most of her life in Florida. Her credentials include a Bachelor's and a Master of Arts degree from Tulane University, both in the study of English Literature.
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Disclaimer: WorkersCompensation.com publishes independently generated writings from a variety of workers' compensation industry stakeholders. The opinions expressed are solely those of the author and do not necessarily reflect those of WorkersCompensation.com.