Steven Mendel, CEO & Co-Founder at ManyPets sits down with Brian McLoughlin, Partner & Co-Founder at MTech Capital to discuss the future of pet insurance with insurtech disruption at the helm.

Transcript

0:00

[Music]

0:06

welcome everyone my name is brian

0:08

mclaughlin i’m the co-founder of mtech

0:10

capital and insure tech venture capital

0:12

fund and i have with us today steven

0:15

mendel who is the ceo of bought by many

0:19

welcome stephen brian very nice to meet

0:21

you thanks very much indeed for the

0:22

opportunity to talk about uh what we’re

0:24

up to going to talk about shortly i’m

0:25

not sure that’s going to be yet but i’m

0:26

excited well let’s get started at the

0:28

beginning uh how did you come to focus

0:31

on pet insurance because i have to say

0:33

you were a bit of a pioneer we’re

0:34

talking

0:35

2013-ish when you started the business

0:38

so

0:38

you could give the audience a sense of

0:40

that

0:41

sure very happy to so

0:43

actually the business set up in

0:44

september 2012 so shockingly for me

0:46

nearly eight years ago

0:48

um in fact next week it’s eight years so

0:50

this is really quite staggering um and

0:53

specifically we

0:54

we focus in a whole broad area of niche

0:57

insurance categories

0:59

over

1:00

over 330 different niche areas

1:03

and we were found that we were just

1:05

unable to persuade insurers

1:07

to be able to provide better product

1:10

price and experience today to our

1:13

members in those communities

1:15

and so we looked at the communities and

1:17

and ranked them according to levels of

1:19

engagement

1:20

and all of our pets communities just had

1:22

a much higher level of engagement than

1:24

any other communities so that was our

1:26

answer i i can’t claim to have huge

1:29

rocket science or great insight into

1:31

this we just looked at engagement and

1:33

thought fine we’ll start there that’s

1:35

what we’re going to do we’re going to

1:36

try and reinvent the pet insurance

1:38

marketplace and at the time we were only

1:40

focused on the uk uh things have moved

1:42

on in both dimensions since then not

1:43

just pet and and not just the uk

1:46

but it’s really very clear for us that

1:48

this was just an engagement driven

1:50

decision and nothing further and tell me

1:53

back then and maybe it’s still true

1:55

today

1:56

incumbent insurance carriers did what

1:58

well for you and what did they not do

2:00

well for you and is this just a matter

2:02

of i have a digital experience i want to

2:05

deliver or even did it come down to

2:07

policy language that they were refusing

2:09

to change

2:10

tell us about that

2:12

yeah so i mean these are good questions

2:14

right because basically they wouldn’t

2:15

change very much they would just about

2:16

change price

2:18

most incumbents were very happy to

2:19

negotiate over price with us

2:22

but definitely nothing on product design

2:25

nothing at all on customer experience uh

2:28

you mentioned policy wording i mean this

2:30

you know

2:31

in the insurance basis we all know is

2:33

incredibly antiquated

2:35

and the uk pet market is no different to

2:37

that

2:38

in fact actually when we launched our

2:40

own pet stuff in february 2017 we won a

2:43

plain english award for the our

2:46

documentation which was created at the

2:48

point of sale so each policyholder has

2:50

bespoke policy documentation

2:53

and that policy documents are designed

2:54

to be read by an 11 year old although

2:56

frankly i’m not quite sure any 11 year

2:57

old would actually want to re to read it

3:00

that’s a requirement to get the plain

3:01

english award so we have that

3:04

so tell me

3:05

your series a was done i believe in

3:07

early 2017

3:09

for the entrepreneurs in the audience

3:14

who are more early stage addressing

3:16

those folks because right you’re a

3:18

company that’s now raised over 100

3:20

million dollars but for a bunch of folks

3:22

listening

3:23

what do you think the key

3:25

uh

3:26

milestones were for you to raise that

3:29

series a what had you sorted out

3:31

so

3:33

so

3:34

so i’ll take you back a little bit

3:35

further than that so we had decided by

3:39

the end of 2015 that we wanted to focus

3:42

exclusively in and around the pet space

3:45

and so we had made a small acquisition

3:46

at that point to enable us to have all

3:48

the regulatory licenses in september

3:50

2015.

3:52

and and in the early part of 2016 we had

3:55

already

3:56

signed an agreement with munich re who

3:58

would provide the capacity for us

4:01

which actually led on to the development

4:02

of munich digital partners which many

4:05

insurtechs now use extensively but this

4:07

was before those days

4:09

and so we had in place licenses capacity

4:13

a target market that we had already

4:15

understood well by this point and these

4:17

were really the main contributing

4:19

elements to our series a which which

4:21

closed at the end of 2016 um and enabled

4:25

us to launch in the pet space in

4:27

february 2017. okay well you know let’s

4:29

do this let’s fast forward to today

4:33

uh it was just early this year that you

4:35

raised close to 100 million dollars

4:38

and

4:38

again for our leaders that’s a lot of

4:41

money and so our later stage uh uh

4:44

entrepreneurs who are thinking about

4:47

what the future looks like for them

4:49

how much capital they might need and

4:51

what the milestones need to be maybe you

4:54

can

4:55

tell us a little bit more about revenue

4:57

progression in the last two years you

4:58

know some quick kpis

5:00

what your uh what your cost to acquire a

5:03

customer is and what your lifetime value

5:05

is and what that multiple is and what

5:07

you think entrepreneurs pardon me what

5:09

you think uh investors were looking for

5:11

as sort of a minimum as it relates to

5:13

those kpis right so brian i i will tell

5:17

you off the bat as i as i as clearly you

5:19

know seasoned investor you hit all the

5:21

right points

5:23

and these we knew we had to have some

5:25

really compelling metrics to be able to

5:28

to raise significant money and and as

5:30

you’ll appreciate raising 100 million

5:31

dollars in the middle of covid lockdown

5:34

was not necessarily a walk in the park

5:36

um so i can talk a bit about that

5:38

experience as well if that’s interesting

5:40

but specifically to your point uh we had

5:43

doubled revenue or in our world premium

5:45

income every single year since inception

5:48

and we’ve never missed that target so so

5:51

being able to make that commitment to

5:53

being not just look at what we’ve always

5:55

done but look at our plans and we’re

5:57

going to stick to that so that doubling

5:59

year on year is an important part of the

6:02

process and in fact actually in recent

6:03

times that’s accelerated so so

6:07

so to give you some very real data to

6:09

bring you up to speed uh june of 2020

6:12

over june of 2019 was 195 up so nearly a

6:16

3x multiple

6:18

um so that rate of growth has been

6:19

accelerating so all of this

6:22

really important

6:24

but not as important as that critical

6:26

lifetime value over cost of acquisition

6:28

multiple that you were just alluding to

6:31

this for me is the single most important

6:32

metric that i watch like a hawk

6:35

i can tell you what it is for every

6:37

single channel on a daily basis

6:39

by product type

6:41

and we

6:43

we all the leadership team are bought by

6:45

many pay a lot of attention to it so for

6:48

us

6:49

we have always said we will beat 3.0 uh

6:51

so and that’s a fully loaded uh lifetime

6:54

value of fully loaded cost of

6:55

acquisition so no jiggery pokery in the

6:57

calculations um we we’re very

7:00

transparent about that um we have said

7:02

that to be able to be sure that we will

7:05

beat 3.0 we will target 3.6 so i

7:09

described that as kind of putting a

7:10

fence around the core target so so we’re

7:14

going to make sure we never do less than

7:16

3.6 of course we’ll pass three

7:19

and in fact um i’m delighted to say that

7:22

over the last few months our

7:24

ltv over cac has never been below 4.6

7:26

and when you calculate ltv do you do it

7:29

based on revenue or based on

7:31

contribution to the overhead of your

7:34

business i’m curious oh so so it’s based

7:36

completely on contribution so

7:39

it’s f and fully loaded contribution so

7:41

so we take out all associated costs uh

7:44

in the co the when i’ve looked at other

7:46

calculations of this it’s actually

7:47

normally the cost of acquisition that’s

7:49

most played around with um we take out

7:52

of that

7:53

on servicing the cost of bringing the

7:55

business on the books as well as the

7:57

cost of the marketing team into that so

7:59

it really is genuinely a fully loaded

8:01

cost of acquisition

8:02

what do you attribute

8:04

the relatively clearly low cost of

8:06

customer acquisition and the very high

8:08

growth rate too and if you look at the

8:10

competitive landscape let’s say in the

8:12

uk choose that market

8:14

what are the key differentiators that

8:16

your uh customers reward you with well

8:19

like what what makes that difference

8:21

that allows you to execute like that i

8:23

think only one i think there’s only one

8:24

thing that really matters i mean i can

8:26

give you i can give you 20 minutes worth

8:27

of specific real examples i think we

8:30

recently counted we have 26 points of

8:32

differentiation compared to the best in

8:34

the market

8:35

um but but i don’t think actually that’s

8:37

why people come to us i think people

8:39

come to us because we have a genuinely

8:41

differentiated and outstanding customer

8:43

service

8:44

our net promoter score has never been

8:46

below 70

8:48

and that’s across all customer touch

8:49

points so so that’s not just post sale

8:53

because i’d like to think that everyone

8:55

has a great experience at sale but

8:56

that’s post complaint post renewal post

9:00

complaining and claiming and we put it

9:02

all together in fact i can tell you that

9:05

for for august which is the month that’s

9:07

just finished our post claims net

9:09

promote score was 84.

9:12

um and and that’s i think why people

9:14

keep coming to us so

9:16

driving down cost of acquisition through

9:18

driving up referral rates is a core part

9:21

of our future success and a part of our

9:24

recent past as well all right so as we

9:26

wrap up stephen tell me

9:28

what does the future hold for you having

9:30

just raised 100 million close to 100

9:32

million dollars i assume almost all of

9:35

that will be directed toward customer

9:37

acquisition but you can tell me more

9:39

about that

9:40

and then

9:42

so you’ve been a hot market m a wise and

9:45

so i’m sure you’ve gotten phone calls uh

9:47

from more than one uh investment bank

9:50

for sure and maybe directly from some

9:52

insurance companies maybe you can come

9:53

in i’ve also had a bunch of phone calls

9:55

from wealth managers i think they’re a

9:56

bit deluded i think they got me a bit

9:58

confused about that 100 million dollars

10:00

um clearly clearly maybe not the

10:03

maybe weren’t reading necessarily the

10:04

press release correctly

10:06

um so

10:08

so yes we’ve been uh we’ve had a lot of

10:10

uh approaches about m a um we as i

10:13

alluded to already once we’ve done we

10:14

actually have done a small number of of

10:16

acquisitions in over the last few years

10:19

uh we’re actually looking at another

10:20

small one right now uh but this is not a

10:23

core part of our growth strategy at all

10:25

we’re not to acquire the reason for

10:27

acquisition is about acquiring talent or

10:29

capability not customers um so we will

10:33

be putting very little of that hundred

10:34

million dollars into into acquisition of

10:36

businesses you are right of course

10:38

customer acquisition is critically

10:39

important to us uh and so and

10:41

maintaining this doubling year on year

10:43

is we’ve made that commitment and we

10:45

intend to keep delivering to it

10:47

and and of course there is this new

10:50

business strain on all insurance

10:52

operations so we have that to contend

10:55

with

10:56

but also it’s about expanding overseas

10:58

it’s about expanding our range of of

11:00

capability as i alluded to also earlier

11:02

on the conversation so we don’t intend

11:05

to be just in the uk and and sweden we

11:08

don’t intend to be just providing pest

11:10

insurance and we don’t intend to be just

11:13

thinking about those very small

11:15

fast-growing but specific marketplaces

11:18

and so some of the money is is to be

11:20

used to expand our horizons in a bunch

11:22

of different dimensions

11:24

and does that include coming to the us

11:27

so we’re looking very hard at the u.s

11:28

marketplace the u.s pet insurance

11:30

marketplace uh actually has a a a

11:33

significant number of players very few

11:35

of whom have properly innovated in that

11:37

space uh the marketplace looks different

11:40

to sweden and to into the uk so a lot of

11:42

people confuse that it is a different

11:44

operation the biggest issue in the us is

11:46

just lack of understanding and

11:48

experience and knowledge and even

11:49

exposure to pet insurance

11:51

so in the uk about one-third of pet

11:54

owners buys pet insurance about 30

11:56

percent uh in sweden it’s 60 which is

11:59

where pet insurance as i said was was

12:01

invented uh 10 years ago sweden was at

12:04

the uk levels of penetration so the uk

12:06

is on that trajectory

12:07

staggeringly in the u in the u.s it’s

12:10

just two percent

12:11

so only one in 50 pet owners buys pet

12:13

insurance we’ve spoken to many vets in

12:16

the us to try and understand why this is

12:18

the case and many of them have never

12:20

even heard of pet insurance themselves

12:22

so so there’s a huge education program

12:25

that would need to happen for the us to

12:27

be on that same trajectory but but who

12:29

knows

12:30

no there are there are more than

12:32

well over a dozen competitors i wouldn’t

12:34

be surprised surprised that there are 84

12:36

brands here too as well but your point

12:39

about uh low penetration is still is

12:41

still 100 accurate um

12:44

but the market is growing very quickly

12:46

so it is uh it’s an exciting market for

12:48

the us uh for sure so

12:51

final question for you stephen in terms

12:54

of

12:54

you know there’s some inside baseball in

12:56

terms of

12:58

the way you’re building your business

13:01

many of your competitors in different

13:03

lines have decided that their reinsurers

13:06

their capacity providers do not keep up

13:09

cannot innovate will not take greater

13:11

risk they decide that they want to be a

13:14

full stack

13:15

insurance company and at least in the

13:17

u.s market there are a number of ways

13:19

you can do that you don’t just have to

13:21

raise equity capital

13:22

um there are reciprocal arrangements

13:24

that you can set up and

13:26

choose your state they’re about a half

13:28

dozen that are popular

13:30

how does bought by many think about

13:33

whether

13:34

capacity providers are keeping up

13:36

whether you need to go full stack or

13:38

whether you can be

13:39

as big as you want as an mga

13:42

so as an excellent question brian and

13:45

unsurprisingly a question i get asked

13:47

often um and and so the first thing i

13:50

must tell you is never say never

13:52

um so

13:54

i i think that’s important to say

13:56

critically it’s not on our agenda right

13:58

now our board keeps track keeps track of

14:01

this debate and we often talk about it i

14:03

think we did it last maybe back in march

14:06

i believe is the last time the board

14:07

meeting we talked about it

14:09

but we are blessed with phenomenal

14:13

reinsurance capacity providers who are

14:15

very happy to stand behind us um so i

14:19

mentioned munich re right at the

14:20

beginning we’re about to announce we’re

14:23

another very large global reinsurer

14:25

who’ll be stepping into sitting

14:26

alongside them and maybe two is not

14:29

enough in the in the long run and we’ll

14:31

have a third but i can assure you that

14:33

of the volume of business we’re writing

14:35

right now this does not at all worry any

14:38

of the reinsurers who are out of the

14:40

marketplace

14:41

yeah our loss ratios are at market

14:43

leading levels as in low not high

14:47

and

14:48

and the growth rates make this a very

14:49

attractive proposition for them to put

14:51

capacity to work there’s no shortage of

14:54

capacity as i’m sure you’re aware in the

14:55

insurance industry but there’s a

14:57

shortage of places to put it

14:58

economically attractively to work and

15:01

this looks like one of them for them so

15:03

when we were looking to add another

15:04

reinsurer alongside munich we were

15:07

actually delighted to find that we had a

15:09

significant number of players who were

15:11

really properly interested in it some we

15:13

approached several approached us

15:15

directly

15:16

and so

15:17

again never say never but right now i

15:19

can’t really see why we would go through

15:21

the heartache and hassle to do it when

15:23

we’re in such a strong position

15:25

excellent well stephen thanks for your

15:27

time today really appreciate it

15:29

stephen mendel

15:31

uh walked by many ceo and founder thank

15:34

you

15:35

brian many thanks to you too

15:43

you

Contact Us

Thank you for your interest in ITC Europe! We look forward to hearing from you. Contact us below with general inquiries.

Name(Required)
I am interested in:(Required)
Business Communications Consent(Required)
Privacy Policy Consent(Required)

Register Your Interest

Sign up now to be the first to hear when tickets are available, find out who gets added to the European line-up, and keep on top of latest industry news and insights.  

Name(Required)
I am interested in:(Required)
Business Communications Consent(Required)
Privacy Policy Consent(Required)