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Demystifying the conversations we're already here at RRE and with our portfolio companies. In each episode, your hosts, Will Porteous, Raju Rishi, and Jason Black will dive deeply into topics that are shaping the future, from satellite technology to digital health, to venture investing, and much more.
Will: Welcome to RRE POV—
Raju: —a show in which we record the conversations we’re already having amongst ourselves—
Jason: —our entrepreneurs, and industry leaders for you to listen in on.
Jason: Well, welcome to the RRE POV podcast. Today we have CEO of Boost Insurance, Alex Maffeo. Joining us. Alex, thanks for coming on the pod.
Alex: Thanks for having me. Excited.
Will: Great to have you with us.
Jason: Today, we’re going to be walking through Boost Insurance. Before we get into the company itself, maybe you can share a little bit about your background leading up to founding Boost.
Alex: Yeah, happy to. So, my background actually, prior to founding Boost, was on your side of the table. So, I’m a reforming venture capital and growth equity investor turned founder here.
Jason: It’s a tough habit to kick.
Alex: I know. I’m trying to break the mold, but [crosstalk 00:00:59] VC to do operating. But yeah, I spent the better part of my career, almost ten years, at a venture and growth equity firm here in New York called IA Capital Group, focusing exclusively on FinTech, broadly speaking. And honestly, I got pretty lucky; I just fell into the right seat at the right time. Didn’t know really much of anything about venture capital at the time, and knew even less about FinTech.
I got started there in late 2008, early 2009, so you can imagine that was a pretty, you know, convenient time for a young guy getting started in FinTech-focused venture capital investing. So, just by nature of those cycles, we were on the heels of the financial crisis, banks had, understandably, fallen out of favor after, you know, tanking the global economy, and for the first time in a really long time, you had new entrants entering various verticals of the banking space and having an actual chance at winning market share. So, I fell in love with it right away, and honestly, it was probably more like philosophically than anything else. Just I loved the idea of upstart, new, exciting companies jumping in. And honestly, all they were trying to do was create better products and better experiences for today’s financial customer. So again, just by nature of those cycles, a lot of my early investment career [unintelligible 00:02:13] investing in things like payments companies, especially finance or marketplace lending companies, small business lenders, really those, like, neo-banking plays before that was really a buzzword.
But just by nature of where the partners that I work for came from—and I—we always had a core competency in insurance. So, we would be doing all the fun FinTech stuff outside, you know, within the actual core FinTech funds that we managed, but every now and then, one of the partners that I worked for, you know, found a really exciting balance sheet business, right, call it a private placement life insurance company down in Bermuda that was super interesting. You know, it wasn’t, but they found [unintelligible 00:02:51] as, you know, exciting investment opportunity. So, we would make these very traditional insurance-related investments outside of the core FinTech funds, kind of in sidecar vehicles, throughout my career. And as anybody who’s ever worked at an investment firm knows how that works is, I was low man on the—in the [rights 00:03:08] at the firm, and I got pulled into those deals.
And [unintelligible 00:03:11] due diligence, built the financial models, wrote the investment committee memos, and really just kind of got forced, at times kicking and screaming, to at least learn the fundamentals of insurance throughout my career. So, I would run as quick as humanly possible down back to FinTech, when those deals were done, but kind of fast-forward around 2015 or so, and at that point, we started seeing this first signal of, you know, this thing called InsurTech coming to the surface. And we as a VC thought that we were pretty uniquely positioned to deploy much earlier-stage capital in that segment because we had so much experience in the traditional insurance world and knew where the bodies were buried, what really important. Kind of in the irony of all ironies, at that point, I was a principal of the firm, so I was able to kind of do my own thing, lead my own deals a little bit, so I got tagged to lead the early-stage InsurTech practice in IA in 2015. So, that segment I’d been running away from my whole career prior to that, I just got sucked deeper and deeper into. And now I find myself at Boost.
Jason: Yeah. I mean, obviously, you eventually went on to found your own InsurTech business. Let’s talk a little bit about that period of inflection. It’s a model that works really well for a New York Life, right, once you’re at scale and cost of capital, and you know, you’ve just got this behemoth that’s, like, so tough to undermine, and maybe they’re not pioneering new business models or technologies, but also, like, the fundamentals of the business are so good, what changed around that time period, where early companies that you were seeing were, you know, finding a wedge into the market? Obviously, like, this is the kind of the zero interest rate [laugh] period as well, so setting that aside, like, what was, at least theoretically, the bit that flipped during that period that encouraged people to take on what has traditionally been one of the hardest businesses to, like, start in scale?
Alex: Yeah, so I’m not going to diminish the importance of money being free back then, but we can get into that a little bit later, in terms of the current environment. But really what we saw was insurance was always five, ten years behind other segments of financial services in terms of, you know, the impact of innovation, and thus the embracing of those technologies as you see in other segments of FinTech, right? So, everyone knew it was coming; it was just a matter of when. To the industry’s credit, they actually did try to embrace the movement. There was far less themes of disruption in the early InsurTech movement than you saw in other areas of FinTech sometimes.
And that makes sense when you think about the context of the financial crisis, and this just being kind of the next evolution of FinTech. And so, we saw insurance companies that really started to engage with startups and making a meaningful effort to support them. That first wave, though, is all about consumer experience, right? It was about, you know, incremental improvement to that consumer purchasing experience. So like, let people buy insurance on the internet, for Christ’s sake.
I mean, it really wasn’t all that exciting, quite frankly, and it should not have been all that controversial, but what we saw was the best opportunities that were getting pitched to us as an investor were the entrepreneurs who were really trying to innovate from the inside out. [unintelligible 00:06:14] really wanted to touch the product of insurance, which is what’s really important: ensuring new risks, taking a different approach to underwriting and data, to better price and select risk. But that starts with being able to actually control what the insurance product looks like. That is where we found to be the most difficult barrier of entry when it comes to, really, innovation in the space. So, the inflection point was really, whenever a company that just wanted to plug into State Farm or Nationwide, and offer that off-the-shelf renter’s insurance product, or you know, life insurance product that had been in the market for decades and consumers had already said they don’t like, just allowing them to purchase that on the internet more efficiently was really the first wave of companies you saw starting to reach scale.
But we knew that that wasn’t all that exciting. That was almost like glorified lead gen for the internet age. But what we saw with a small handful of companies, the early movers like Lemonade, and Hippo, and even Root to a certain extent, they were able to build long-term scalable businesses. I mean, say what they want here, they made their own mistakes, but that was because they really controlled the actual product. But they were few and far between.
So, we got really frustrated watching what we thought were the opportunities that have the highest upside, those that were trying to be true managing general agencies, trying to really innovate on the product side, those were objectively the hardest companies to get to market, and most expensive to scale thereafter. So, that’s where this idea of Boost started being, you know, formed at IA. It was called Project Boost, and we incubated it for about two years, trying to figure out what the right go-to-market model would be to really better support innovation like that in the space, not just slapping, you know, a mobile app on State Farm, but really trying to support product innovation, better coverage, better pricing, and entrepreneurs that really had a sophisticated approach to building a full-blown insurance operation. So, you saw a whole lot of inflection points in the early days, but in our opinion, it was pretty flimsy, more or less a distribution, digital distribution that wasn’t really making all that much difference in the industry.
Will: Alex, it seems like you’ve gravitated to the big hard problem, and the one that can really transform the industry long term. Maybe you could talk a little bit about the scaling journey for a company like that in the insurance sector, given the historical challenges around adoption, the historical attitudes towards innovation, and how you’ve been balancing, kind of, growth and achieving the long-term strategic goal that you described a minute ago.
Alex: It starts by just understanding what is important, what has always been important in insurance, and what will always be important in insurance, and that is really compliance, capital—from a risk capital perspective—and underwriting, right? Those are just three core components of the insurance industry that are just always going to be the most important for the stakeholders across the value chain, right, so you have to be at least conscious of those things. And some of the, kind of, now cautionary tales in hindsight with InsurTech was not appreciating at least one or more of those three core components, right? The customer acquisition journey, which is really—Boost is a B2B2C platform, so we really never touched the end policyholder, or have to acquire them or market to them. That’s really what our partners really do, and are very good at.
That in and of itself has extremely high customer acquisition costs, and requires, in the early days, a whole lot of investment in order to get to scale of some sort. So, that by itself is really difficult to do, and you saw a lot of companies really burning a lot of money in terms of CAC. But that’s normal and totally table stakes in the insurance world. But what they were also doing was burning a lot of money on the underwriting side, too, where they were not underwriting effectively on behalf of those that were agreeing to take risk on their innovative concepts, and you cannot burn the candle at both ends. We all know that music will stop eventually, and we’ve seen it really stop in a pretty emphatic way over the last 24 months in InsurTech, right?
But really, it takes millions of dollars to build what is effectively a managing general agency, you know? An agency that’s not a carrier, does not have a big, traditional balance sheet, if you will, but does have all the operational roles and responsibilities of a carrier, especially underwriting responsibilities. So, they have to not only acquire customers, service them, but they also have to underwrite effectively on behalf of their risk capital provider, whether it’s an insurance carrier, or a reinsurance company, or some combination of the two, otherwise they’re going to lose their support and have to eventually become balance sheet businesses. So, you kind of saw that evolution with some of these early movers were Lemonade, Root, Hippo, the same way they all kind of eventually evolved into full-stack carriers and balance sheet businesses because they had to, right? So, we saw a lot of those pitfalls where just scaling that MGA is very difficult, very expensive, even worse, when you actually have to build the balance sheet on top of that, at the end of that journey.
Will: Makes sense. It seems like the balance sheet question is always a factor for scaling companies in financial services.
Alex: It eventually comes up, for sure. It’s not inevitable, but it does eventually come up, for sure.
Jason: Shocking.
Alex: Yeah.
Jason: So, Alex, before we get too deep into it, for the uninitiated or those less familiar with how insurance actually works, maybe you can walk us through a very high level, who are the players, what are the technologies, who bears the risk, and effectively, how does insurance work at the most fundamental level?
Alex: Well, let’s start at the front of the value chain, right, the distribution side of the marketplace. There’s really two—or maybe three if you squint—different business model options you have if you want to get to market in the business of selling insurance products. That starts with a broker. So—all these are licensed entities, by the way, so just, they have, you know, their own varying degrees of licensing requirements. But really, a broker is selling insurance on behalf of an insurance company, and using whatever that insurance company’s off-the-shelf product is, right?
And they really are advocating on behalf of the policyholder themselves, so legally—and from a roles and responsibility, and fiduciary perspective, a broker represents the policyholder and authorized to sell, solicit, and offer a carrier’s insurance product, right? They have the least amount of control over what the actual product looks like—coverages offered, pricing, and things of that nature—but the most amount of control over the actual customer acquisition and relationship component of that transaction. Then you graduate into the retail agency or agency market, which is, you kind of flip it. An agency is appointed by an insurance company, and is authorized to—again—sell, solicit, and offer the carrier’s insurance product. But technically, they represent the carrier, right, so [there is far less 00:13:01] fiduciary responsibility in terms of who’s representing the policyholder, and who’s supposed to be advocating for them in that arena.
But then you get into, like, the most popular, and honestly, in my opinion, the sweet spot of insurance distribution, and that’s the managing general agency. So again, that is a company that’s appointed by a carrier, and authorized to not only offer an off-the-shelf insurance product, but often to actually create their own specialized version of an insurance product. And they’re able to get that level of control because they also have a significant amount of underwriting capabilities. So, you as an MGA, would go to that carrier and say, “I, entrepreneur Alex, want to start an MGA to offer, you know, alien abduction insurance,” or something crazy and off the wall. It exists actually, which killed my early [days 00:13:49] joke because when I found out that it was an actual insurance product—
Jason: [laugh].
Alex: —the joke wasn’t that funny. But somebody went to a carrier and said, “Look, there’s a market opportunity for this. I have this amazing, you know, underwriting model to really, you know, assess and price, the risk of aliens coming down and beaming me up, and I want to sell this product.” So, you would go through that process with the carrier and create that risk that they’re comfortable with, and then you have really a whole lot more authority operationally, and from a transactional perspective with that carrier as a managing general agent. You can underwrite, bind, and even issue policies on their behalf without any sort of intervention from the carrier itself.
So, it’s really the best of all worlds where you are controlling that customer, you have a whole lot of say in what the actual product is that you are building, and you have the underwriting authority to allow you to transact and bind that risk without actually having to be the balance sheet company, right? So, behind those MGAs or brokers or agents are the carriers. That’s the traditional balance sheet in this industry. They’re the immovable object, the, kind of, slow-moving, bureaucratic—clunky, in my opinion—you know, entities that operate in the middle part of the value chain. And they are the most highly regulated, so it makes sense that they’re a little slower, more risk-averse.
Jason: Yeah, those are the brands that you’d recognize.
Alex: That’s the Jake from State Farm, right, and Flo.
Jason: Exactly.
Alex: Exactly. So, those are the ones that you see on your TV commercials every single day, right?
Jason: And like, briefly on reinsurance—because I know we’ll get into that eventually—but that’s kind of another part of the industry: super important, but less well known to people outside of it, so maybe a brief recap there.
Alex: Exactly right. That’s the [unintelligible 00:15:19] for insurance companies, kind of. I mean, that’s the way dumbed-down version of it, but it’s part of the capital stack that sits behind insurance companies. So, State Farm might be comfortable taking 90% of the risk on their homeowner’s insurance program, right, but they might want to seed about 10% of that off to the reinsurance market that sits behind them. It allows them to be a little bit more nimble from a capital perspective, you know, manage their own balance sheet and risks behind the scenes.
So, there’s a whole ‘nother layer behind that called the ILS industry that we don’t have to get into today, but really, there’s all sorts of ways that you can, kind of, seed risk back to other risk capital providers. So, that’s kind of where—like, how the ecosystem works. And we saw that the InsurTech movement really honed in on the managing general agency model, and rightfully so. Again, best of all worlds where you can really innovate on the product side, and have ultimate control operationally with your customers and your transactions, right? But it’s objectively extremely expensive to build an MGA and get to market as one, and then just as expensive to scale it because you’re effectively building an underwriting operation, a marketing engine, and a technology business, all in parallel, as opposed to others that just want to be a broker, I just slap an app on State Farm, and are off to the races [unintelligible 00:16:36].
Raju: Alex, can we jump into the technology and the innovation a little bit here? I’m just a major geek [laugh]. I don’t know if we’ve—
Jason: Well before, we need to hear what Boost does. This was all a build up to Boost.
Raju: True. True.
Jason: What is Boo—listeners will be shocked to learn that [laugh] you’re in the MGA space.
Alex: Or they might just have tuned out because I’m talking about insurance way too much.
Jason: Right, yeah, yeah.
Alex: [crosstalk 00:17:01] insurance, I’m happy to. But really, again—
Jason: Let’s give the elevator pitch of Boost, and then we’ll get into the tech. Sorry.
Alex: [unintelligible 00:17:08]. So again, we are focusing on MGAs. Those are our customers, right? That’s really our sweet spot in terms of who we focus on serving. And as I mentioned, it’s extremely expensive to get—it’s very difficult to get to market as an MGA, and even more expensive to build and scale one once you actually are lucky enough to do so.
So, we provide infrastructure for, really, any company that wants to be an MGA in the insurance industry, right? So, our specific segments are brokers that want more control of over product and the user experience, MGAs who are already MGAs that are either looking to move to a more cost-effective platform, or build a new line of business on Boost rails. And then the buzziest of buzzwords in the insurance industry—which does have some substance, obviously—the embedded insurance vertical. So, companies that are in any industry other than insurance, but want to build a meaningful insurance vertical by selling an insurance product on their platform. So, we serve those markets, and we provide them with compliance, capital, and technology infrastructure to really power their MGAs. So, it’s basically an all-in-one turnkey platform for a company to be an MGA, but just to do so at a fraction of the cost.
So, Boost itself is licensed as a managing general agency. We can do any line of business in the property casualty space. We—from personalized to commercial lines, you name it, we are agnostic in that sense of the word. We also have appointments from a number of [unintelligible 00:18:36] A or A-minus carriers that have delegated full authority operationally to Boost down. So, we can actually not only rate and quote, and bind, and issue insurance policies on their behalf, but more importantly, we actually develop our own insurance products from scratch, developing the forms, rates, the underwriting guidelines really custom to what we think addresses the market opportunity the best, and tailored to our distribution partners’ and customers’ needs.
Raju: That was a great overview. What I’d like to hear just some real world examples of, you know, how you’re deploying this, just some case studies, use cases that you’re in, that are live today.
Alex: A good example of a program that we’ve supported from the bottom up and for a long period of time now at this point, is Cowbell Cyber is one of our more notable customers in the cybersecurity, the SME cyber insurance space, where we’ve been supporting them for about, I want to say five, maybe even six years at this stage. And we were introduced to them when they were still pre-launch as a company themselves. And what they did was they integrated with Boost API, we tailored the SME Commercial Cyber product for their end-specifications, for their end-users, and then they have integrated with not only that insurance product that they can now offer as their own to their end customers, but with our end-to-end policy administration technology system. So, a policy admin system is really that core back-end brain of any insurance company where, in order to rate or underwrite or bind or issue an insurance policy, there’s a whole complex series of yes or no decisions and multiplication tables that need to take place before you’re able to bind risk. Traditionally, that’s done over the phone with underwriters, where it’s, you know, somebody’s calling their carrier partner—an MGA calling their carrier partner and saying, “Hey, we want to bind risk on behalf of this small balloon shop.” And we say—our systems actually automate one hundred percent of those workflows within the underwriting guidelines of the—
Raju: Wai—Alex, just let me interrupt for a second. Was that the key to that sale was that they didn’t have an automated way of doing it, and you did? Or was it, you know, they just didn’t—you know, it was too much time for them to execute this on their own, and you, kind of, sped it up? Or was it that, you know, you just allowed a new way of creating policies that, you know, like—or executing the whole value proposition that, you know, they just would have to break a lot of what they have to make happen? I’m just trying to understand, why not do it themselves? Why work with you guys?
Alex: That’s a great question. So, I think in the early days—and even with Cowbell, if you asked them back then why they were going with Boost, it was speed to market, without a doubt. And that is a very, very true and powerful value proposition that we offer to any company, whether it’s a startup that’s trying to get to market first, or another company that wants to just test a new line of business quickly in a market. We offer unparalleled speed to market in that sense of the word. It can take anywhere between 12, 24, 48 months to get to market yourself by banging your head against the wall with other carriers to support you, right? That is usually the leading value proposition for our customers.
Jason: That’s the build-your-own MGA—
Alex: Exactly.
Jason: Thing, which is super expensive for everybody, and you’re effectively offloading all that cost and complexity because you’ve already banged your head against, like, eight or nine different walls.
Alex: For sure.
Jason: And that’s your core competency is, like, banging your head against a wall on behalf of your customers, effectively, right?
Alex: We do all of the [guts 00:21:55], the back-end ugly work that nobody wants.
Jason: Right [laugh]. And so, your time-to-market is tremendous. I mean, maybe you could walk through, like, some of your fastest time-to-market for a new line of insurance.
Alex: So, when we’re developing a new product from scratch, from the ground up, it can take anywhere—again, 24 to 36 months if you’re doing it yourself. Boost can get you to market anywhere between three and six months, maybe twelve on really complex, countrywide type programs. But it’s a fraction of the time and cost to get to market that way. But then you look at all the actual ongoing, the cost-effectiveness of the platform. When you look at Boost, it’s almost like AWS for insurance for an MGA.
And that is when—you ask Cowbell when we launched them what our main value proposition, it was speed to market. You ask them today, and its scalability, right? Because again, that fraction of the cost to get to market carries through as that program scales. So, in the early days, Cowbell started with one product [unintelligible 00:22:51]—powered by Boost in the background. Since then, they’ve launched four, five, six different other products away from Boost that are a lot more hands-on and require a lot more specialty underwriting that we’re not equipped to really automate, right?
So, they’ve built and scaled that program horizont—that company horizontally. Meanwhile, our program that we power for them has been running on autopilot, like it’s AWS, for five years now, right? So, they take a hundred percent of their internal time and resources to focus on other things, and we handle everything for free, almost, in the background, you know, through a very turnkey API solution that you can set and forget. So, what is today X percent of their overall business which is meaningful, they probably invest 0% of their actual resources into maintaining, and controlling, and growing. They can take all their resources and dedicate it to other things that they’re doing within their business.
Jason: Which might come as a surprise to people just generally, the number of, you know, insurance companies that are leaning on Boost, [laugh] actually.
Alex: Right.
Jason: Right? You’d expect for an insurance company, I mean, to want to internalize all of this. Like, why do you think—you know, as you’ve built out, what’s been the key—I mean, the policy administration technology that you’re talking about is maybe some of the least sexy and most important tech. It’s a real system of record. I mean, you’d mentioned earlier, like, manually calling people. That reminds me of the early days of, you know, credit card rollouts [audio break 00:24:12] where, you know, you’ve got the [laugh] two different banks, literally calling each other, like, “Is this person good for it?” And then kind of coming full circle, like, talk to us about what you’re able to enable, given your highly sophisticated policy administration system, and how it stacks up in the market generally?
Alex: Yep. So, the [build-by 00:24:31] dilemma on the tech side, specifically, right? So, you have the MGA and the compliance and the capital piece, that we can easily stand behind that. On the tech side—especially when money was free, right, going back to that theme—it was easier to hire a ton of engineers to really build your own policy administration system. And in those days, we were like, there’s so many better ways to allocate your engineering resources from a technology and a stack perspective.
You can build a better mousetrap, better data analytics, things that are really tailored to you your specific business, as opposed to a policy admin system, which is a really complex system, but it isn’t utility at the end of the day, right? It’s a payment processor for insurance. So, we just offered that as a service, much like we offered, you know, the MGA compliance and capital as a service, too. And it was a hard pitch in the early days; it’s not a hard pitch anymore, I can tell you that much, where, you know, investor capital is scarce, and thus, you know, the engineering resources really need to be optimized. Nobody’s trying to build a policy admin system themselves anymore.
All of the enterprise value can be built outside of that. So, we do that for them. That’s the guts piece on the technology side, and what that enables us to do is automate things on the back end for our reinsurance partners, and our core carrier partners, who are increasingly appreciating the value proposition that we offer in the marketplace, too. So, in the early days with them, it was being an aggregator and a curator of innovative new insurance programs, addressing InsurTech startups more efficiently. But today, we are automating a hundred percent of the underwriting and program management for them, all of the data analytics, and reporting that are boring, and awful, and manual, that is all a hundred percent automated in the back-end, as well.
So, becoming that full end-to-end, vertically integrated platform has enabled us to have a really competitive advantage on data analytics, actual risk management, and the overall, kind of, insurance asset class portfolio management on behalf of all of the stakeholders in the value chain of our programs.
Jason: You know, that’s more on the startup and scale up, which you know, you’ve enabled people to do incredibly well, not just for, kind of, Cowbell Cyber. Another one that’s on your website that we can talk about is Wagmo for pet insurance, right, where they’re [adding 00:26:42] a new line of business. I know that there are a couple, like, national and massive brands that are maybe deeper in the pipe we can’t talk about, but you know, I expect it to a slightly different sale. Maybe you can walk us through, you know, is the value prop is same for your startup cyber insurance company as it is for a nationally recognized brand that powers you know, industry X, Y or Z?
Alex: Yeah. So, just like in the early days when I said the go-to-market time and shortening that was really our main value proposition. That would imply that Boost is some sort of, like, launching pad to something else, right? That is not what we are, and that’s proven itself over time, and these are perfect case studies for that.
So, both of these companies that you were alluding to—cleverly, but I still will not disclose—are already, like, multibillion dollar operations. They are—one of them is the largest wholesale broker and MGA in the United States. And they’re appreciating—they don’t care as much about go-to-market speed because they have plenty of time to take their time with everything that they do, right—focused on scalability and cost-effectiveness, first and foremost. And we are about as scalable as it gets now because we’re backed by 12 different global reinsurance companies. Four different [unintelligible 00:27:52] or A-minus rated fronting carriers have [appointed 00:27:56] Boost.
And our actual technology systems have been battle-tested across numerous lines of business, and a significant amount of actual API call volume and things like that. So, they’ve tested us in—they go through the rigmarole—the [diligence 00:28:10] rigmarole—on those value propositions way more so than they do on speed. So, that is where we’re proving out our scalability as a platform to address companies of any size and shape that want to build a more digital and cost-effective insurance program.
Raju: Hey, can I just jump in with—I touched on this earlier, but it wasn’t the appropriate time. I just—you guys are bringing a ton of innovation to this, you know, sort of archaic platform. And I say ‘archaic’ because insurance is such a big industry, but it’s been around a long time and the innovation rate is kind of been bland. This API integration, you do so much [of it 00:28:46]. You talked about it a few times during the podcast. Can you talk a little bit about the importance of that, and then maybe we can touch on some of the challenges of it, too because it’s not free. Anyway, just if you want to comment a bit on that, that would be helpful.
Alex: Yeah, we went API first in our go-to-market because we knew that our go-to-market customers were going to want nothing to do with our front-end or brand, right? We wanted to sit in the background. So, knowing that the early-stage InsurTech startup was really that first market that we were going to address, we went API first, and that really worked extremely well for them. One, they’re all technology-enabled in their own right, so the integration was not intimidating. If you have a competent developer focusing on our API integration, you can be live and in market in two weeks or less. It’s that simple. It’s about as modern and turnkey and simple and easy to use as you’ll find in any industry, let alone the insurance world.
But as we started moving upstream and cross-stream, we realized that the API could be actually a barrier and a friction point in our sale, and we had to address that as well. So, for example, you can have an InsurTech that’s at scale that is super technology-enabled, but they have other things going on, so just getting on the roadmap—the developer roadmap—could be a challenge, similarly with companies that aren’t focused on insurance as their core business. So, you know, again, very scarce developer resources on their end. We needed to be able to address that and make sure we are winning opportunities at servicing those customers without forcing them into an API integration. So, we actually, just this year, built out a front-end interface that allows them to transact with no code.
Raju: I love it.
Alex: It went from low code, which really works with people that know that they want to just go all-in and use their front-end environment and know what they’re doing, and then low code, for those that are cool is just starting with something that’s a little less directly integrated, but, you know, I would definitely trade that to get to market fast.
Raju: That’s fantastic. But how do you manage all of that? I mean, so part of the challenge with APIs, no-code, low-code stuff, is that every time the underlying platform gets updated, you got to do something [laugh], you know? How are you managing that as a business? Because it tends to get a little tough over time, right? And we have a ton of API companies that, you know, that love to hear how you’re thinking about managing that problem?
Alex: Yeah. It’s great. So, we—it’s worth noting that we’ve built everything on those technologies [unintelligible 00:31:05] platform. So, there’s no custom, client-specific dev that ever gets done. When we develop a new product or line of business, it’s using all the platform features and product-specific features that can scale across future programs as well. So, there’s never an opportunity where we’ve had a large customer that said, “Build me this,” and we just built a completely separate environment for them, right?
So, because of that, the API is extremely efficient, not only to integrate with, but then to keep updated, you know, thereafter. So, when we make a change in the back-end system—say all of a sudden, we found ourselves, you know, running hot in bowling alleys in Nebraska on this random insurance program, and we want to really restrict how much business we’re producing in that segment. We make a change in the back-end from an underwriting perspective in that system, and it immediately cascades down through the API to ensure that either we’re limiting the quote volume, or, you know, restricting the limits that are offered or whatever the actual underwriting protection that we’ve put in, without our customers having to do anything in the front-end. And it just automatically updates in our front-end via the API.
And then there are certain things that we’re patient with. Like, you don’t have to do them right away. And it’s just a matter of updating the API with a new version when you see fit. So, if it is something that is required by either law or underwriting mandate, it’ll cascade down immediately across the API. If it’s something that we can be patient on, we never force the API update. They can continue to operate off their version for as long as they want, within reason, obviously.
Raju: You know, just, I guess we’ll—I’ll ask this question. You’ve done a ton with your tech in product, and it sounds like it’s—I mean, definitely proven. You got major, major players on the platform, and oh, by the way, some stuff coming that I can’t wait to hear about. I know Jason, you know about it, but I want to know, too [laugh]. But don’t tell us that. Tell us, where do you go from here?
Alex: Yeah, so we’re going to continue to focus on the larger, enterprise-type partnership model that has been working in recent months. We’ve moved upstream, and we can continue to serve startups in the way that we always have, and it’s just an extremely efficient platform for that market, and always will be. It’s the larger, more enterprise-type partners that have already built it all themselves that are actually moving over to Boost that we’ve been leaning into. So, from a distribution and volume perspective, that’s really where our focus is in terms of our growth strategy going forward.
The other piece that’s equally important—might be a little scary to some investors, but as Jason can definitely attest to firsthand, it’s not as scary as it sounds—is the balance sheet piece of the business. So, for us, that means a whole lot—a much different thing than just being a carrier and building a balance sheet and taking risk. We are actually launching—we act—we announced this a couple of months ago, Boost Re. Boost Re is our own reinsurance entity that sits behind the other MGA infrastructure stack components, where it allows us to at least seed risk to ourselves through various [other 00:34:03] vehicles that are capitalized, not by Boost’s equity capital, but by third-party capital markets that want access to this asset class. So, I alluded to this earlier, where we engage with reinsurance companies.
Those that sit behind that are pension funds, ILS—hedge funds, any sort of asset manager that wants access to the asset class of insurance premiums can do so now through Boost Re on the back-end of our platform. So, we’re engaging that market and enabling them to use our vehicles to actually deploy risk capital and get access to the asset class insurance premium on our platform as well. And that is great news for our distribution partners who continue to grow, and will always need more and more third-parties with capital to do scaling. We now enable them to do that far more efficiently, tapping into those risk capital markets behind them. And then further, if they themselves want to go full stack on our rails, again, proving that we can be the most scalable insurance platform in the industry, we can spin up one of those vehicles for them as well, and they can then be distribution, and their own risk—running their own risk capacity on both sides of, you know, the insurance—the Boost infrastructure marketplace. So, again, there’s no reason at all to go full stack or build any of this yourself because you can build a hundred percent of it on Boost rails and get all the different value propositions that you would get by going full-stack insurance company at any stage.
Jason: I think, like, implicit in that is that you’ve got great performance on your paper.
Alex: That’s right. Yep.
Jason: Okay, I think that’s the final thing. I know Raju always does the Gatling gun questions, but I think it’s an interesting… you know, building in FinTech during these past five years has been quite a roller coaster, right, like, post—you know, in 2022, we saw, like, a rapid collapse in multiples and big pullback, the money is no longer free. You know, I think you guys have done a very great job, like, deliberately growing. Maybe you could talk just briefly about balancing growth and performance of your actual paper, right, the underlying risk, and how that’s put you in a position to even launch Boost Re to begin with.
Alex: Yep. So, growing at all costs in the insurance industry ends badly, and you’re seeing that happening all around us. Boost did not take the approach. We took the slow and steady approach to getting to market and to growing. It honestly took us two years to produce anything when we went to market.
And then from there, we’ve been really disciplined in the programs and the partners that we will work with in front of us, with underwriting profitability always, you know, top priority for the company at scale. You can’t underwrite on behalf of other people if you’re going to underwrite poorly. So, we’ve made some tough decisions. We went from zero to 2 million in premium one year, and then terminated a partner who was about 90% of that, for not honoring compliance and underwriting guidelines, right? So, it was like zero to one back to zero [laugh], and then rebuild, again.
It all paid off in the long run. So, we look at Boost today, prioritizing underwriting profitability keeps risk off of our balance sheets, and maintains stability for our distribution partners in front of us, who otherwise may have gotten caught up in some of the growth hysteria. But when you look at January, we have a lot of reinsurance renewals. A lot of InsurTechs lost their reinsurance capacity. Nobody else will guarantee their risk, so they have a lot of decisions to make about their own businesses going forward.
Boost was able to secure almost 150 million of additional reinsurance capacity year-over-year to allow us to continue to scale and grow, and we’ve done that by underwriting profitably and responsibly on behalf of those third parties. So, we are in a much better, much stronger position by just being a little bit more disciplined in our growth approaches on the top line over the last twelve of months. That announcement, I’m willing to give you a spoiler on, a quick little sneak peek.
Jason: There you go. That’s going to give people a lot of confidence. I think, you know, just being a good steward of, you know, capital and risk in your customers. It’s a tough place to be in to balance with growth, and it’s a trade-off that, you know, is a double-edged sword, but I think you guys have managed it really well. I know Raju is champing at the bit to jump in with his Gatling gun.
Raju: Yes.
Alex: [laugh].
Jason: So, fire [laugh] fire away.
Raju: Yeah, man.
Alex: Good luck, Alex.
Raju: So yeah, this is the impromptu—super impromptu version of—you know, end of the podcast.
Alex: Sure.
Raju: So, it was just—it’s going to be a series of questions. Some of them yes or no, some of them just one answer. We’ll give you a little time to think about them. They’re going to be related to Boost… Insurance… you know, category…
Alex: Okay.
Raju: Ish. So, most impactful product: booster rocket or booster seat?
Alex: Rocket.
Raju: Best finance-related movie? Open-ended question.
Jason: Damn, that’s actually a hard one.
Alex: Got to be—
Jason: There’s been some pretty good ones.
Alex: Wolf of Wall Street, for sure.
Raju: Wolf of Wall Street. That’s a good answer.
Jason: [laugh].
Raju: That’s a good—
Jason: Boiler Room is also great.
Will: One hundred percent.
Alex: Oh, Boiler Room is a good one. A little bit more of a throwback, but—
Jason: Boiler Room.
Raju: That’s because I’m old, Alex.
Alex: Fair enough.
Raju: That’s because I’m old. Okay. [unintelligible 00:38:54] risk-oriented stuff. Riskiest product introduction: Apple’s Vision Pro or Netflix Games.
Alex: Oh, Netflix Games, just because it’s a guaranteed failure. But—
All: [laugh].
Raju: All right, there you go. Best risk game: OG Risk or Risk 2210 A.D.?
Alex: OG risk, all day long.
Raju: All day long. Fine.
Alex: Yeah.
Raju: Riskiest move: surprise marriage proposal or betting on any New York football team to win?
Alex: I would just [unintelligible 00:39:22].
Raju: Okay.
All: [laugh].
Raju: [unintelligible 00:39:27]. Year when custom insurance can be offered on the fly for any product?
Alex: Any product? Well, I mean… never. The answer to that question is never. There are always going to be lines of business that cannot be offered on the fly.
Raju: Okay, fine. Last question: how and when can firms invest in Boost?
Alex: Firms can invest in Boost [unintelligible 00:39:48] our upcoming equity round of financing that is TBD, but is in process right now. So—
Jason: Get in touch.
Alex: Yes. We have an amazing group of investors, including yourselves, a lot of strategic investors, including a number of global reinsurance and insurance companies, like RenessanceRe, and Markel, and Canopius, so we’re actively looking for additional financial investors, and additional strategic investors to join the party here at Boost.
Raju: Fantastic.
Will: Awesome.
Jason: Sounds great. Well, thanks so much for joining, Alex. Really appreciate it. It’s a complex web of capital, risk technology, et cetera. We’re really excited about what you’re doing. Obviously, we’re already investors, but we’re really excited for you to continue to grow and scale responsibly, but with a brand-new set of capabilities through Boost Re, and doubling down on your strengths with the MGA. So, really appreciate you coming on.
Alex: I appreciate you letting me nerd out on the boring stuff, but—
Jason: [laugh].
Alex: —we can’t build the fun, exciting tech stuff without really leaning into the boring stuff in the space. So, we’ve definitely, definitely committed to doing that. So, thanks a lot.
Jason: Amen. Sounds good.
Raju: All right. Thank you.
Jason: Thanks. Yeah.
Will: Thank you.
Alex: Excellent. Bye, guys. Take care.
Jason: Bye.
Will: Thank you for listening to RRE POV.
Raju: You can keep up with the latest on the podcast at @RRE on Twitter—or shall I say X—
Jason: —or rre.com, and on Apple Podcasts, Spotify, Google Podcasts—
Raju: —or wherever fine podcasts are distributed. We’ll see you next time.