AI For Customer Targeting & Direct Response With Sean Harper
AI for customer targeting is much more precise than the old way of advertising on TV commercials during a football game. Chad Burmeister’s guest today is Sean Harper, the co-founder of Kin Insurance – an easy and affordable home insurance policy personalized for you. Sean discusses with Chad how he uses AI in marketing to figure out who the good customers are. They also use AI in underwriting to figure out what the right price is for each home given its risk characteristics. Listen to this episode and discover how AI can make customer targeting and direct response so much easier for you. Dive in!
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AI For Customer Targeting & Direct Response With Sean Harper
I've got Sean Harper with me, who is the Cofounder of Kin Insurance. I was thinking, "How is Kin different than all of the other insurers out there?" We're going to dig into that. We're going to dig into how Sean and Kin use AI inside of their platform, but also a little bit in the selling motion. Sean, welcome to the show.
Thank you for having me.
Sean, before we kick off, I like to get the audience to know who you are. A lot of times, the best way to do that is to think back to when you were a kid 6, 7 years old. What were you passionate about then in life? Do you remember?
I've always been into gear. When I was little, I wanted to be a fighter pilot because the planes were so cool and they're fast. I've always been into computers and tech. My dad was a police officer, but he was a pretty nerdy guy too. He always had gear around the house and was into us learning about computers which at the time was like the Apple II.
I was thinking of the Apple IIe with the floppy drive. It started with the real little one and then it got to the Mega drive or something like that.
I remember writing my first computer program. I was probably ten or something. I wrote a computer program to help me sort and organize my baseball cards. It’s the beginning of my career as a nerd.
If you think of the secret line, a little blue line through life that goes from then to now, how does what you're passionate about then apply to what you're doing now?
I’ve always been interested in technology. The Kin is my third tech company. I love solving problems and making things efficient. Another big influence on me was I got into economics when I was in high school, then I ended up going to the University of Chicago, where I get to experience some of the best economics faculty anywhere. I became passionate about making capitalism work for people. We have an economy right now that is probably more corporatist than capitalist in that it helps big companies and the rich people and the entrenched interests and stops competition. Insurance is a great example of that, with the industry we're in.
Ultimately the most important thing is that customers are happy.
The big insurance companies are the same companies that were big more than 100 years ago, which is crazy if you think about it. The world has changed so much over that time period. Why is that? One big reason is that it's so hard to start an insurance company with the regulations and the capital and everything. It’s an oligopoly. That is worse for consumers because there's not a lot of competition and innovation. I'm into this intersection of like, "Let's use tech and finance to create competition for some of these entrenched interests so that we can help consumers in their day-to-day lives.”
One thing you talked about is that the NPS score from your organization is high, in the upper 80s. NPS score for some of the traditional insurance companies might be in the 40s. I remember talking to a professor in Texas who knows one of the insurance carriers. They were having to make the decision whether to continue doing IVRs, press 1 for this, 2 for that, 3 for that and then offshore people or onshore. Some of those kinds of decisions and choices are what lead to a score of 40 versus a score of 87. Talk to us a little bit about how you make those decisions. Does artificial intelligence play a role in your ability to maintain that kind of score?
Insurance companies have an issue which is that they outsource so much of their customer acquisition and servicing to these insurance agents. In a lot of ways, they don't think about the customers as their customers. They think about the agent as their customer. That creates a lot of sub-optimizations. For Kin, our customer relationships are direct. We pay a lot of money to get a customer with advertising and sales cost and everything. One reason why we do that is because we want to keep these guys forever. We see that. We have 93% of our customers stick with us one year to the next. We're super invested in that. A lot of the times, when big companies are making these decisions around costs, they're not always waiting for the customer impact. It can be harder to see because you could do something that saves you dollars now but impacts your turn two years from now and you don't know until it's too late.
We're super interested in optimizing around the customer. That's ultimately the most important thing, is that these customers are happy. We also started the company with that ethos. We're named Kin. Who would you rather have helping you with your home and presenting your home than your family? We take that seriously. We use some AI in marketing in trying to figure out who the good customers are. We use a lot of AI in underwriting to figure out what the right price is for each home, given its risk characteristics. We use a little bit of AI on the sales side to figure out which lead should be matched to which salesperson. We have a pretty big inside salesforce or customer service. It gets a little bit gray there, but we have about 150 people who spend all day corresponding with the customers to answer their questions because our product is somewhat complicated. We're insuring homes, which is, for most people, their biggest asset.
One thing that made me curious when we were talking is that you said that extreme weather is causing a lot of homeowners to not be able to get insurance on their homes and it's rising. A lot of the big carriers are moving out of states and moving out of certain zones. Talk to us a little bit about that. Why is it happening and what's happening in that area?
Global warming is having an impact on the weather. I don’t think that can be debated at this point. The weather is getting more extreme every year. It’s happening everywhere. It’s not in Florida and the Carolinas. One of the biggest natural disasters we had in 2020 was this derecho that went through Iowa, the rest of the Midwest. It was more than a $10 billion weather event. This is happening. It's happening everywhere. It's going to be part of our life and we're going to need to figure out a way to adapt to it. One issue with older insurance companies is they aren't built to adapt quickly. They've been doing it the same way for more than 100 years. When the weather, demographics, buildings, and consumer preferences changed, they keep on doing it the same way they always did. That's not a good solution.
What you've ended up is, in a lot of these areas, they're huge areas. It's everywhere that touches the ocean or is exposed to wildfires, the legacy companies don't know how to price that risk properly. Their value chain is so inefficient, they have a hard time balancing the distribution of their customers. Their response to it is to leave. It's becoming harder and more expensive for people, especially in these coastal areas, which is where most of our population lives. It’s becoming harder for these customers to insure their homes. It's a big problem.
A friend of mine is starting to do work with a company, tiny homes and then printed homes. I have to believe that part of the solution might be how you build it. Is your house built upon a rock or is your house built upon a sandcastle?
Houses can be built to withstand a lot. They can be built to be strong or not. A lot of stuff goes into that, like the material that's on your roof, the shape of the roof, the angle of the home, its elevation, and the material of the walls. Some of these new technologies like the tiny home stuff, these homes are built well. They're built in a factory, so they're built to a spec which you don't have when you're building a home on a lot. That's going to be part of the solution. We can't stop global warming right now. We got to try so we can stop it or slow it down 50 years from now. In the meantime, we're going to need to adapt. A big part of that is building to be more resilient.
The moral of this part of the story is if you're high and dry because your carrier won't cover you, check out Kin because they use advanced techniques and they have the ability to underwrite when you might not be able to underwrite somewhere else. When it comes to the sales motion and marketing, you said you've got over 100 reps, maybe 150 sellers on your team. Big data's important choosing great customers that can continue with you to maintain that 93% renewal rate. What are some of the techniques you use that leverage artificial intelligence in sales and marketing?
We're a direct-to-consumer business. These are not huge contracts that we're doing. One of the issues is that insurance companies historically have been untargeted in how they get customers. They get customers in two ways. They have television commercials and branches. There was an insane number of insurance branches or agencies. There are more insurance agencies in the US than there are fast food restaurants, which is crazy if you think about it. I eat fast food multiple times a week and I never visit an insurance agency ever. I think that's true for most people. That's super untargeted. The majority of the people watching that television commercial during the football game or driving down the street and seeing the branch, they're not buying insurance right then. A lot of what we do is we were able to figure out exactly who we think are going to be good customers and who are likely to convert and target them specifically through direct response marketing. That's a recipe that's much more efficient than the old way of doing it.
There are probably some ego-driven decisions that are made when you have a banner that's on the freeway and on the Super Bowl commercial. Some of it is that's how we've done it for more than 100 years.
We're in a good situation now for new businesses because you can measure when somebody converts. That's higher marketing spend to getting to the customer. In the old world, where maybe you're selling through a branch and you're doing untargeted advertising, it's hard to even tell what advertising is working. There are a lot of times it’s like shooting in the dark when they're making decisions about things like billboards and Super Bowl ads and stuff.
Traditionally, having been in call centers, we typically didn't call them call centers. We call it an office, an account executive. We'd have a Y splitter, though. You'd have the manager listening in on the rep and there'd be coaching. That was in real-time, but then companies came out with conversation intelligence. Now, they can record it. You can listen after the game tape and fast forward and rewind. You probably have some of the conversation intelligence installed now. What's that doing for you guys?
I can't imagine running a contact center without that. We have all of the calls recorded and transcribed and they're searchable and you can run it through language recognition algorithms. It's an awesome tool.
Even for onboarding, then you can have a, “Here's what a good call sounds like. Here's what a call that could use improvement sounds like.”
One issue with older insurance companies is they aren't built to adapt quickly.
For us, in a regulated industry, it can become pretty important what was said to the customer. We can end up in a situation where maybe we're in a lawsuit over, "Should we pay the claim with something promised to the customer that wasn't proper? Did we make some representation to them?” It’s nice to be able to know like, “Here’s the recording. This is how the conversation went down.” They were warned of X. Useful.
There's a guy named Marc Bernstein who's had his business about the same. You guys were born around the same date. Marc's company does inside the conversation coaching powered by AI. We could be talking to someone and they go, “How does this compare to my current Allstate contract?” The AI hears the word Allstate, and a little screen comes up. What's cool about it is you can toggle it so that for an advanced rep, as long as you get the core concepts, then you don't have to say it word for word. If you're an early junior rep, I need you to be 98% on target with word for word and then you graduate from the word for word to that. It's a neat technology. Are you starting to be approached by different companies that bring different kinds of AI for sales in? What's most interesting to you through the rest of 2021?
We're interested in that. What a cool technology that is? A lot of techie people jump directly to this conclusion that we won't ever have salespeople or customer service people will be done by a bot. I don't think that's realistic about the things that machines and humans are good at. Humans are good at relating to each other. We've evolved for our whole existence to enjoy talking to other people and relating to each other that way. We like the cyborg approach where you’re using the AI. You're using the machine to make the person more efficient, make them smarter, arm them with the information they wouldn't otherwise have, but still having a human element to it because most of us enjoy the human element.
Dr. Joel Le Bon from Johns Hopkins University, he wrote the foreword of my book, AI for Sales, and the back. He read the book twice. He's probably the only person on planet Earth who's read the book twice. The takeaway for him in 21 different chapters of all these different technologies was the area that salespeople should focus on is building trust. Draw a circle and say, “If a computer can send an email, then that's probably going to happen over time.” If your core job is sending an email every day, that's at risk. Having the conversation on the phone with the customer looking at them in eyes on the Zoom video, that's not at risk. Giving someone the tools to augment what they're doing versus replace is where the industry set it.
What do you see over the horizon 2 to 5 years from now? Where does AI evolve to over the course of the next 5 to 10 years?
You're seeing it happen already where AI is becoming less of a standalone thing. It's becoming embedded in almost everything. Even then, the line between what's just an algorithm that helps us understand something and what's truly AI matters a lot more around the application like, “Is this something that's providing useful insights?” This is a boring prediction, but I think the trend will continue, and you'll see AI in many more places. Its use will become much more practical.
It'll be under the hood of everything, like Amazon Alexa. You don't know that AI is there, but it's there. We've got this code we purchased. Typically, it's B2B customers, so probably it wouldn't apply as much in your space. Let's say you have a list of 500 people that you need a meeting with. The AI goes out and looks at who you know that have a connection to those people and then we reach out to the intermediary and say, “You already have trust with that person. Would you mind making an intro?” Scaling trust to that level traditionally has been hard. There are millions of records available. Now with AI, in 7, 8 minutes, you click a button, it tells you, “Here are your 500 people that can get you a meeting with those 100 people.” It's built into the technology everywhere. This has been a great conversation. If someone wants to get ahold of you because they're uninsurable or maybe they're running a contact center with 150 people or whatever, how can they get ahold of your Sean?
Housing insurance alone?
We insure homes and other buildings. It could be a building that you live in or a building that you rent out. The common thread is that they're all physical structures.
Since you don't have all of the heavy distribution costs, I suspect it might be a good idea for me to check. It can't hurt to run through the calculator.
The cool thing is we're automated and we don't have the agents, so we're cheaper on average. We're also more accurately priced. If you do have a home that is more resilient to the weather or is located in a place that's more resilient, then we're able to give you an even lower price.
Thanks for sharing your thoughts both inside of your product as well as inside your sales and marketing motion. I appreciate having you on the show, Sean. Thank you, everyone, for attending. We'll catch you on the next episode.
About Sean Harper
Former management consultant, current multi-time tech company founder and angel investor. My focus is on financial services technology. Banks, insurance companies, etc are basically software companies in disguise, but are often not particularly good at software development, which creates an opportunity for people with our skill set.