Building a New Insurance Company From Scratch: Clearcover CEO Kyle Nakatsuji (Part 7)

Kyle Nakatsuji: The fortunate thing for us is that car insurance is a $230 billion per year market. The fact that one person who didn’t know us wanted to buy was an indication that lots of people we didn’t know would do the same. So we ended up immediately growing pretty quickly, faster than we would have liked in fact.

We ended up moderating our growth early on, but it was really staying laser-focused as a company on getting that first person to buy the product. Because of the size of the market and the way that we built our distribution, it just started to grow pretty quickly.

Sramana Mitra: There’s nothing really worth exploring strategically. You hired some insurance sellers and you basically incentivized them to sell your insurance product, which was priced lower than the market.

Kyle Nakatsuji: The magic in the business is, our ability to do that rests on the technology foundation that we spent a long time building. For example, our distribution strategy and our distribution partnerships are all enabled by a proprietary API platform that our team built from scratch in-house in order to be able to sell the product effectively and at a cost that supports a low price.

One of the challenges we faced was simply building an insurance company that works, which in hindsight felt like it was inevitable and was a monumental challenge. It’s one that we’re still spending a lot of time figuring out today.

The second challenge was doing that in a brand-new way using a brand-new technology stack that would allow us to deliver on our expectations and our ambitions for having a low-cost structure so we could price the product competitively. The magic in the business was being able to build and run the insurance company from scratch.

Most importantly, it’s the underlying technology substrate that allows us to do all of the things we do in a cost-efficient manner so we can deliver that higher quality product to our customers at a lower price.

Sramana Mitra: You’re selling car insurance only at this point, right?

Kyle Nakatsuji: Just car insurance right now in California only. Although this year, we’ll roll out in a bunch of new states. In insurance, you have to launch state by state. So our big goal through this year is state expansion and continuing to prove out the model. But right now, just auto and just California.

Sramana Mitra: How much lower are you?

Kyle Nakatsuji: It depends on the company and it depends on that company’s cost structure. People typically find we’re 20% to 40% lower depending on what company they’re coming from. It could be much lower than that.

Sometimes it’s not quite low. But on average, we find 20% to 40% is a pretty decent range. That tends to represent a lot of money on an annual basis. The policy’s going to cost $1,000 to $1,500.

Sramana Mitra: Is there anything else that I should have asked you about this business?

Kyle Nakatsuji: Maybe. But we would’ve ventured into a real insurance territory, so we’ll try to keep insurance at a high level as possible.

Sramana Mitra: All right. Thank you for your time.

This segment is part 7 in the series : Building a New Insurance Company From Scratch: Clearcover CEO Kyle Nakatsuji
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