On a recent episode of AAIS Pulse, AAIS’s John Kadous hosted Kevin Mitchell, President of TypTap Insurance Company, and Aimee Bernadicou, Lead Broker at MJ Hall & Company, to discuss challenges to growth and the innovative ways companies are capitalizing on new opportunities.
TypTap is an insurtech expanding its reach in the mature homeowners market, while MJ Hall seeks to grow in the burgeoning cannabis marketplace, including working with its sister company, Golden Bear Insurance Company, to bring AAIS CannaBOP to cannabis businesses in Arizona, where the tailor-made package policy was recently approved by regulators.
Whether a company is seeking growth in a market old or new, one of the major issues is data. From Aimee’s standpoint, “One of the biggest challenges in the cannabis space is that there's no historical data -- companies are currently working with about four to six years of data,” Aimee noted. “Capacity is limited – and we are seeing some serious capital moving into this space, facilities are becoming larger and larger.”
Hamstrung with limited data for a wholly new exposure, carriers are thinking out-of-the-box and pulling data from other markets to better understand the risk. For example, they are looking at traditional nurseries where plants are stacked on pallets and and racking systems are similar to those used by cannabis businesses, Aimee explains. MJ Hall, which has been growing and evolving in this market for a few years now, is also leveraging its specialized knowledge of the space to build relationships with carrier partners.
“It's an always evolving market, and we're always learning new things,” Aimee added.
For TypTap, unlocking data has been critical to success as well – in this case honing in on the right data in a market where reams of historical data exists.
After developing technology and collecting data on the homeowners’ risk, the company needed to test its theories – and took the test to one of the toughest homeowners’ markets around, Florida. “We set out to see if we could leverage technology and data analytics to drive a more profitable result,” Kevin recalled.
“Because of the technology we've developed, we have ultimately been able to go down to the rooftop level and make a determination if that risk meets our underwriting criteria,” Kevin noted. “We now have the confidence to expand across the US.”
While on the one hand, expanding out of the challenging Florida market would seem to make everywhere else seem simple, Kevin is quick to note that every state has its own challenges – not just around climate and weather but varying regulatory and litigation environments. By being open to evaluating the data on the ground (as opposed to using data aggregators) and understanding which data is important, TypTap has been able to grow not only by strategic risk selection – but also by making the underwriting process easy for consumers.
TypTap also differs from many insurtechs in its focus on working directly with independent agents. “They're vetting the customers and figuring out who would be the best fit for Typtap for the long term. We pay an enhanced commission to those agents for bringing us those customers, and why this whole lifecycle works is because we've done the initial deep dive into the data,” Kevin explained.
The cannabis insurance market has gotten a perhaps unexpected boost from regulatory-driven technology. “One requirement that I think really helps the cannabis insurance marketplace is going to be a tracking trade system,” Aimee said, pointing to a system California has been requiring statewide to control inventory from seed to sale. If there is an issue with safety measures or a “bad batch,” exposure can be tracked and mitigated. The system also enables inventory to be tracked in real time, so in the event of a loss at a specific location – a building burning down for example -- insurers have better information to use in adjusting the loss.
Aimee also sees opportunities for cannabis insurance expanding across more and more lines as operations become more complex – becoming very large, vertically integrated companies.