In a handful of years, PolicyGenius has gone from being an idea in the minds of two ex-McKinsey & Company consultants to one of the nation’s leading insurtech companies. One reason is that the company established a dominant content marketing presence with younger insurance customers before incumbents saw the potential market opportunity. However, the key to the company’s traction extends beyond a simple first mover advantage. Co-founders Jennifer Fitzgerald and Francois de Lame recognized the power of creating an insurance marketplace that would allow consumers to choose between the trade-offs that often accompany insurance policies. Building that marketplace hasn’t been easy, but thanks to the grit of its team led by Fitzgerald, PolicyGenius is now well positioned to deepen its moat and potentially extend its business into new areas over the next few years. The FR’s Gregg Schoenberg recently met with Fitzgerald to talk about her company’s journey, the state of insurtech today and where PolicyGenius may go next.
The Financial Revolutionist:
Great to see you Jennifer. Starting out, you sought to engage with self-directed consumers online, because as an ex-McKinsey consultant, you looked around and said, "My clients just don't get it." Is that a fair assessment?
Jennifer Fitzgerald: That's a fair assessment, Gregg.
FR: PolicyGenius has gained a significant amount of momentum since you made that initial diagnosis. What are the metrics you're most proud of?
JF: One is our online search results. It’s a very powerful channel, and it requires a strong and unwavering belief in high-quality content.
FR: And you can’t just snap your fingers and make it happen.
JF: That’s right. We track how many pages per ranking we're on the first page for and which verticals we're starting to pick up steam in. And yes, it's not something that you can just turn on overnight with success.
FR: Do you have a digital marketing ninja whose name you won’t reveal behind the company’s online search success?
JF: No, that was my co-founder. That was all Francois. He had a belief in the power of content and content marketing, particularly for insurance, because it's such a considered purchase and a complicated area.
FR: And people do some reading before making a purchase.
JF: Yes, absolutely. Also, the industry had left its flank open. Nobody was paying attention to content marketing or organic search. They were all just buying AdWords on Google. We saw an opportunity to own that white space. That was all Francois' hypothesis and execution.
FR: Are there any metrics you can share to provide a sense of how big PolicyGenius has become today?
JF: We grow our visitors and our traffic 10% month over month and are serving tens of thousands of people every month.
FR: Okay, so tens of thousands. Is it fair to say that of all the insurance markets you serve, life insurance is your number one vertical?
JF: Yes, absolutely.
FR: What's the number two vertical?
FR: You know that PolicyGenius has been called the "Kayak for insurance." I'm aware that you don't necessarily like that characterization, though. Could you explain why?
JF: I think it oversimplifies what we actually do and what we’ve built. It also glosses over the complexity of the consumer's journey. If you think about Kayak, it’s aggregation of flights and real-time prices. You don't need to do decision support because consumers know exactly how to shop for a flight. They just need to go from A to B as quickly and as cheaply as possible.
FR: And your point is that when it comes to insurance, it’s far more complicated.
JF: Yes. That is not even remotely close to an insurance journey. People don't shop often for insurance and don't know how to shop for it. Plus, there’s no quick and fast rule for how to pick the right policy. On our side, in addition to the aggregation, we have to think about the consumer’s starting point and how much decision support they need to get from A to B. And getting to B is not even the end of it, because they have to feel comfortable about their purchase and confident that they understand what's in their policy.
FR: I received a life insurance quote on your site. After putting in my information, AIG and Banner Life came back as the best options. Underneath those two, I received another four quotes, which tells me that PolicyGenius is making a big judgment call.
FR: So there are several levers that you can use to analyze which policy is better?
FR: If you're making a judgment call, then, it implies that PolicyGenius has leverage through its recommendation engine. How many of your consumers choose from the top two recommendations?
JF: We have regular, plain vanilla term life insurance. And when you look at the policies and carriers, it’s pretty apples-to-apples assuming that you aren't looking at carriers with a low financial strength rating ─ and we don’t work with any low-rated insurers.
FR: What’s the biggest driver, then?
JF: Price is what drives most of our life insurance shoppers. And to answer your previous question, a vast majority of people pick one of the top two.
FR: Do some of your carrier partners ever contact you and say, "Jennifer, we disagree with how you have prioritized our offering vis-à-vis someone else's"?
JF: Not on the life insurance side, because they know that they're largely competing on price and brand.
FR: So how often will shoppers pick the low-priced option?
JF: About two thirds of the time. In the other cases, a selection is usually driven by a brand they recognize.
FR: You’ve expressed a view shared by industry groups that there’s a massive life insurance coverage gap in this nation. Do you think the coverage gap is a front-end market problem or an issue with the underlying products?
JF: Based upon my experience, I think it's more of an upfront problem.
FR: A marketing and perception issue?
JF: Yes. We’ve seen surveys where people are asked, "How much do you think a $250,000 policy would cost for a 30-year-old, healthy, non-smoking man?" Most people think that it's four times more expensive than it actually is. That's a marketing and distribution problem, not a product problem.
FR: What about the application process, the doctor visit, the back and forth of the paperwork? You can't fix that with education.
JF: We can't and we have to deal with that. We take people all the way through the end, so we have seen every possible roadblock, hurdle and no-show medical examiner. It's painful. I wish I could wave a wand and get rid of all of that and bind instantaneously.
FR: Are you referring to a “no medical” life product?
JF: Yes, but saving money is a powerful motivator, particularly when it's a long-term contract that you're looking to own for 10 to 20 years. A one-time medical exam for a 10- to 20-year contract... people are like, “Ok, I'm comfortable with that If that's the factor that's going to guarantee me the best possible rate.”
FR: Have you turned down carriers because they are not providing a seamless enough customer journey?
JF: We've turned down very big brand names, who are A-rated carriers, because their consumer experience or underwriting process wasn't up to the bar that we’ve set for our consumers.
FR: Regarding the consumers, you're upfront with them about how you get paid, which is a commission for referrals resulting in business for the carriers. If a carrier builds a relationship with a customer that leads to other product purchases down the road, does PolicyGenius get rewarded for that?
JF: No, it's just on the policy that we broker and transact.
FR: You're keenly aware of the fact that some of the insurance companies you work with have enormous resources and could go direct themselves.
JF: They could try to do it.
FR: So when big carriers decide to engage with you, they are essentially making the bet that you are going to acquire high-quality customers for them more cheaply than they could do it. Is that a fair way of characterizing it?
JF: Yes, that is. But that doesn't preclude some carriers from trying to do both: working with us while also trying to go direct to consumers digitally.
FR: AIG Direct, for example.
JF: Yes, AIG Direct. The same is true for Protective Life and that's totally fine, because we think that we have a unique value proposition.
FR: Because people want to compare?
JF: Yes, a marketplace. We have the trust and the open choice architecture platform, as opposed to just, “Hey, this is the only carrier that we have, take it or leave it.”
FR: So turning to another vertical, you’ve said to me there isn’t too much art to recommending a life policy. That’s a different story in your healthcare insurance offering right?
JF: For sure. We learned that when it comes to healthcare, people don't trust black box recommendations and if you're making a judgment call for them. So what we decided to do was break open the healthcare insurance selection process and walk people through the tradeoffs.
FR: To be clear, you’re not seeking to make the judgment call?
JF: We don't make the judgment call. We just illuminate choices for people: “Here are the four decisions you're going to have to make, and here's what's available to you based on your decision.”
FR: It sounds like you want the company to be a holistic provider of insurance. You've entered the healthcare market in part for that reason. Still, PolicyGenius has not entered P&C even though it’s massive and ripe for disruption. Why is that?
JF: We wanted to tackle verticals first where we saw bigger opportunities and less competition. That's how we think about product strategy. It's a very McKinsey way of looking at the world, and we simply saw more favorable conditions for newer, smaller entrants in the life, accident and healthcare spaces. Plus, P&C is dominated by big brand names who write direct and run Super Bowl commercials. So if we had launched in say, autos, we would have probably died on the hill.
FR: What are you tackling next then?
JF: Actually, we’re getting into P&C by relaunching renter's insurance in the next month or two.
FR: Starting with your existing consumer clients?
JF: Yes, we’re going to start there and see where it can go.
FR: Have you ever considered offering your own branded insurance products?
JF: Yes, we've talked to carriers and reinsurers about that because it comes up from time to time. To be honest, we’re less interested in offering PolicyGenius branded products in our core verticals like life and disability because it could cannibalize sales to our partners. Plus, the products available for white labeling aren't that different from what's in the market anyway.
FR: It sounds to me like you’re thinking about offering PolicyGenius branded products, but if you do it, it will be beyond the core of your offering today?
JF: Yes, it’s possible that we might get into our own brand of insurance products, particularly for new risks or new slices of risk that aren't getting served by existing offerings. If we chose that path, we could be in a category by ourselves.
FR: What would be an example of this new type of product?
JF: I'm talking about the changing face of the American consumer and working relationships ─ the gig or sharing economy ─ and the fact that, increasingly, more and more people are moving away from the traditional W-2 arrangement.
FR: When you talk about gig economy professionals, are you referring to the unevenness associated with their income, which hurts their ability to buy a home or access credit products?
JF: All of the above. A specific life, accident or health need, or the hybrid, which is a disability income need, could be applicable. If you look at disability insurance ─ which is really income protection insurance as opposed to insurance against disability ─ it's really hard for self-employed folks because of the traditional underwriting rules associated with this type of insurance. Freelance writers in particular have a tough time getting disability insurance. We're able to put them in policies, but it's not easy for people who are outside of the traditional W-2 employee framework.
FR: Let’s turn to your recent partnership with LendingTree to feature a life insurance comparison tool on its platform. Does that signify that you're not looking to venture into lending products?
JF: Yes, we're not looking at lending. I think it's a very tough place to be in, dominated by a lot of companies who have done it for much longer than we've been thinking about it. We are excited by this partnership because LendingTree pioneered the marketplace approach to financial services.
FR: Could this partnership potentially expand beyond lIfe insurance?
JF: Yes, it could.
FR: Speaking of pioneers, you’re in a small group of female CEOs in the insurance/insurtech industries. Do you think getting to the top was easier because you started your own company, versus having to work your way through a battlefield that’s often skewed against women?
JF: Maybe yes, because obviously when you start your own company, you can crown yourself CEO. But when it's a two-person team, that's meaningless.
FR: Until you scale a company as you’ve done.
JF: I joke that being the CEO of a new start-up is like being the valedictorian of your home school class. You didn't have any competition. But it's tough because, as you know, building your own company to a size that's meaningful is one of the hardest things you can do. Every day it’s a punch in the face while pushing a boulder up a hill.
FR: PolicyGenius, first and foremost, has been successful in raising capital because the business has executed and it’s addressing a huge market. Still, do you ever think to yourself that being a one male-one female founding team helped in the capital raising process?
JF: It’s hard to know. I will say that it wasn’t easy for us, and mixed gender founding teams aren't that common. Usually you'll see solo founders, two women, two men or more. But the male-female founding team is less common, so it may not have helped. I can tell you that for our seed round, we were rejected by every single institutional investor. Not a single VC dollar was interested. That forced us to piece together a bunch of angel checks from people who knew us.
FR: Was the Series A easier?
JF: No. It was a really, really tough round. Honestly, we were probably one or two months away from running out of money.
FR: Down to the wire.
JF: Yes, because we raised only $735,000 in our seed round, which is not a lot of cash when you're trying to take on a big, messy vertical like life insurance.
FR: What got your Series A Lead, Karlin Ventures, over the line?
JF: TX Zhuo, who was the managing partner there at the time, is a really good early-stage investor. He got it. Keep in mind that in 2013, insurtech wasn’t hot. We’d walk into meetings with VCs and receive a huge number of blank stares from investors who said, "I don't get insurance. I don't get what you guys are doing. It feels like this probably exists already.”
FR: How did you connect with TX?
JF: After he sold his first company in college, he joined McKinsey after graduating. We had a few people in common thanks to McKinsey, and he had heard about us. More importantly, he's really good at sniffing out investment verticals before other folks do, and he sought out an introduction to us. From there, we hit it off. He's also a hustler and will do whatever it takes for his entrepreneurs, and that really mattered to me.
FR: Sounds like the ideal early-stage backer.
JF: Yes. If he hadn’t come along, I probably wouldn’t be sitting here before you, Gregg.
FR: So I’ll end with a question about the broader Insurtech sector. In 2013, it wasn’t hot, but obviously things are different today. Do you ever look around and say, "Hmm, maybe it's too hot?"
JF: Kind of all the time, actually, especially when I compare it to the desert days of 2013 and 2014. There's going to be winners and losers, as there usually are in any sector that catches fire. In terms of the amount of VC money invested, it's been a lot. But compared to the amount of money in insurance and the premiums written each year, it's a relative drop in the bucket.
FR: It sounds like PolicyGenius is well positioned to get its share of that bucket. Thanks for taking the time.
JF: Thank you as well.
This interview has been edited for content, length and clarity.