Electronic Chat with Steve Lekas, Branch Insurance
Laura Mazzuca Toops | August 25, 2020
Steve Lekas is cofounder and CEO of Branch Insurance, a Columbus, Ohio-based MGA startup that specializes in simple bundling of homeowners and auto insurance. Currently operating in five states, Branch recently announced the launch of its reciprocal insurance exchange and plans to expand nationally. Branch also operates SafetyNest, a philanthropic program designed to assist uninsured or underinsured people who have suffered a home or auto loss.
Please tell us a little about how and why Branch was launched.
Branch was founded on the belief that insurance should be and can be less expensive and that insurance should be and can be good. Early in our country's history, insurance companies were frequently groups of people banding together, pooling their resources and helping each other when the worst happened.
Over the past 250 years, the greatest innovations in personal insurance were by the brands we know so well today, and their fantastic innovations were almost always tied to lower costs for consumers, defining their privilege of growth. We'd witnessed the more recent migration of consumers from agency writers to direct, a business model innovation benefitting the prices consumers paid for insurance. It was obvious that there must someday be a tech-forward business model that innovated on the full insurance stack of product, price, business model, distribution model, and brand, in a way that could dramatically reduce price for consumers that aligned the consumer with the community, whose funds ultimately pay claims and that could close the loop on reducing the uninsured population in a way that benefitted the price of insurance for all of society. Our founders saw this vision and were compelled to make this better future real to the benefit of all of society.
What sort of financial backing did you use for the startup?
Branch has raised $27.5 million to date in funding. We'd built four product lines (home, renters, auto, umbrella), the technology to manage a full-stack insurer, and a phenomenal team of deeply expert believers for less than $5 million -- an unparalleled achievement.
What states are you currently operating in, and will the exchange allow you to open up in more areas?
Branch operates in Arizona, Illinois, Missouri, Ohio and Texas. We are in the midst of rolling out to the rest of the U.S.
What key technology tools do you rely on to do business?
Our business is fundamentally technology. When you first meet Branch, our mobile web or web flow greets you, asking you for name and address. Branch needs no other information from you to sell you both home and car insurance instantly. This is our most prized technological tool. There are many technologies beneath this surface, but because the industry is regulated by line of insurance, has skill sets varying by line of insurance, manages separate P&Ls by line of insurance, the incumbents maintain systems by line of insurance so that there is no platform that could enable people who own homes and own cars to bundle simply. Branch then had to build for this wonderfully high lifetime, digitally constrained market from scratch. We are an entirely serverless insurance company with incredibly flexible tech that enables us to experiment and iterate as a part of everyday life to the benefit of our members.
How will the new reciprocal insurance exchange arrangement work?
Branch is the facilitator of a membership where each member pools small resources to prevent the unfortunate few from falling off their life's trajectories as a result of a claim. Branch receives a fixed, 5% fee for facilitating this community. Branch can't take more or less than this fixed fee, regardless of how much is paid in claims or how many members are in the community.
Branch's responsibility is to make insurance as inexpensive as possible through delightfully efficient technology. If then there are leftover premiums after Branch's fee, expenses and claims, each member as an owner of the Exchange may receive a dividend as a grant, which members vest in over time, rewarding their loyalty in a way an insurance company never has rewarded its loyal policyholders. Branch's mission is to make insurance less expensive so more can be insured. The Branch Insurance reciprocal exchange is one of the many ways Branch executes on that mission to the benefit of all.
Will you still retain a relationship with current underwriter General Security National?
Yes! General Security National Insurance Company is a subsidiary of SCOR, an investor in Branch. Branch is glad to be a part of the SCOR family of companies. SCOR enabled Branch's launch as an MGA through its underwriting company, General Security National Insurance Company. Branch now enters the next phase of its growth as a full-stack insurer, eliminating the MGA cost from business stack, enabling less expensive insurance as Branch grows in capability and scale.
What do you hope to achieve over the next year?
We are achieving amazing member experiences. We will continue to launch exciting and innovative new features for our community over the next year, and will launch in many new states that give Branch greater scale, a benefit we can pass back to members as lower prices. We'll be announcing exciting new partnerships that amplify the value insurance provides to its users unique to Branch because of our technological differentiation. We hope to continue to have the privilege of rapid growth with strong insurance economics because we delight our members. We hope to make a positive impact on people's lives and on society by bringing more of the financially excluded and uninsured into the safety insurance affords through the combination of Branch and SafetyNest.
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The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
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