Fintech Insurtech

Scott Loong from Covera on the future of brokerages

Scott Loong from Covera on the future of brokerages.
Written by Phil Siarri

Phil Siarri talks to Scott Loong, founder of Covera, a Montreal-based startup aiming to simplify the annual process of shopping for insurance.

Hi Scott. Can you tell us about your background, and your company Covera?

After picking up my law degree and MBA at McGill University here in Montreal, I began my career as a business lawyer. The worst part of my job was dealing with the brutally risk-averse culture of a big law firm, and the best part of my job was working with startups and entrepreneurs. While I valued my time in ‘big law’, I was eventually able to seize the opportunity to join with a fintech-focused VC and business-building studio called Ferst Capital Partners. I started with them in 2015 with a mandate to dig into the insurance industry and find a compelling business model.

Covera is a product of that intense initial research. We were about 12 months ahead of the curve, Insurtech wasn’t even a word at the time. I reached out to insurance-related startups in the UK, Germany, Switzerland, Australia, New Zealand, France and the US. The goal was to understand what was gaining traction and what was a flash in the pan. I also did a lot of customer discovery interviews, where I asked people to speak openly about their impressions and experiences with the insurance industry.

One of the most common pain points that our future customers talked about was the recurring problem of renewals. When your existing home or auto policy comes to term, 80-90% of people simply renew without taking the time to shop for alternatives. This data is striking when you consider that satisfaction rates among insurance customers are some of the lowest among all products and services in the modern economy. So what’s keeping all of these customers in place?

The typical renewal story starts with a paper package arriving on the customer’s doorstep via snail mail. At 15-20 pages, these packages contain a ton of material that customers are supposed to sort through in order to make an informed decision about whether they should shop around. Of course, they are informed right at the top that if they don’t put in the work, their policy will be automatically renewed within 30 days. It’s no surprise that life gets in the way: most aren’t motivated to slug through this time-consuming and boring chore, and as a result they are captive clients.

Covera provides a digital solution to break yourself out of the standard insurance renewal process. Our customers provide some key information about their policies and themselves, and we handle everything for them. In order to eliminate cancellation fees, we only make changes when your policies expire. If you’re already placed with the best possible insurance carrier, we leave you right where you are. However, if you can get better coverage by migrating to a different provider, we handle all of the administrative work necessary to get you switched over to the optimal carrier in time.

What is Covera’s unfair advantage vs established, mainstream insurance brokers?

Mainstream insurance brokers are forced to use expensive third-party software to manage their practices. These systems are built on codebases that are literally 40 years old; we’re talking blue screen COBOL interfaces that don’t even have mouse functionality.

We are building back-end tools that are 10 times more powerful than those available to incumbent brokers. While they struggle with basics such as data capture and logging phone calls and emails, we are using AI, machine learning and natural language processors to automate large chunks of the brokerage value chain so that our team of licensed experts are free to focus their attention on providing the best possible service to our customers.

What are the main regulatory challenges for insurtech in Canada?

The regulatory environment in Canada is undergoing change. It’s important to recognise that these regulations have the ultimate goal of protecting the consumer as they navigate the insurance-buying process.

What we’ve seen in Canada and elsewhere is that incumbent brokerages, who have a vested interest in maintaining the status quo, have attempted to hijack regulation in an attempt to stamp out competition from fintech and insurtech players. Fortunately, our impression is that Canadian regulators are wise to this game and have begun a process that once again puts consumers first.

Incumbent brokerages have attempted to hijack regulation to stamp out competition from insurtech players Click To Tweet

The analogue, outdated and conflicted processes deployed in many incumbent brokerages are quite frankly a far greater threat to the consumer than anything being implemented at Covera. To answer your questions, we don’t see regulatory compliance as being a challenge in Canada. We are 100% committed to complying with all applicable regulations and licensing requirements regarding the distribution of insurance products. We have faith that the regulators will put consumers and their changing needs and preferences first. It’s my honest opinion that Covera will be able to outperform incumbent brokerages on any metric, including our ability to properly service our clients in line with applicable regulations and our professional obligations under the law.

How far are you in the product development cycle at the moment? Do you have an approximate launch date?

It’s highly likely that we will be selling home and auto insurance to Canadians in the first quarter of 2017. When that happens precisely is a moving target. We’ve received a commitment to be appointed as a broker for one of the largest standard insurance companies in the world, and are in the process of locking down a few more key partners. We are actively recruiting for a few important positions, and have some administrative work to finish up in respect to securing our brokerage licence.

Any plans to expand beyond Canada?

Certainly. There are a number of digital insurance brokerages that have started the process of migrating from Europe to the US. We expect to do the same once we’ve fine-tuned our technology and internal processes. It’s too early to talk about precise timelines for that expansion, but the US is a market we have our eyes on.

Last but not least, do you sometimes miss your old life as a corporate lawyer? What has startup life taught you?

I can’t imagine going back to big law. I really believe that I’m made for the life I’m living right now. Fintech and insurtech are the perfect industries for former professionals, because founders of fintech and insurtech startups are constantly required to cross between the startup and corporate worlds. Even today, I’m getting suited up multiple times per week, and sitting down in corporate offices where jeans and a witty T-shirt aren’t going to get the job done.

As I’ve said in the past, there are many benefits to having been toughened up by the corporate world. You’ve probably developed a healthy respect for how perception can matter as much, if not more, than substance. You’ve witnessed real-life examples of how office politics can destroy value. You’ve learned how to read between the lines when it comes to formal and informal communications. All of this context makes me a better startup founder.

The most remarkable thing about my new role is that I have full agency over almost all decisions. However, that agency comes with total accountability, and I, like most founders, will admit that it can be a lonely journey at times. The beauty is in embracing uncertainty and committing to the process, and for what it’s worth, I have never met a founder who regrets taking that leap.

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About the author

Phil Siarri

Phil Siarri is an innovation management professional and fintech observer. He has been selected as one of Canada’s top 40 social influencers in finance, innovation and risk by Thomson Reuters, as well as top 50 fintech influencers in Montreal by FinFusion.

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