Cover Genius has a broad vision: To protect all the customers of the world’s largest online companies.
According to the InsurTech’s website, it currently sells “millions of policies per year in 60-plus countries and 50 U.S. states” through its online partners that include Booking Holdings, Magento and Shopify.
The company’s award-winning technologies include XCover, a distribution platform providing coverage for any line of insurance in any country, language and currency, and XClaim, an API for real-time payment of approved claims that handles tens of thousands of instant claim payments in 90-plus currencies.
Mitch Doust, EVP of the Americas, described the workings of both platforms. (Related articles: “The Story of Cover Genius” and “VC Funding Could Dry Up, InsurTech Exec Says“)
Q: How does XCover work?
Doust: XCover is a single platform that can house, in theory, any insurance product that we can distribute via any digital touchpoint as long as we can integrate the API or some kind of technological linkage, which enables us to consume the data we need to price and deliver the quote.
XCover sits between the distributor and Cover Genius. The distributor is an e-commerce business, which could be a retailer, a large online travel agency, a shipping platform, an automotive distributor…We integrate with those digital environments via our APIs, and then we partner with a global network of capital providers in the back. They can be local direct carriers, reinsurers, the Lloyd’s market—whatever represents the most efficient and best way of accessing risk capital…
We are licensed as a platform to actually undertake the quoting and binding of that policy and to manage and administer the claims. In other words, XCover can control and operate the end-to-end value.
Q: How does XCover match carriers and customers?
Doust: Imagine a hypothetical scenario where you’ve got a customer that’s booking a holiday. XCover offers them a comprehensive travel product and maybe an international gadget protection product that they can purchase for the discrete duration of that trip. XCover, having identified and consumed the data points about the trip in real time as that customer is booking, has basically gone back to our global network of carriers and selected the right coverages and products for that customer for those purposes.
They could be separate carriers that are providing different elements of that. It’s essentially assessing the customer’s need and then mapping that need to the right policy or coverage from our panel of carriers that sit in the back.
Q: A traditional underwriter might decline to cover particular risks. Does anyone get refused for coverage via XCover integrations? How are product offerings and insurance prices determined?
Doust: No, I think that just comes down to the pricing.
Who knows? There may be certain circumstances where we identify certain characteristics of a customer, for example, someone that might be on a sanctions list or something, where we don’t offer our coverage to those people…
We’re constantly analyzing data to get better and better at serving up the right product…
Example: Here’s Mitch, he’s traveling from New York to Colorado at this time of year. He’s done a similar trip at the same time of year four times before. On the balance of all of the data that we can collect and analyze, we think that he’s going skiing, so we’ll offer him this type of product, and then based on what we know about his profile as an individual, we think he has this level of price elasticity. Maybe he wants additional products for laptops and phones…
It’s a data science-driven approach. We just look at what the data tells us about the profile of customers, and then we test different versions of products to see what resonates with people.
Q: In the U.S., regulations about price optimization differ by state. How does Cover Genius overcome regulatory hurdles with respect to price optimization?
Doust: Price optimization is something globally that’s core to the XCover platform. When we deliver products in the U.S., it’s a little different. The optimization side of things is probably going to end up being about product optimization. How can we create multiple different versions of a product that can allow us to tweak coverages and benefits and things like that so that we can offer different propositions for the customer rather than playing around with price?
Q: Whose underwriting model is used: Cover Genius’ model or the carrier’s?
Doust: It depends on the product. In certain circumstances, we seek to launch a product that we don’t have any data for, so we can go and work with a specialty carrier on that. They bring a lot of knowledge to the table in terms of what [is] the right underwriting model. Where we all come together there is that we’ve got a whole bunch of other data which is relevant to that, which those guys previously didn’t have access to. There are nuances to our distribution model which change the customer behaviors, which drives different outcomes from a risk point of view.
To give a great example, selling asset insurance for a mobile phone at the point of sale has a hugely different risk profile to selling the same product B2C. So, if you’re advertising mobile phone insurance on the Internet, and people are coming to your website, your loss ratio is generally sky high compared to when you’re selling it at the point of sale. At point of sale, you’ve got reasonable certainty that that asset is in good working order. It’s brand new and the customer doesn’t even have it yet, which removes a lot of the fraud risk…
Thinking through the implications of the way that we’re distributing and how that’s different to your traditional models is where we have to collaborate with the carriers to figure out what the right models are. And, the great thing is that as soon as we start selling, we’re monitoring data and we can figure out how our hypotheses are actually standing up to what we expected.
There are other circumstances where we’re taking products that we know really well and we’re globally expanding the markets for those, right? In those circumstances, we can do a lot of the underwriting ourselves. We’re quite good at pricing it. We’ve got global data. We’ve got really good knowledge of the behavioral drivers of loss ratios. And because we have visibility over the end-to-end value chain, we can actually be quite responsive to the data, which is something that a traditional carrier in that model has been unable to perform because there’s a real lag in terms of how they monitor and implement changes based on performance history.
(Doust gave an example during a presentation at insurtechweek: NYC related to rental car insurance business. Cover Genius first noticed a huge spike in sales coming out of Southeast Asian countries, followed by a huge spike in claims coming out of Iceland a few weeks later. The two observations were related. There was a huge push driving people from Asia to go to Iceland to see the Northern Lights at a specific time of year. But going from driving on one side of the road to the other side meant they incurred huge claims in their rental cars.
Doust said that visibility across the whole value chain and active data monitoring allowed Cover Genius to enact product and pricing changes before its carrier partner had even identified a problem. In a more traditional insurance distribution scenario, insurers might take months to notice that, and their typical action would be to just embargo those countries and not sell policies to those people traveling to that destination, he suggested.)
Q: Does Cover Genius handle all the insurance claims? What is XClaim?
Doust: Generally speaking, we handle all the claims. We have our own claims teams. We’ve got licensed adjusters…
Q: So, for a rental car accident, they inspect the damage?
Doust: It depends on the type of product. A lot of the rental car coverages globally are cash reimbursement type products. So, it’s more of a validation of loss and that sort of thing…
We’ve got our own claims management platform that’s delivered by XClaim, which basically facilitates a seamless, quick process…Part of our XClaim service and proposition is our instant payments technology…
You can imagine, especially in things like travel, when something bad happens to customers, getting that cash back into their bank account can be quite important to them. Making sure it happens in a timely manner is something that’s proven to be really valuable to customers.
Q: Does Cover Genius handle claims for more complicated insurance products, like BOPs for small business?
Doust: There are and will be use cases where we’re probably better served having other parties work with us on the claims process. We’ll always control elements of the claims process via XClaim, purely because it’s the way that we deliver the best customer experience. We will engage with experts as necessary to facilitate some elements of that claim. You can imagine the complexities of getting into liability claims, for example. From our perspective, there will be elements of that process where we can apply technology to improve that customer experience. There will be elements where it doesn’t make sense, and in those parts we can work with providers, whether they’re our carrier partners or others to help run those elements of the process.