The workers’ compensation market has always been one in need of a technological bump, as the need for more efficient claims services grew. Even before the COVID-19 pandemic, things such as improved two-way communications between claimants and claims professionals and the automation of data entries were badly needed in the industry.
Enter Pie Insurance – an insurtech specializing in workers’ compensation insurance for small businesses. In June, the company expanded into Alabama and Oregon, making its footprint cover 38 states and Washington D.C. – representing 89% of America’s small businesses.
Read more: Pie Insurance expands into two new states
Insurance Business spoke with Dax Craig (pictured), co-founder and president of Pie Insurance, to track the growth of the company, and to learn how it has navigated the tricky pandemic landscape. We also ask Craig on what his opinions are on the insurtech front.
You’ve founded a few businesses in the insurance and technology spaces. How did you come up with the idea for Pie Insurance?
Prior to founding Pie Insurance in 2017, I was the founder and CEO of Valen Analytics, a data and analytics provider to property and casualty insurance carriers. At the time, I was becoming increasingly frustrated because our traditional insurance carrier clients weren’t buying and using Valen’s predictive analytics solutions as they were intended. Instead of fighting an uphill battle to convince these carriers to use our solutions accurately, I had the idea to create my own insurance company that would integrate data and analytics into its foundation.
Entrepreneurship is in my blood so starting an insurance company from scratch was energizing and exciting. In 2016 I connected with John Swigart, Pie’s co-founder and Esurance veteran, and we became laser focused on building Pie.
From the very beginning, Pie was created to serve small businesses. We saw a gap in the insurance market that left small businesses consistently overlooked and overcharged by traditional insurance companies, often by up to 30 percent. We knew we could do better by small business owners and had the pricing algorithms and data needed to support our mission of empowering small businesses to thrive by making commercial insurance affordable and as easy as pie.
Pie is the company I have always wanted to build. In just over five years, we’ve sustained incredible growth. This is a testament to the need we fill and demand from small business owners for accurate pricing and easy to access insurance. To date, our workers’ comp offering is available to small business owners in 38 states and Washington D.C. In addition, we’ve raised more than $300 million in funding, employ more than 400 team members (we call them Pie-oneers), and have achieved an annualized run-rate of more than $300 million.
What do you think are the key challenges that the insurtech sector is facing right now?
First off, it’s important to acknowledge that building an insurtech company is incredibly complex and difficult. Pie entered an industry that has existed for more than 600 years so building credibility and taking market-share for long-term success is not something that happens overnight.
With that said, recently we’ve seen insurtechs face criticism in the public markets, which has inevitably created some skepticism amongst the viability of insurtechs overall. To me, that’s because many of these early wave insurtechs, we call them Insurtech 1.0, focused on growing fast and building technology-first insurance companies. This strategy came at the expense of delivering positive unit economics and good loss ratio performance required to run a sustainable insurance company.
At the end of the day, we’re an insurance company and must deliver on insurance business metrics like loss ratio, customer acquisition cost, and retention rates in order to prove we can be long-term investments.
I believe that we’ll continue to see a shift in overall perception towards insurtechs as the next wave of Insurtech 2.0 companies like Pie continue to show how we successfully apply technology to drive sustainable and profitable growth, all while delivering a modern and accessible customer experience.
Where do you see opportunities for growth for Pie Insurance? What do you hope Pie Insurance will look like in five years?
In five years and beyond, I hope Pie will become a household name. We truly believe in our mission and our goal is to become the number one choice for small businesses when shopping for insurance. Looking at how far Pie has come, and how much we’ve achieved in just five years, the opportunities that lay ahead of us are massive.
In the short term, our initial workers’ comp offering remains a focus as we continue to take market share and use our granular pricing to offer small business owners across the U.S. savings of up to 30 percent on their policies. We’re also exploring additional lines of business and anticipate announcing our next line in the near future.
Another key area of growth we'll be executing upon is our strategy to become a full stack carrier. To date, we’ve served as an MGA, but from the very beginning our strategy has been to control the entire experience for our customers - from quote to claim. Our initial step was acquiring our first carrier last year, Pie Casualty Insurance Company, and we expect to begin writing policies on our own insurance carriers very soon.
We also expect to continue expanding our distribution and continuing to meet our small business owners where they are – whether that be direct, through a trusted insurance agent, or through their payroll provider. This year alone we’ve launched integrations with three of the leading commercial platforms, Bold Penguin, Tarmika and Talage, and developed a flexible pay-as-you-go offering.
Pie has achieved impressive growth in a short period of time and we look forward to continuing to expand and provide value to our small business customers and the agents who serve them.
What key gaps in the insurance space have you built Pie Insurance to fill?
As I mentioned, small businesses have historically been overcharged and underserved for decades by commercial insurance companies. This is why we built Pie. Typical commercial insurance companies rely on a time-consuming process in which underwriters manually price every single policy. This cumbersome process means legacy commercial insurance providers either neglect small businesses entirely or often group them with other larger businesses and charge them more than they should be paying for the work they actually do.
Instead of manually pricing each policy like traditional insurers do, Pie uses sophisticated technology to price most policies at a granular level. As a result, Pie is able to provide automatic decisions on 73 percent of class codes, freeing up our underwriters to spend most of their time evaluating complex cases. This means we can support a larger volume of policies, and quickly offer accurately priced coverage to more small businesses.
Pie’s first customer, the owner of a small concrete-laying business, is a great example of the gap we fill. This customer came to Pie for a quote because, despite not having any claims, he was dropped by his previous insurer when they decided they couldn’t profitably service policies that cost less than $10,000 per year. Because of Pie’s pricing technology, Pie was able to offer him a policy 30 percent less than his previous insurer and after four years, he’s never had a claim and has consistently grown his business with Pie.
While the personal lines of insurance, like home or auto, have benefitted for years from data-driven pricing and automated technologies, the small business commercial market still has a massive opportunity for disruption. Pie is leading the charge and filling this wide gap in commercial insurance to do better by the backbone of America’s economy - small businesses.