EP 155 – Simon O’Dell – InsurTech Gateway Australia – Let’s Hold Hands and Partner, Please

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Michael Waitze worked in Global Finance for more than 20 years, employed by firms like Citigroup, Morgan Stanley and Goldman Sachs, primarily in Tokyo.  Michael lived and worked in Tokyo from February 1990 until December 2011.  Michael always maintained a particular focus on how technology could be used to make businesses more efficient and to drive P/L growth. Michael is a leader in the digital media space, building one of the biggest and fastest-growing podcast listener bases in the region.  His AsiaTechPodcast.com show has listeners in more than 130 countries and his company, Michael Waitze Media produces some of Asia’s most popular podcasts.

Guest
Simon O'Dell

Simon has spent the past 7 years breaking down barriers for Australia’s entrepreneurs focussed on disrupting the insurance industry. Simon co-founded Insurtech Australia, a not-for-profit peak body with a mission to build a thriving insurtech ecosystem. After 2 years at the helm Simon joined forces with Insurtech Gateway London; the world’s first authorised independent incubator + fund, & Envest to take the resources available to early stage founders in Australia to the next level. Insurtech Gateway Aus supports the most promising early stage insurtech founders with their unique platform.

The Asia InsurTech Podcast spoke with Simon O’Dell, the managing director at InsurTech Gateway Australia, about the state of InsurTech in Australia and how the industry has accelerated over the past years.

Here is the transcript of our conversation:

Michael Waitze
Hi, this is Michael Waitze. And welcome back to the Asia InsurTech Podcast. This is the only podcast in Asia focused on insurance that gives entrepreneurs, thought leaders and investors a platform to discuss how technology is reshaping the insurance industry, in Asia and frankly, globally. Today, I’m joined by Simon O’Dell, the managing director at InsurTech Gateway Australia. And just as a point of reference, we have already had Oliver Lane on one of our sister shows, the Wolfcasts and got some great insights from him about the UK, Europe and the US market, Simon, it’s great to have you on the show as well. And today, we’d like to get an Australian and Asian perspective to and before we get into the main part of this conversation, we always like to ask our guests, what do you think is the biggest trend and InsurTech, in Australia, in Southeast Asia, and frankly, in the world right now?

Simon O’Dell
Hi Michael, thanks for having me. It’s great to be on your podcast. I’m a frequent listener, and it’s a pleasur to be joining you today. Trends in Australia, it’s a tough one. Some trends come and go quite quickly. I think I’ll be joining a few people at the moment around the world in championing the trend of embedded insurance that’s quite big in Australia at the moment, and also Southeast Asia and around the world, I guess. Yeah, I think some of the benefits of embedded insurance that we say are that generally comes with distribution. Distribution is really hard to come by. Stephen Britton, he’s one of the founders in gateway HQ out of London, he describes two different types of embedded insurance. One is, do you want fries with that? And the other is more inseparable to the core product, which is like the cheese on the hamburger? Yeah, so I mean, there’s Would you like fries with that is an offering that is somewhat compelling and can get some traction, but I guess, the type of embedded insurance that is inseparable from the core product, the core non insurance product is generally more scalable, and more defensible, as you will probably appreciate. So yeah, it was seen some interesting things in that space, at the moment in Australia.

Michael Waitze
Can you give us a bit of your background as well for a little bit more context?

Simon O’Dell
Yeah, sure. So I have an insurance domain background, I guess you might say I was a broker in the Australian market for about 10 years. So that was quite interesting. I moved on from broking and did some study. And through that study, I met a guy named James Hutchins and Jimmy Hutchins, we call him his mentor Gateway now. He’s had a, an extensive insurance background. And he was I was lucky enough for him to be the Associate Professor, head of the business school at the University of Technology, Sydney, where I stydied. Yeah, and through that relationship, I was able to get involved in some projects, working with some reinsurance brokers and learning about that end of the value chain. And that really opened my eyes to looking at the insurance industry more holistically and understanding how it works and so on. And that was really valuable for me personally, I then joined Y Combinator’s online startups go launch my own InsurTech in the Australian market, so that was quite fun. And that was like 2015, 2016, when InsurTech was quite fresh, especially in the Australian market. So that was an interesting experience. We generated some value had a successful pilot, but found it quite difficult to raise capital in the Australian market in that in that era. FinTech was just taking off and not many VCs knew much about InsurTech. So after exiting, some of gracefully from from that venture, I joined forces with a few other like minded people, founders and other incumbents like the head of innovation for Munich Re and people like that to form InsurTech Australia, a not for profit member Association, really with the remit to help provide more support to founders looking to break into InsurTech and overcome some of those barriers in the Australian market.

Michael Waitze
Are you surprised when you look back? So you said you you were you did the Y Combinator online class in 2015. Do I have that right?

Simon O’Dell
Yeah. 2015-2016.

Michael Waitze
Yeah. Are you surprised when you look back now? And you know, we talked about this a little bit offline, right. When you build something from scratch, it feels like you’re operating in a vacuum. You had this conversation? And I know what that feels like. But back then maybe it felt like you were operating in a vacuum. When you look back then. And then look at today where there was more money raised in the first like three quarters of 2021 just for InsurTech. Right. Then there was in all of 2018 and 19 combined. It’s just interesting how like fast this has moved right. Sorry. Go ahead. I feel like I’ve interrupted a thought.

Simon O’Dell
I think the volume of capital rise for InsurTech globally In 2016, is about 10% of what it is anual today. That’s amazing. Yeah, that’s incredible how much it’s exploded. But it speaks to the interdependent nature of InsurTech as a particular startup vertical itself, the fact that it requires the incumbents as well as capital for the ecosystem to take off. So 2017, we launched InsurTech Australia with the goal of generating a certain level of interconnectedness, we call it as a metric that the development of or the first key milestone or phase of development for a startup vertical, and being InsurTech. Insurance, it’s a convoluted value chain that requires participants all throughout the value chain. Yeah, it was really important for us to bring the incumbents along for the journey as well. And the maturing of the ecosystem is indicated by not only the growth of venture capital being deployed into InsurTech. But as I’m saying the participation from the comments as well.

Michael Waitze
It’s interesting that you wanted to bring on the bring along the incumbents as well, there was this this idea? I don’t even know how many years ago you want to call it a few years ago, five years ago that InsurTech are trying to not just disrupt the InsurTech insurance space, but displace insurers. Do you feel like that’s changed in the past? Like five or six years?

Simon O’Dell
Yeah, definitely. Um, there’s, there’s the outliers, like the lemonades of the world, who will write risk on their own balance sheet and right and so on. But yeah, by and large, definitely, it’s, it’s all about collaboration, it quickly moves. Because I guess InsurTech came on the coattails of FinTech, and the manager of FinTech was going to disrupt and gotten them fired for doing that, whether it was payments or over the top banking app solutions and things. And yeah, InsurTech soon learned through the examples of trover Avari, and others who sought to launch a beta a product, that Yeah, you really do need to collaborate to move from disruption to Let’s hold hands and partner plays.

Michael Waitze
Some of these insurance companies have been around for 150 to 200 years building a balance sheet that’s pretty robust. It’s hard to replicate that in 18 months, just by raising capital. Is that fair?

Simon O’Dell
Yeah, exactly. And that’s why we like mga models, so managing general agent models, it allows the players to benefit relative to their strengths. So any comments strengths, as you say, is the bounce rate their size, they understand customers, they understand how to do what they do, and mgas InsurTech understand how to be more nimble and innovative, how to put in place, product feedback loops to encompass the feedback from the different stakeholders, the customers, distribution partners, and so on into product development cycles, and so on. So, yeah, that’s a really nice match. So if you look at the Gateway portfolio, a lot of our portfolio companies are MGAs.

Michael Waitze
in a way, it feels like you were cool before the rest of the world realized it. You know what I mean? It’s like the world is finally caught up to this idea that insurance is this massive industry, that super cool, that can be enhanced and enabled by technology, something, it’s almost like being a geek in high school, right, whether in the rest of the world feels like, oh, actually the people that do tech are kind of cool. Yeah, definitely feels that way to me, right? Because when I started the InsurTech podcast two and a half years ago, super senior in common people, and even like some of the greatest entrepreneurs, I’d be like, Oh, this is so uncool, and nobody wants to work with us. And now it’s like, like we talked about earlier, the fire hose is on.

Simon O’Dell
Yeah, exactly. Yeah, I guess there’s a couple of revelations, nothing short. They’re off, that we’ve seen in the last decade. And that’s startups and all startup verticals, and then InsurTech, which has really come into vogue or come into its own. I think one of the reasons why InsurTech is more easier on the aisle, or sexier these days and InsurTech and sexy Paul shouldn’t be using the same Oh, no, definitely should. There you go. Is because basically, some of the world’s biggest problems, you might say, can be solved with insurance, top disciplines, for example, helping to create resilience in supply chains, helping to create mitigation and prevention for natural catastrophes so bushfires in Australia, obviously. We had an interesting summer a few years ago, a couple years ago now. And yeah, the tech startups that have come in from all the founders that are coming from, say, physics, astrophysics, even neuroscience, we’re seeing, obviously climate science and so on coming into InsurTech to create bushfire risk models, propagation might be in early bushfire system alerts and things. It’s yeah, it’s really exciting to see.

Michael Waitze
It’s been kind of cool. I want to talk a little bit about InsurTech Gateway itself. One of the things that Oliver explained to me was that, you know, Gateway considers itself the fastest place to launch and build an idea. And in London, they have the benefit of having the FCA authorization. What do you guys do as a team in Australia to sort of enable that in this region? Or at least in Australia?

Simon O’Dell
Yeah, sure. So yeah, we’ve got the equivalent ASIC authorization. So we have our own financial services license. So we offer that authorization to those who need it. We’re independent, which makes us unique. So we’re not a CVC, or an incubator attached to an insurance company, it’s quite important to be agnostic. So we can tailor solutions or offer services to InsurTech that are aligned with their needs, as opposed to servicing our own agenda. So yeah, we offer access to our partners. And we have relationships with both insurers and reinsurers to source risk capital as well, where that’s needed. We offer pre seed funding, so they’re small checks, but it can be quite helpful in building out an MVP. And we’ve also got a broader venture group. So we’ve developed a venture group in not just Australia, but globally, we’ve got investors in Asia and other parts of the world who will join us for a quarterly catch ups and look at those who were investing in early and understand that their de risked opportunities for them from an investment point of view so I can get, you know, like, we’ve just partnered with a soon to be announced technology provider, where we’ve got access to their tech stack now. So we’ve acquired our own instance, or policy administration system. So the, the InsurTechs, that come in, can use that text doctor to launch a new product into the market.

Michael Waitze
This is a really interesting way to do this, right? If you look at other venture capitalists, and let’s leave the CVCs that are associated with insurance companies aside, because that’s just a completely different animal, right. But just as an independent venture capitalist, not many of them if if only a handful have gone out and gotten their own licenses, their own financial services licenses, whether it’s the FCA they are the one that you mentioned here, but also have combined the incubator business with and the accelerator business with the investment business. It’s a really powerful model, right? Because you see the whole thing, you’re not compelled to necessarily invest in everything that goes through the incubator, before you should see some great companies. And by working with them for three months or two months, or however long it is, you’ll get a much better insight into that then just doing some due diligence and paperwork, right?

Simon O’Dell
Yeah, exactly. Yeah. So we get very intimate with the founders. We spend a lot of time with him through the incubator. And yeah, I guess that’s the way we use for it is to de risk it with a risk for the insurance industry participants or the risk capital providers. Right. So the the major is we make them insurable and investable, so insurable from the risk capital providers point of view, and investable from our LPS who sit in the fund that centralized in UK HQ. And they write checks once they come out of the incubator, etc, as as you just mentioned,

Michael Waitze
Is there a reason why InsurTech Gateway went into Australia as opposed to setting up in another part of Southeast Asia? Do you know what I mean? Like a lot of funds will come and just go Singapore. That’s it. We’re going there. Why did you choose Australia? I guess the answer has to partially be you. I mean, I hadn’t thought about it before asked it. But that’s got to be partially true.

Simon O’Dell
Yeah. And I’d like to think so. That was a part of the decision making process. But I think if I’ve been more humble, the profile of Australia certainly aligned with with that desire to go out for from the Gateway in the UK. Firstly, it was a similar market to the UK. So it was low risk in replicating their own incubator model. It has a lot of the global players in it. And yet, it’s a small enough market where decisions are made quickly, right. So you’re able to, which contributes to getting something to market quickly, which is essentially the number one underlying value proposition for gateways. Quickly, I’ve met them through sending the delegation over to the UK, through InsurTech, Australia, we sent over 10 founders and about 20 insurance executives on this delegation and Robert Lumley and we’re lucky enough to have him come present to the delegation, and then through that process, and then we identified the opportunity.

Michael Waitze
And this just proves this other this other belief that I have that you’ve got to kind of be in the game, to have any opportunity. You could have been like the best broker, the smartest insurance person and know all this stuff. But being able to be in the game and show up with all of those founders and all the people in them be able to just meet normally, right means that Oh, this guy’s in the game. So that’s an opportunity raise a lot of people sit on the sideline in every industry and just think I can do that better. Man. Yeah, I dare you to actually like, you know, put on the cleats and get on the field and figure it out. Yeah,

Simon O’Dell
yeah. Good call. And thanks for recognizing that it’s, I encourage more people to do that, rather than to Yeah, just go along with the way things are. Think first principles and when you don’t have it And you don’t have those obligations, and you can take bigger risks to go out there and don’t take some risks and make change happen.

Michael Waitze
Do you see from your perch in Australia? Do you see regional differences in this region? I mean, obviously, Southeast Asia and the sort of greater Asia, including Australia, New Zealand, are going to be very different than the US and in Europe, do you see sort of nuanced differences in this region, as well, as you’re looking at companies in which to invest or just bring into the fold?

Simon O’Dell
Yeah, definitely. It’s quite tricky here. I mean, we originally set out in Australia to cover the Asian market as well. But it’s almost like another planet compared to Australia. And vice versa. Such a different market, Australia to Asia. So I mean, our approach now is that now that we’re established, we’ve got some solid runs on the board, we’ve got some portfolio companies that are doing great premium and doing the things as to now focus more on Asia. But we have maximum respect for the fact that it’s a very different market, very Compliers different structure in a lot of different regulators and in different countries, obviously. So our approach strategically is to have some people on the ground who can help provide some insights, send us through some deal flow, where there’s an opportunity to get our first one away. Yeah, we’ll say to support a local InsurTech. And just take it as it comes

Michael Waitze
really interesting. Again, I think a lot of people outside Region X, whatever that region is, kind of think of it as a monolithic thing where everything is the same, I would even make the case that inside of China, there are regional differences, right? It looks like one sort of monolithic market, but it’s not. But from where I sit in Thailand, again, in every vertical, I know that Indonesia is not Vietnam. We are not Malaysia. Yeah. And it’s not Thailand. Do you go out and or strategically? Do you try to go out and create relationships with the regulators? So to give you just a better understanding of the overall market?

Simon O’Dell
Yeah, that wouldn’t be a silly approach, that’s for sure we do partner with Australia, in Australia is a government agency, who is responsible for seeing the flow of trading capital and other things across borders. So they’ve often established relationships with different incumbents, whether they’re insurance or otherwise in some of the Asian markets, who are seeking to essentially do a reverse pitch. So they might say, I think we saw one from Asia air come through, where they wanted to do a reverse pitch to these Australian startups and say, we’ve got these problems, which startups can either solve those problems. So that’s one way that we say the government and regulators helping out and obviously simpler, more consistent with our model, if we can get some regulatory permissions in some of those jurisdictions, but as we said, similar to the US in so many different states, thus regulatory Commission’s required in each of those states, it’s just a matter of choosing which one? Yeah,

Michael Waitze
I mean, that was one of the things that I didn’t know as well, when I first started doing this, that the insurance industry, the United States is regulated differently in every state. So you had basically have 50 different subsets of regulations. Yeah, kind of strange for a strange country anyway. Yeah. Is there a sandbox in Australia, like a regulatory sandbox where products can get tested?

Simon O’Dell
Yeah, there is the official one, the government one, and then there’s the gateway one. So essentially, I’m being cheeky. So there is a government ASIC sandbox, and it’s followed the FCA sandbox in the England, okay. And we also part of the digital finance Advisory Committee and other committees that helped to negotiate the terms of that for InsurTech. It’s been quite a long battle, and it hasn’t been able to, unfortunately, achieve the terms that were otherwise ideally achieved to be able to attract inshore tech founders to utilize that, towards that most. Ideally, the regulator would like to free market to be able to offer such solutions. And the fact that the gateway exists, represents one of those opportunities, it’d be nice if we had quite a bandwidth. At the moment, we say, Say 150 to 200 pitch decks a year. And we could only back three or four. So it’s quite difficult for us to say everyone, but we try and do our part.

Michael Waitze
Interesting, when you’re as an investor. And for you, this is interesting, because you’ve been on all sides of the table, right? You were a broker, you did the InsurTech, Australia. And now as an investor, what are some of the things that you look for in founders? And I’ll tell you why I’m asking it sounds like a basic question. But for me, it’s really not. And I’ll tell you why. After doing across the whole platform, right, like so many recorded conversations with people, I feel like I can now get a sense for it. founders that are going to be successful and the founders that aren’t regardless of the product that they’re building. You know what I mean? Do you have the same sense now after doing this for a while?

Simon O’Dell
Yeah, definitely. And it’s certainly a calibration that can be honed, if that makes sense. Yeah, I agree. Yeah, initially. One, would it make sense to take a thesis driven approach to finding the right founders, the back, and that the guts starts to contribute adequately to making those decisions? So I guess it’s a combination of thesis driven, as well as gut, which, which kind of makes sense. But yeah, as you say, you can tend to pick the winners when you speak into them. They have certain attributes, one being, they give across an impression that they’ll win no matter what, yeah, how many are going to join them on that journey? Or are you going to watch them do it from the sidelines? So

Michael Waitze
it’s so true, though, right, you can feel it. And it’s almost like you don’t want to play football against them, because you’re like, they’re just gonna run me over kind of thing.

Simon O’Dell
Exactly. Yeah. Yeah, exactly. You don’t want them on the other side. You want them on your turn?

Michael Waitze
Yeah. Yeah. I always say like, when the war starts, I want those guys on my side kind of thing. Yeah,

Simon O’Dell
exactly. Yeah, yeah. And we like those who have multiple founders. It’s nice when they appreciate and understand very thoroughly the startup playbook, so to speak. So they take a scientific method to developing products, like they’ll create a hypothesis tested in the market, and so on and so on. We like market shifts as well. So if we see an InsurTech, that’s looking to introduce a product that’s anticipated a market shift. That’s something that personally I really like. It can be more moderate risk that yeah, it’s generally more exciting.

Michael Waitze
So do you think parametric insurance fits into that category?

Simon O’Dell
Yeah, you know why I would have said that when robbing the team in the UK, back to flood, flood flash, but it seems to be more of an established product. Now. The product innovation in that space. Certainly serves a purpose. We’re seeing a massive boom at the moment of parametric providers. That’s kind of like a bundled parametric whether offer parametric first Say hail, fire flood pervious and others within the one product. And we’re seeing a lot of that being targeted at the agri in all the agri spice the agriculture. Yeah, that’s something that’s quite interesting.

Michael Waitze
One of the guys I think it’s also in your portfolio company. Koala in France, brought up this idea to me of para indemnity insurance. Right. So it’s parametric, which means that the beginning you’ll get a payout, it’s guaranteed, but you’re also indemnified if the losses are large enough and measurable enough. And I thought that was kind of cool, too.

Simon O’Dell
Yeah, definitely. Yeah. Yeah. And we’ll say it’s a very clever company. And we’ll see these parametric, badass continuing to evolve.

Michael Waitze
Yeah, I thought it was it was kind of cool. It was one of the most fun conversations I’ve had in a while. Do you think there’s a place for distributed ledger technology in the insurance space? And do you see more and more of that happening?

Simon O’Dell
I’m actually one of probably a few, not many, who are quite bullish on the role of blockchain distributed ledger technology in insurance and InsurTech. If you think about just at a high level, the value that creates terms of it helps to reduce fraud, that helps with operational efficiencies and convoluted value chains and operating systems that I don’t know there’s a few things there that seem to align really well with the insurance industry. And yes, it will take a long time to demonstrate and prove its use case in the insurance but I’m quite bullish on that. We are seeing some InsurTech come out of Israel at the moment. They seem to be a mecca for producing insurtechs and other types of startups that focused on blockchain technology. They absolutely love it over there.

Michael Waitze
Do you talk to Kobe at all?

Simon O’Dell
Uh, yeah. If whenever I can, he’s a great guy. It’s nice to see you again. Someone who is only in

Michael Waitze
He’s all in. He goes to ITC every year in Vegas with like, 700 people and seems like

Simon O’Dell
A big delegation. I love that. Yeah. Yeah. He’s passionate about it, which is great. It really, yeah.

Michael Waitze
I guess the last thing is, how would you characterize the state of InsurTech right now in Australia, and where do you think it’s going to be in like the next three or so years?

Simon O’Dell
Yeah, I mean it’s booming and you can say that through the investment investment numbers. So the global investment numbers that certainly represented on an individual unit level in Australia, we’ve just had our first genuine InsurTech unicorn in Cover Genius, which indicates the maturing of the market. We love seeing that happening. And these InsurTechs that are getting so much traction globally, and IPO. And I think is putting the InsurTech as a vertical investment vertical on the map, which is really positive. We’re saying, in Australia, in particular, post the Royal Commission, which is where our government gets a committee together and analyzes an industry that’s been a little bit naughty and producing negative externalities and gets the role of actors, right, we’re going to reform this industry. And so it’s going through a fair bit of regulatory change, and the insurers are quite conservative as a result, with change comes opportunity. And it’s a cliche, but it’s certainly the case. And I mean, what about portfolio companies? JLo. Carter, certainly positioning really well, to adapt to that change, for example, and this ties in with another theme answering one of your earlier questions in what we’re seeing in Australia is the desire to capture risk data or data that explains the risk profile much more objectively, I guess. So. The regulator’s come out and said, You know what, it’s time that you stop asking the consumer, what their building is made over. And if it’s the house is flooded in the last 20 years, I’ve been living in for 12 months, because there’s enough data available in the market now for you to go out. And you need and use the insurance company to capture that data. So please go out and and do that yourself. So they’ve actually changed the duty of disclosure regulations. So there’s less onus on the consumer to provide all that that data. Yeah, Geolocator are quite exciting. They’re basically have 1000s of sensors in Australia, in the built environment every day that is capturing really high fidelity data, and jellycat are provided a marketplace, whether through a shared economies model capturing that data and feeding that into existing workflows within insurers, and so on so they can understand the built environment, property characteristics and so on at a very high fidelity.

Michael Waitze
I think we can have an entire conversation on deploying IoT and other sensors, like you said, into just the lived environment, whether it’s for flooding, or electricity breakdowns for cloud outages for everything. Yeah, build that data into insurance products as well. I’m gonna let you go. This was awesome. Simon O’Dell, the managing director at InsurTech Gateway Australia, thank you so much for spending time with us today. Pleasure. Thanks for having me.

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