Alex Timm’s path to the C-Suite of an InsurTech carrier probably isn’t typical.

Unlike other InsurTechs headed by technology experts or marketing officers from outside the insurance industry, Timm is a casualty actuary. And while lots of traditional insurance carriers these days have actuaries at the helm, not many will say that they had a passion for the insurance business since they were teenagers.

[Pictured Above: Root Co-Founders Alex Timm and Dan Manges]

“My father was an executive at Century Insurance [and] I started when I was 14, working in an actuarial department doing reserve development on E&S lines of business. Right away I really had a big passion for it,” Timm recalled. “A lot of it was around [the fact that] the product was incredibly important. We were there for people on what very well may be their worst day of their life. We were really helping people, right? It was a really rewarding product.”

Timm also loves anything that “mathematically-driven”—a fitting description for insurance. He attended Drake University to get a degree in actuarial science, working at State Auto through college. He worked in a variety of different departments that included actuarial, claims, and then mergers and acquisitions.

Seeking a greater breadth of experience once he attained his fellowship in the Casualty Actuarial Society, he went to Nationwide Insurance after graduating to take part in the carrier’s leadership development program. Working in several different divisions over time, his last role was that of a senior consultant in the strategy department. “Part of my job was to really look at the landscape and ask, ‘What’s happening with technology? What’s happening with consumers? How do we sort of steer the ship in the right direction?'”

The timing of the role coincided with the advent of big data and the proliferation of mobile. “It just became so clear to me that those are going to be such a huge part of the future that I’ve got to try something—I’ve got to try to be a part of this future.”

Starting Root was the next step.

See related sidebar, “How Root Insurance Did What Other Insurers Only Imagined

Timm knows very well where he got the courage to take that step and to ride out the early challenges of a startup.

“My father was certainly a huge influence on me. He had started a couple of companies prior, [so] the entrepreneurial route was something that was familiar,” he said. “I knew it wasn’t easy. I knew often these new endeavors fail. But at the same time, I think the way I thought about it was I would regret not trying much more than I would regret failing. That was really what it came down to.”

In fact, when he called his dad to tell him what he was planning to do, that’s essentially the advice that the young CEO remembers getting from Christopher Timm, who in addition to being president of Century Surety in his last role was the founder of a managing general agency specializing in environmental liability earlier in his career (according to his LinkedIn profile). “Well, you have to do it. You’re probably going to fail. But you have to at least try.”

In dealing with some of the early setbacks, the most public of which were sky-high loss ratios, Timm sounded very actuarial when he addressed questions about profit problems during an April 2018 “Ask Me Anything” session on Reddit. “Early on, any new line of business does not have reserving or loss history. So at Root, we take extremely conservative reserves on our statutory financials, which supports our state expansion,” he said, explaining a 2017 loss ratio of 168.

But the ideas that actuaries aren’t great business people and that they don’t speak the language of CEOs still persists in some circles, among those who forget that some of the industry’s most famed executives, like AIG’s Brian Duperreault, are also casualty actuaries.

Timm sees his actuarial background as a benefit. “When you’re an actuary, you’re taught not to think in black and white. You’re really taught to think in probabilities. I think a lot of that extends to the ways that we think about the business. Really when you’re faced with a business decision or strategy, a lot of it is probabilities. You don’t know for certain whether or not it’s going to be a zero or a one. You just know it could be somewhere in between,” he said.

“That sort of thinking allows me to act as a CEO and as somebody who can play some of these bets. Really, I think being an actuary teaches you not necessarily to think so deterministically but to think a little bit more statistically. It also gives you an appreciation, I think, for risk—and both risk on upside and downside.”

He said that he often asks his team, “How do we make sure that we can make decisions that could surprise us on the upside—[that] go way better than what we had ever imagined? I call it leptokurtosis, but basically it just means fat tails,” said the actuary, referring to statistical distributions that have higher probabilities of extreme outlier values (according to an Investopedia definition).

“If we make enough of those, do we believe that one of them will start to work? That suddenly leads to a different mindset. Really only one’s got to work for the company to be successful,” he said.

He said that is why they do so much experimentation at Root. “We really can think about these things almost as a portfolio of risk.”

“When you continue to experiment, you just need a couple and it’ll drive the whole business if they start to work,” he said. “When you continue to experiment in those sorts of areas of the business, what ends up happening is you just need a couple and it’ll drive the whole business if they start to work,” he said.

Asked for specific advice to share with young technology-minded or data-minded individuals who may want to pursue executive positions in the future, Timm noted that in addition to taking a lot of computer science courses, in addition to a mathematics degree, he has another degree in accounting. “I thought it was really important to actually understand the business side,” he said, noting that a couple of accounting courses rather than a full degree are likely sufficient.

Topics Tech