Tag Archives: OnDeck

What Gig Economy Means for FinTech

Earlier, I discussed the implications of the gig economy on the insurance industry. We concluded that the existence of “crowdworkers” in the gig economy creates four main opportunities for insurers: a faster flow of information, claim process efficiencies, information customization and cost efficiencies.

We at WeGoLook believe all industries must take notice of the disruptive gig economy to remain smart and streamlined, adapting to consumer needs.

What I want to do today is focus on the traditional finance industry, which includes insurance, and the new disruptive trend in fintech. When you combine two major disruptive shifts (fintech and the gig economy) the results are game-changing.

The Fintech Disruption: The picture we can already see

Fintech is an umbrella term for an array of new financial sector services that were once monopolized by large financial institutions. This is a good thing. The change is forcing traditional banks to adapt and may even keep those pesky banking fees to a minimum!

Goldman Sachs predicts these fintech startups will capture as much as $4.7 trillion in annual revenue from traditional financial companies and $470 billion in profit.

These fintech companies include budgeting platforms such as Mint and Acorns, automated investing services such as Betterment or lending services such as Lending Club, OnDeck and Kabbage. What these companies are accomplishing is the decentralization and democratization of financial services like loans, banking and investing.

These fintech companies are making traditional services more accessible to consumers. Remember, the gig economy — or what some people term the “sharing economy” — is all about access.

See also: ‘Gig Economy’ Comes to Claims Handling  

In 2015, the Economist declared fintech to be a “revolution” of the finance industry, and Time Magazine stated banks should be “afraid” of fintech.

The Role of the Gig Economy in Fintech: Flexible workforces

In the gig economy, intermediaries disappear. But don’t ask me — ask your local taxi owner, hotelier or car rental agency if Uber, Airbnb or Turo have affected their way of doing business. This is a rhetorical question; of course there’s been an effect. This is a good thing, but how we react will define our businesses in the years to come.

When discussing what fintech means for the traditional finance industry, Barry Ritholtz, a Bloomberg columnist, aptly said: “What is much more interesting to me is how the traditional money-management industry will respond to and adopt the latest technologies for helping it operate more efficiently and with greater client satisfaction.”

This flexibility is something most industries, including the financial sector, have yet to fully embrace. There are a number of gig economy companies out there that have access to thousands of on-demand workers who can perform a number of tasks that were traditionally in the wheelhouse of full-time employees.

Why would an insurance company or other large financial institution have tens of thousands of employees across the country to verify assets when they can leverage a stable of trained, vetted and professional gig workers? This is the gig economy, where people with spare time are self-identified as willing to complete on-the-ground tasks in their location.

See also: The Gig Economy Is Alive and Growing  

Gig economy companies aren’t just a vendor service — they can be part of the process. Need we get into the amount of money this can save a company?

Let’s dive into a specific sector of fintech — online lending — as a case study of how the gig economy can enable and complement the lending process.

Gig Economy Case Study: A flexible workforce and online lending

Online lending, including peer-to-peer lending, is an old concept reinvented for a digital age. Entrepreneurs, business people and citizens have always borrowed and lent money, but only in recent history has that become much more sophisticated and accessible through online marketplaces and fintech services.

Foundation Capital predicts that more than $1 trillion in loans is expected to have originated through these new lending marketplaces by 2025. Let that number sink in for a second.

Indeed, fintech has enabled a safe lending environment between people and businesses through innovative screening and credit checking. Investors and businesses of all stripes can now lend and borrow through internet platforms without traditional bank applications or even the need to physically exchange documents.

In most of these cases, however, asset or document verification are still requirements.

Take, for instance, common financial loan transactions, such as vehicle financing or refinancing, property financing and business loans. All these transactions require some form of physical verification that an asset exists and is “as described.” Whether that is a car, property, business or some other assets, someone needs to fulfill lending requirements.

Gig economy companies such as mine, WeGoLook, have access to thousands of workers across the U.S. who are ready and trained to travel to a specific destination to complete asset verification tasks.

The Gig Worker Landscape: What that means for fintech

Technology allows us to direct our “lookers” to capture the correct on-site data and perform tasks in a consistent manner across the U.S. (and now in Canada, the U.K. and Australia). The benefits of this gig model are numerous, and a looker, or gig economy worker, can now:

  • Replace multiple vendors;
  • Augment or supplement employees in the field;
  • Augment, supplement or replace employees dispatched from a bank to verify assets or perform a task;
  • Provide faster task completion at a lower cost; and
  • Capture and store all data in the same place and format.

For an example of a real estate report we provide to many of our banking clients, click here.

Because of the flexibility inherent in gig work, there is a significant increase in flow of information to clients. For instance, companies like mine can provide an electronic “live” report, which allows clients to review photos and information prior to receiving a traditional report.

There is also the ability to support video, enabling a walk-through of a property, a demonstration of a piece of equipment in operation — and much more. This walk-through can also be done live with the client, if needed.

In the past, a customer would need to bring documents to a bank and work face-to-face with a branch employee for notarization and paperwork completion. This is no longer the case.

Gig employees can now immediately travel to the customer’s home or place of business. The gig worker can take photos of the asset, deliver documents, notarize originals, deliver them to a shipper and submit all relevant information via an electronic report.

This allows the bank to view all information and verify all documents are properly signed. The bank can then fund a customer before the FedEx or UPS package of original documents arrives.

See also: On-Demand Economy Is Just Starting

All this flexibility allows for faster turnaround times, the elimination of multiple vendors and a reduction in lag time waiting on a customer to try to get to the bank during business hours.

In the end, what we have is a smarter and faster process, which is important, particularly when a loan rate guarantee is in place.

Changing entire industries takes time, but the gig economy and fintech are rapidly altering the landscape of the traditional finance industry. As discussed, all three of these industries aren’t mutually exclusive. Traditional financial services can embrace the better use of technology through fintech and greater efficiency through the gig economy.

Uber’s Thinking Can Reinvent the Agent

I read the article Nick Lamperelli wrote after attending the Insurance Disrupted conference titled “No, Insurance Will Not Be Disrupted,” with his conclusion that there are insurmountable barriers to the “Uberization” of insurance. I’ve developed great respect for Nick’s perspectives. But our team at Insuritas disagrees.

We think disruption within insurance (at the Uber level) is emerging. We just need to think about insurance in a very different way, much like how Uber thought about the ubiquitous taxi cab and getting a customer from point A to point B while making sure the customer actually enjoyed the ride. Uber knew a vehicle was a requirement to provide the ride, so they focused on reimagining the role of the driver to deliver a new, and enjoyable, customer experience. There are approximately 234,000 licensed taxi drivers in America – and there are approximately 466,000 licensed insurance agents.

Our Perspective

When our team thinks about the three primary actors in insurance – the insured, the agent and the carrier – we’ve drawn a couple of conclusions. First, we’ve concluded that the insurance carrier will not be replaced. The scale and immense capital required to insure the unknown is substantial. We believe carriers will continue to transform their businesses. Automated pricing algorithms and streamlined delivery systems will continue to emerge, particularly as the actuarial science and actual claims history affirms that the new algorithms and modified delivery systems work. There will just be winners and losers among the current providers.

Some thought leaders have been looking at the disruption in banking, particularly in lending, and suggesting insurance disruptors will try to mimic OnDeck, Kabbage, SOFI and Lending Club. These banking disruptors are making loans by underwriting repayment risk using nontraditional and publicly available data points and algorithms (e.g. “likes” on Facebook, Glassdoor ratings, LinkedIn contacts, etc.) to determine if a borrower is likely to meet her repayment obligation. Until there is a market cycle downturn, no one will know if these new underwriting algorithms using publicly available data will prove to be prescient or a disaster.

Some folks are thinking this same type of “disruption” is available for a new generation of insurance carriers. We think it’s important to remember that these new online lenders do risk losing the $100,000 they might lend to a borrower, but they can only lose the $100,000 they lent to a borrower. With insurance, unlike repayment risk, claims risk is open-ended, and the open-endedness of claims loss requires capital levels that make an entirely new model carrier entrant unlikely.

Just as Uber concluded that the role of the car should not be replaced in providing the customer with a satisfactory ride, our team has concluded that the insurance carrier will not be replaced in providing the actual insurance. Insurance customers, like taxi cab customers, aren’t happy with the current experience, so just as Uber decided to look at the licensed taxi driver, we decided to look at the licensed agent.

Uber and Insurance

Uber thought long and hard about the one actor it could reimagine to deliver the customer a simple, comfortable ride: the licensed taxi driver. Uber didn’t disrupt the product – i.e. the car – because it knew people still need a vehicle from point A to point B. Uber simply reimagined the driver experience so the customer got what he wanted. Uber reimagined a new generation of “drivers” operating with elegant new tools to finally deliver a ride the way a customer wanted it, a ride experience the customer would love. That includes: clean and detailed cars because of personal vehicle ownership; technology to better understand each driver’s addressable market; instant guidance on where the customer wanted to go and the most efficient way to get there; ways for the customer to instantly access a picture of the car and driver; the ability to rate, rank and celebrate great service instantly that in turn automatically leveraged more business for the driver; the ability to coordinate multiple riders on a single trip to multiple destinations to save time and money and lower the environmental impact of the ride; and a simple, instant payment method … and that’s just to name just a few.

Uber didn’t eliminate the driver. It couldn’t. Uber simply reimagined a driver who delivered the product a customer wanted – a comfortable ride. Consumers responded, and the rest is history.

Now, think about insurance. The actors are very similar – just think about insurance rather than a taxi ride:

  • the consumer is anxious for a new insurance experience;
  • the insurance carriers are like the ubiquitous taxi cab the taxi driver uses – the carrier may be a bit old and clunky with aging operators and legacy distribution capabilities (not as upgradable as a Toyota Camry), but, as the car is needed to get the customer from point A to point B, the carrier is currently the only source for the risk management products the consumer needs;
  • the licensed agent, who like our licensed taxi driver is the licensed intermediary who delivers the product the consumer wants. And we think it helps to think of the term “agent” globally – agent, broker, MGA, direct writer, core system, raters, IVANS, ACCORD, LeadGen – the collective delivery system of the insurance products to the customer today. Is it possible to reimagine the agent?

We believe the customer is simply looking for a better insurance experience. And, as with Uber, we are focused intensely on the agent. We see the same challenges Uber saw: Traditional agents and all the stakeholders surrounding them are strongly committed to the notion that there is only one way to deliver a customer/insurance experience, and it is through them.The taxi industry stakeholders were (and still are) insisting, “We have the vehicles, the licensed drivers, the medallions, the ride meters, the street maps, the taxi parking spaces, the taxi license, etc. and thus are the only platform able to deliver the ride the customer needs.”

Uber didn’t eliminate the driver; it simply reimagined the work and found a new generation of drivers delighted to deliver a reimagined ride. In that same way, our team is reimagining the licensed insurance agent in America.

A Customer Reimagines an Agent

What do today’s insurance customers want? The ability to shop, compare and buy all of the risk management products they need to protect themselves, their families and their small businesses in a simple, one-stop, omni-channel, comfortable and advisory shopping experience. They want to be able to buy multiple products in a single shopping cart, make a single payment at checkout and have an online insurance account that stores all of their insurance information so they never have to provide the same information twice, never have to keep paper records and buy and cancel all additional products using their online insurance account. The list would be long, all tied to a simple notion: a trusted, comfortable insurance experience.

Now, this is the hard pivot for all of us in insurance. Imagine in 2008 that someone asked you what you wanted from a taxi ride, and you ticked off all of the things the Uber driver actually delivers today, and that list was turned over to the taxi cab industry. Could you ever imagine the taxi industry getting close to delivering what you wanted? Ask that same question of insurance customers, let them tick off everything on their wish list for a great insurance experience, and hand that list over to the insurance industry.

The Reimagined Agent 

For insurance carriers, delivering their product to the customer requires a three-step process:

  • The application – collecting public and nonpublic information (NPI) about the character and collateral of a prospective insured;
  • The quote – once an application is complete, using actuarial science to profitably underwrite and price the claims risk;
  • The sale – once a price is accepted, payment is collected and coverage is bound.

We can leave it to historians to explain how we got here, but there’s a massive infrastructure, including more than 400,000 insurance agents and a multibillion-dollar lead-generation industry in America, designed to sell insurance products to the customer. It is a system almost as old as the taxi system. Go back to your list of things a customer might want for an insurance experience. How about, “I want a trusted adviser who works for me and gets me what I need in a safe and frictionless environment”?

As consumers, we don’t like providing private, nonpublic information to anyone, and we are reluctant to engage with people whose job it is to collect it, period. We never have, whether dealing with insurance agents, mortgage originators, tax preparers, government regulators, auto lenders, nurses, doctors, landlords or attorneys.”

Is it possible to imagine a new type of licensed agent with the tools (just like the ones the Uber driver has) that would let them provide a transformative insurance shopping experience: a simple, comfortable insurance purchase? Can we imagine a new generation of agent that can instantly access all of the public and non-public information about a customer’s character and collateral, deliver it to a wide stable of insurance carriers in exactly the format they need it, get instant quotes from the carriers that reflect the customer’s risk tolerance and assets to be insured, be available to provide any of the advisory insights the customer might want — all at exactly the moment the customer has an insurance need? What about a new generation of agents, fulfilled in their work as risk managers and customer advocates, operating in a seamless, frictionless ecosystem in service to the customer?

Similarly to how Uber has built a new generation of drivers, we are building a new generation of agents, who are empowered and excited to deliver insurance solutions to consumers, who are operating inside companies that have long and deep trusted brand equity with the customer and that have access to everything a carrier needs to know about their character and collateral, eliminating the dreaded insurance interview and application. Our new agent never prospects, sells or steers a customer; she simply focuses on delivering a frictionless shopping, buying and post-purchase service experience tailored to each customer exactly at the instant the customer needs it. We believe the role of an agent, with a completely reimagined operating environment, is more important and more valuable than ever before.

More than 5,000 consumers and small business owners ask our agents for help every month. Our agency owners have addressable markets and underwriting packets on more than five million households and get more than 30 million web visits a month with no cost of customer acquisition and application preparation. Our partners have underwriting packets filled with everything a carrier needs to know about character and collateral, ready to be delivered instantly to the carrier, and our reimagined agent is like the Uber driver who is simply focused on providing a concierge level of service to a consumer who has to buy insurance, making sure price, coverages and support are all frictionless.

In 2009, Uber imagined a new kind of taxi driver. In just six years, 162,037 reimagined Uber drivers are at work, earning $6 per hour more than the legacy taxi driver, while self-employed, controlling their destiny and glad to be providing the customer with a safe and comfortable ride. A new generation of agents is emerging, reimagined to reflect what the customer actually wants. We are very excited, as the customer is starting to respond.