By Rick Huckstep

To answer this question, I skyped with Max Steinmetz earlier this week. Max is the CEO of German InsuranceTech startup, Risk Eraser. A week ago, I hadn’t heard of RiskEraser, or Max, for that matter. But after my article last week about the apparent lack of tech startups focused on Insurance, Max was the first to get in touch, and I’m glad that he did. Max displays all the qualities that investors want to see in startups – passion, creativity, market awareness and above all, a drive to want to challenge the conventional; to disrupt!

The business started about four years ago with a group of friends sharing a train journey and talking about buying travel insurance with their mobile. And the insurance would need to be easy to buy, all inclusive (no small print, no gotcha’s should they ever need to claim on it), and priced specifically to their individual needs.

The friends challenged themselves to show that this could be made possible and set about building a platform. Their initial aim was to sell direct to consumer in a B2C business model. But they quickly learnt, as most B2C startups do, that the customer acquisition costs would be too high. The sheer cost of online marketing to attract customers would kill the business case before they even got started.

They believed in this business concept and after taking a year out, they restarted in 2013 with a new approach selling to those in the market that had the customers. In other words, they moved to a B2B model for their digital insurance platform.

Now, RiskEraser targets two segments of the insurance market; the brokers and the “Shared Economy platforms”.

For Brokers, RiskEraser provides a white label mobile app that runs on an agile, SaaS digital platform. This is a distribution platform and called ‘MySurance-App’. This enables brokers to provide standard protection products to their customers through a mobile device. All the policy details are available through the phone and not in the filing system in your house (which is exactly what you need, when you need it if you are in a car accident or struck down with a bug on a strange continent and need medical attention).

The key here is that the broker has the flexibility to distribute standard products on a self-serve (low cost) basis but still provide good service should the client need to make a claim. And if the insurance product requires consultation, the broker and client can meet, discuss and then place the business through the app.

Consumers don’t get the same level of service when they buy through the comparison websites as they do when buying through brokers. The quality and appropriateness of the product is often left out when the focus is on price as the buying criteria.

Consumers want both convenience and a personalized approach to providing insurance.

The other market that RiskEraser are enabling, is what Max describes as the “Sharing Economy”, and for this they have their “ShareSurance” offering.

I must confess to being unaware of this term and Max explained to me what it means. Essentially, it is about borrowing something that belongs to someone else, for a short term, a one off ‘situation’. Businesses like Erento, Paul Camper and Shelfsailor are creating digital marketplaces where businesses and individuals alike can hire their stuff out. And when they do, the ‘thing’ needs to be insured, which is where RiskEraser comes in.

These short-term, one off transactions are not so popular for mainstream brokers given their high volume and small value. So, in this business model, RiskEraser act as the broker and they already have a panel of big name established carriers behind them that offer the underwritten products.

As Max was explaining all this to me, I thought of a very recent experience of my own that was neither convenient nor cost effective for me. My wife and daughter had planned a 4-day trip to the North East of England and they wanted to share the drive from the South. My daughter has been driving for 8 years with 100% no claims and we wanted 4 days cover for what would turn out to be about no more than 8 hours behind the wheel of my wife’s car.

The cost to provide this cover was 10% of the annual premium for my wife. And to make matters worse, because the annual renewal fell in the middle of the 4-day trip, this meant that we had to pay the premium twice (2 days on each policy). On a pro-rata basis, the cost of insurance was £25/day for my daughter versus £1/day for my wife. And remember, my daughter already had 3^rd party cover in place from her own car insurance.

If Max and RiskEraser are to be successful, and I have no reason to doubt that they will, then their approach will be disruptive because I would have turned to RiskEraser and bought 4 day’s of incremental cover for my daughter to provide the additional protection we wanted.

And this gets to the very heart of the point I made last week. The Insurance market is ripe for change. It’s an open goal! There is no justification for such a huge pricing gap between the cost of my wife or my daughter driving the car. There is no logical reason why my daughter represents a 25 times greater risk than my wife.

In this situation, I have paid a premium (literally) for convenience.

And yet, I believe most established insurers know they need innovation, but are seemingly unwilling to take the risk (sic)! It is true to say that not all of the major insurers are behind the curve. Max calls out Allianz in Germany, and I would add Aviva in the UK in the category of those insurers working hard to innovate. For them, they will have first mover advantage.

But for the majority of insurers they are, at best, smart followers, but followers nonetheless. Some are in self-denial and believe that they are unbreakable and immovable. Some are still running on outdated technology with origins in a time when a communicator and a tricorder were science fiction and Enterprise was the name of space ship!

These I call the Dinosaurs and they will lose the battle with the Unicorns. It’s not a matter of whether; it’s a matter of when.

I was impressed by Max and the business he runs with the other 7 members of the team. They have bootstrapped the business so far, with funding support from two consultancies that believe in their vision. They have a long way to go, as all startups do. But they exhibit the creativity, desire, invention and commitment that startups have and that most established business, sadly, do not.

MySurance-App and ShareSurance may well change the business model for the distribution of protection insurance. But I felt there is more to come from Max and RiskEraser. They have ideas up their sleeves for disruptive plays in this world of insurance. I do hope so, this industry needs it!