Bestow’s Melbourne O’Banion on the insurance industry, pandemic growth

Bestow’s Melbourne O’Banion on the insurance industry, pandemic growth


Covid-19 exposed a flawed and broken medical infrastructure in America and, for perhaps the first time in a long time, had the majority of Americans thinking about the possibility of an untimely and unexpected death.

Despite the tragic and unusual circumstances, it’s been a boon for insurers.

Northwestern Mutual, the largest seller of life insurance, saw a 15% jump in the number of policies sold between April and September 2020. AccuQuote, an online insurance marketplace, saw its policy sales grow nearly 30% as a result of the pandemic. There was a 13% increase in life insurance applications among the under-44 age group according to MIB, an insurance analytics firm.

But getting life insurance has never been associated with ease — and that’s exactly what inspired Melbourne O’Banion to start Bestow, which became the first fully digital life insurance carrier last year and entered into a definitive agreement to purchase a nationally licensed life insurance company.

The company ranked No. 35 on this year’s CNBC Disruptor 50 list.

CNBC recently spoke with O’Banion, who says pandemic-induced tailwinds are giving Bestow the ability to bring new products to market as well as use data to improve its artificial and machine learning algorithms.

The following Q&A has been edited for length and clarity.

CNBC: Life insurance isn’t necessarily the sexiest industry to get into. What was your inspiration?

O’Banion: I’m a repeat entrepreneur. I’ve started several insurance businesses before Bestow — one in the title industry and the other in the healthcare industry. My co-founder and I are both young fathers with kids; We’ve gone through the life insurance purchasing process ourselves. As you know, entrepreneurs are always looking for a problem to solve and a market opportunity where a better product or service is needed. In 2017 we came together and started looking into the life insurance space and we were really intrigued by the dislocation that exists between the demand for millions of customers who know they need life insurance, and the lack of adoption for millions of families. We looked into a lot of the reasons why that exists and came to the conclusion that we could develop a product that lives fully digital, allows people to buy a policy in five minutes, just like any other good or service, rather than the four to six weeks it takes on average. We then set out to build this with a vision of democratizing and scaling life insurance to millions of underserved families who need the protection, but who have yet to purchase.

CNBC: Well the industry certainly enjoyed a bit of a renaissance throughout the pandemic. What kinds of tailwinds have you experienced when it comes to Bestow’s growth?

O’Banion: What I think is so interesting is that as software kind of eats the world and disrupts almost every industry, what’s become really unique about life insurance is that it was so void of technology, even compared to other types of insurance. There’s been a lot of other insurance companies that, at this intermediated traditional distribution, develop digital product to really bring software and technology solutions to the market; Nobody’s really done that before with life insurance. Nobody’s really digitized that that entire end-to-end purchasing process. So there were already enormous tailwinds.

The pandemic certainly accelerated the demand by customers who recognized their own mortality risk in a very unique way. I think it reset a lot of people’s view on the need to develop a financial plan, and even purchase financial products that help protect them and their families. So, demand went up significantly during the pandemic and we were uniquely positioned to serve customers in a unique way, because the traditional distribution just didn’t work right. The agents couldn’t meet with customers; Applicants couldn’t get traditional medical exams from somebody physically coming into your home or your office and offering a medical exam. Our digital process, one that doesn’t require any face-to-face interaction, just really outperformed and we began to scale significantly as a result.

CNBC: Where does the name Bestow come from?

O’Banion: It’s so hard to find something that works well. Fundamentally, life insurance is a kind of virtuous product that doesn’t really benefit you, but rather, a loved one. You’re genuinely bestowing a gift; Taking your own income and purchasing something that protects a loved one or beneficiary if something happens to you. The idea that you’re bestowing this gift on someone else really resonated with us and I think it’s resonated well with our customers.

CNBC: You’ve said your typical customer is between the ages of 25 and 45 years old, most of which have young children at home. How are you convincing younger people that they should be investing in life insurance?

O’Banion: We did a lot of our research early on to find out whether the demand exists or not. We discovered that there is massive pent up, latent demand by customers who know they need this product, but they just don’t have relationships with a traditional agent. They don’t believe that a medical exam should be necessary. It’s on their to do list — but it’s like number 90. So they just haven’t gotten around to doing it yet.

The vision was to develop a process that was so seamless and intuitive for the customer, that they could just check it off their to do list, easily purchase coverage and meet them where they are. That’s been very self-evident in the demand that we’ve received. Customers are coming to our site every day, purchasing in as fast as five minutes, not interacting with our agents that are available by phone or by chat or by text, and purchasing the amount of coverage that they feel like they can afford. We’ve kind of re-cast the income and cost structure by developing our own software and infrastructure as a true full-stack provider that’s developing our own software, extracting a lot of costs, which then allows us to pass savings on to the customer, and actually make a solid profit as we continue to scale and grow the business at a much lower premium per applicant than the incumbent. We’re selling policies of $200,00, $300,000, or $400,000 at face value and going after a marketplace of customers that really want to pay just $20 or $30 per month, rather than the higher net worth, more affluent customers who are paying a higher premium. To be clear: We have those customers as well, but initially, we’re really going after an underserved market of customers who traditionally wouldn’t wouldn’t have been targeted by agents or advisors.

CNBC: Right, the model seems very similar to Lemonade — another CNBC Disruptor 50 company. And since going public they’ve introduced a number of new insurance products. Have you thought about expanding beyond life insurance alone?

O’Banion: Yes, certainly. It’s always been our vision to offer a whole suite and portfolio of life insurance protection products, and also savings products on our platform. We don’t have an interest in PNC-type products, pet insurance, or what have you, but in the near-term, we are going to be launching other kinds of protection and savings products on our platform and distributing those to our customers with the same benefits that we offer today through a term life insurance policy. So yes, we’re going to be aggressively expanding our product suite.

I think a lot of the industry looks at us today, and sees us as a direct-to-consumer company. We’ve expanded this year into multiple business lines. We’ve developed the best-in-class API integration that allows us to embed life insurance into fintech partner apps or websites, and bundle life insurance in a way that’s never really been done before. So that’s a growing line of business for us as we leverage and partner with companies like Acorns, Stash, Lemonade and others that are looking to develop more products within their own portfolios.

The beauty of a company like Lemonade is that they developed an incredible user experience and brand. They went to market looking for a life insurance partner that could match their existing customer experience and their expectations for that product experience, on their platform, for their brand. So we partnered with them to work on taking all of our expertise and developing API’s that integrate into their app and allows a customer to have a Lemonade-branded life insurance policy. It’s a very similar product and feel as their renters and homeowners insurance policies.

CNBC: Bestow is Texas-based. Sadly, the situation in that state is particularly grim when it comes to Covid infections. How are you thinking about the return to work?

O’Banion: We’ve rolled out a hybrid workforce plan. We fundamentally believe in the benefit of face-to-face interaction and are allowing for a lot of flexibility and autonomy with respect to how frequently our team comes into the office. We’re expanding in new offices, both in Dallas and in Austin, and we really want them to be hubs for people to come in, do great work together, kind of solidify and establish relationships, and then pull people in remotely for various kinds of working sessions that are beneficial for the team to get together. We’re finding that when teams come together, they can accomplish in a couple days, what it would typically take a couple of weeks to accomplish remotely. But mostly we’re just providing a lot of flexibility to our team, seeing how that goes, and iterating from there as we continue to learn more.

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Mellisa Cullwell