Transcription:
Patti Harman (00:07):
Welcome to this edition of the DigIn Podcast. I'm Patti Harman, editor in chief of Digital Insurance. We're still early into the hurricane season, but carriers and insurtechs are investing significantly in technology that will provide valuable intelligence to help them prepare for and mitigate the impacts from significant weather events. So far, we've already had a few hurricanes I think this year. Flooding, hurricanes, high winds, wildfires, tornadoes, and even high temperatures are playing a significant role in insurance claims and affecting coverage access and limits. Here to discuss all of this and more is Nikki Devlin, CEO and co-founder of RIC, an extreme weather focus and MGA that specializes in creating micro parametric insurance products designed to help policyholders recover more quickly from extreme weather events. Thank you so much for joining us today, Nikki. I heard you speak at ClimateTech Connect and I knew immediately that I wanted to do an interview with you, so I'm really excited to have you today. And we also profiled your company as part of our Meet the InsurTech series, so it was great to have just a little bit of an overview on some of the great work that you're doing in the industry.
Nikki Devlin (01:32):
Thank you. Very excited to be here.
Patti Harman (01:35):
So there's so much that's going on in the technology space related to climate and climate change, and I thought it might be helpful for our audience to start with just a quick overview of Ric, your focus, the pain points you're addressing for property owners and insurers, and then why you've decided to focus on weather risks.
Nikki Devlin (01:55):
Absolutely. So just a quick overview of RIC, as you said before, we're an MGA focusing on micro parametric climate- related solutions, and that's a lot of words. And what exactly does that mean? An area we focus on is, so when you look at the United States, 95% of Americans don't carry flood insurance. And when you look at the problems in the U.S., 99% of U.S. counties have experienced a severe flood in the last decade. So the problem that Ric is trying to solve is how do we help close this gap of Americans who are absolutely going to be experiencing extreme weather and how do we get them fast cash after they experience an extreme weather event? So that's the parametric portion. What we do, so the micro portion of what we do is that our policies are priced around what we have in two tiers, around 200 to $400 annually.
(02:58):
So that's the micro of the pricing and the product once it's activated, responds rapidly in getting cash to an individual experiencing this event. And that's also the other micro portion of our product in that your payouts will range between five and $10,000, and it's fast cash that's meant to get into the hands of the individual experiencing that event so that they can make choices to help them recover faster. And what's really beautiful about the parametric space is that that fast cash that you get does not have to be used just for property damage. You can use it for financial loss too. And so that's really what the problem is we're trying to address. We know folks need money after an extreme weather event. How do we get it to them rapidly and how do we get them flexible cash that they can spend in a meaningful way to help them speed up their recovery?
(03:53):
So when you look at the traditional flood insurance space, most flood insurance premiums can be well into the thousands of dollars with a multiple-page application. And then when you look at the claims experience, so if you're part of the 5% of the population that has flood insurance, your claims experience, it's pretty tough. Your home might be underwater and you have to spend time submitting a lot of documentation to your insurance company, filling out more paperwork, and then after you wait a few months, you might get a check to help you with your recovery. And the typical average flood claim loss is around $46,000. So our five to $10,000 payout is really not meant to replace flood insurance, but it's supposed to be a benefit that you add on top of your, if you have flood insurance, add it on top. But if you're part of that 95% of folks who are completely uninsured for flood insurance, this is a really good option for you.
Patti Harman (04:55):
I agree. A key focus, as you mentioned is the parametric piece. Are you seeing interest growing in this type of coverage and then how, maybe you could explain for our audience how parametric differs maybe from traditional insurance.
Nikki Devlin (05:12):
Yes, absolutely. So I would say that we've seen interest growing for the parametric space for a very long time. Maybe a little background on myself here might be helpful. I was a broker for many years and parametric insurance is not new. The people using parametric insurance have sort of shifted. It was largely a commercial product and now we're seeing parametric insurance people working together to try and just figure out, well, this is a really helpful tool, how do we get it into more people's hands? So I would say that the spaces of interest now more to the general public than just the commercial sector. And then for those who need a little refresher on what parametric insurance is, I'll do a little side by side of how it differs from traditional insurance. So with parametric insurance, we look at a third party verifiable dataset. And for Ric in particular, let's take a look at our rainfall product.
(06:13):
We create a customized rainfall trigger activation trigger for each of our customers. So it's unique for each of our customers. I live in New York, it's roughly nine inches of rain in 48 hours for me, for my policy to activate. So this is not on the responsibility of the insured. They don't have to reach out to us. We are automatically monitoring the rain and the weather in their area to see if the policy trigger has been met. And the weather data that we're accessing is publicly available weather data. So that's that third-party trust and transparency and you can verify this. And I think that parametric insurance, why it's becoming very popular more in the mainstream is that there's a lot of transparency there for the customer that they sometimes lose when they're working with insurance companies that say, Hey, our price and our premiums are held in this tightlipped insurance model that you really don't have access to.
(07:14):
So that's how parametric insurance differs on the front end. We look to verifiable third-party data sets, and for us, it's rainfall for our first product. And then on the claims end, once that third party data set has been verified and your policy is activated, you get the money really rapidly. Our goal is to get cash to folks within 48 hours to 72 hours. And that's really different than when you look at traditional insurance. Sometimes it's three to six months for you to get your claim payout. So we're using third-party data and then on the backend, getting you your money much more quickly. So those are the two big differentiators between parametric insurance and traditional indemnity insurance.
Patti Harman (08:03):
So you talked about having personalized trigger points. How do you determine them then for each policyholder? Is it based on geography? Is it based on weather trends in that particular area? What types of things are you looking at then?
Nikki Devlin (08:20):
There is a lot of really good weather data out there, and a lot of our data actually comes from NASA. We're using satellite data that they have. Again, a big part of what we are looking to do is be as transparent as possible to our consumer. This ties into we can pretty easily and quickly calculate a unique rainfall trigger for each of our customers, but how do you do so in a meaningful way for them on one of the things that Ric has done? So this is a little blend of the art and the science of underwriting. We have over 300 years of rainfall data, so we have a really clear picture in the U.S. of how frequently and how much rain is expected to fall in your geography.
(09:08):
The art part is, well, how much rain is falling in your geography that's going to be impactful to your life? How much of that is that nine inches? Is it 13 inches of rain? That's the art part of being able to set that trigger and knowing that it's going to be responsive to the community. So a lot of our work early on was actually working with a community out in Norfolk, Virginia, and working with the resiliency officer there who helped us take a look at what weather events were impactful to their community that caused widespread devastation and what that devastation looked like at a household level. So we worked with them to understand that, and that's how we calibrated what our rainfall trigger is. So our policy is not meant to respond every time your basement floods, but when your community is being impacted by a large scale weather event. And that's the art part of what we do. And then we backup, we work backwards from there with all the weather data that we have available to us to build out. Essentially we've mapped the entire United States to a specific type of weather event, and that's how we're setting the policy triggers for each individual.
Patti Harman (10:25):
As you're trying to figure out all of this, are there any challenges then for policy holders who want to obtain this type of coverage? Because I'm going to guess that some of them aren't familiar with it and may not know where do I even go, how do I obtain it, that sort of thing. Is there anything that they need to know?
Nikki Devlin (10:42):
Yes. So I think that, and if you don't mind, I'll take a step back and I'll revisit that really alarming statistic that only 5% of Americans carry flood ants, and that's because it's hard to get and it's complicated and they're not sure what they need to do. I was a broker for a very long time and I've sold flood insurance, and we can firmly attest it is complicated and it's kind of a nightmare process. So when we formed, we knew that really critical to what we are looking to do is how do we make it really easy for people to get them this coverage that we know that they need? Insurance is so important to the functioning of your household and to your community. How do we make it more frictionless for folks? So for Ric, one of the things we focused on is how do we access large groups of folks at scale to get them these micro products?
(11:40):
And for us, we found major alignment with working with larger employers in communities. So if someone wants to buy our product, it's actually going to be sold to them through their employer during their open enrollment season. So a lot of times, and I feel like it was probably even mentioned at ClimateTech Connect, I hear people saying, oh, nobody wakes up thinking that they're going to buy flood insurance today. And I hate that sentiment that the industry sometimes has. And I was just like, I don't agree with that. I think that once a year, many Americans wake up and think, I'm going to buy insurance today. They're going to buy medical insurance, they're going to buy dental insurance. And I think that when you intersect that with climate, I think that we need to paint a picture for Americans that buying your dental and your medical and your climate insurance is just as important as those two other things you're buying because it really, like I said, the average flood claim is $46,000.
(12:44):
That's a huge financial shock to a household. And employers already have this vested interest in making sure they can help you absorb the financial shock from a broken bone. And they're really keen on the idea of, you're right, climate is the next big financial shock. Most households in the U.S. are going to be experiencing, and they see themselves having a role in helping their employees recover from that financial shock. And I think that when you're an InsurTech and you're looking to figure out how do you make yourself sticky in these areas, we've really done a lot of research and work to look at, so that $46,000 claim that a household is having, when you look at all of the households in that community, it translates back to workforce cost to the employers operating in that community. And we've been able to tie this back to how it's impacting these companies. So they, they're really well aligned and they see this as a value of our ability for their workforce. Buying climate insurance for your employers is part of your business continuity planning. So that's sort of how we, there's a lot of really good infrastructure in the insurance industry, and Ric really looks to see how can we blend the existing infrastructure that's there and make it easier for the customer to get access to these products.
Patti Harman (14:15):
I love that you're looking at this from the customer's perspective because by making it easier, I think it takes some of the trepidation out of it, and it's just a great way to educate them. When you own a property or you rent a property, there are the certain things that you need to consider as part of that process. I moved a couple of months ago and my broker said, oh, do you need flood insurance? And I laughed at her because I'm at the very top of a hill and I said, if I need flood insurance, y'all are going to need an ark. So I probably don't need it at this point, but I am aware that that is something you purchase separately, and I understand the value of that. So I'm really glad that you're looking at how can we make this easier? How can we get money to people faster? Because when you're standing there and your place is flooded out, that amount of money can make a huge difference, and it just buys you time to assess everything and figure out what are my next steps, what do I do, all of that sort of thing. So that's why these types of products I think are just so important. As climate risks increase, how is insurance coverage evolving to meet these changing needs? Are you seeing that more so, I guess, even now?
Nikki Devlin (15:36):
So as climate needs increase, I wish that the industry was moving a little bit more rapidly than it is, but with that being said, I also think it creates a massive opportunity for folks thinking innovatively in the space to come up with new solutions. And I do think that what work we are doing, we're starting with extreme rainfall, but we're also looking across the climate space. One of the other products we're looking at developing is an extreme heat product, a wind speed product, which is for hurricane and wildfire. So for most folks, typically in the past you'd have to go buy those products individually, but our goal is to really offer a marketplace because we know that, let's say you're out in California and just to take the LA fires for example, they experienced this extreme wildfire and two weeks later, extreme rainfall was happening to the same community.
(16:36):
And how do you make people more resilient to climate change? There's not going to be just one event type that they're going to experience. They're going to be experiencing multiple types of events. And I think that by creating a suite of products for them, they'll have the ability to make themselves more financially secure after they experience these back-to-back extreme weather events. And one of the things that I'd like to highlight is that extreme heat is directly tied to extreme rainfall, right? When the extreme heat happens, a lot of water evaporates, the clouds are heavier, and then you're more likely to have an extreme rainfall event. And extreme heat is also with extreme heat, it's going to increase the amount of land that's dry and arid, and increase the amount of wildfires or just if it's not increasing the amount of wildfires, it's increasing the spread of the wildfire because more and more ground is now dry and it's all interlinked.
(17:34):
And I think that one of the things that the industry can continue to develop is creating these interlinked policies and offering people more holistic coverage. So for some folks, and this is where parametric insurance in particular comes into play, for some folks, your house may not have burned from a wildfire that happened, but your town was evacuated, you had to leave, but there's no way for your policy to activate if you do have wildfire insurance to get you cash because your house didn't burn down. So that's where parametric insurance comes in in the sense that it doesn't need to be intrinsically tied to property damage for the policy to activate. And just to take it back to our rainfall product for a moment, I live on the 11th floor of my apartment building in New York City. Again, if I get flood water in my apartment, we have such bigger problem.
(18:28):
I'm never going to see a drop of flood water in my apartment. And for every existing flood insurance product on the market right now, the only way they activate is if I have flood water on my 11th floor apartment. But I've lived through Hurricane Sandy in New York and our elevators go down. And part of why I focused on parametric insurance, I sort of built a product that I myself wanted to have access to. I needed a product that would activate, even though I didn't have flood water in my apartment, because I don't know if anyone's ever looked at the cost to stay at a hotel in New York City, but it's incredibly, incredibly expensive. And I have no insurance product right now. I have no flood insurance that I can buy, even though I live directly next to the East River. And absolutely my building has flooded in the past. The elevators go down, you lose electricity and you need to be out of your apartment while this is going on, but there's no flood insurance coverage for me. So that's where Ric also sort of comes in, that my policy would activate, I can take my family to a hotel while all the repairs are being made.
Patti Harman (19:38):
Oh, wow. That's an extraordinarily practical use of that type of coverage. And I was in New York City covering after Sandy went through there, and I can attest to the amount of damage that occurs for something like that. And you're right, I hadn't even thought about what happens when the elevators go down. There's damage on the first couple of floors of the building, and it's really a lot to take into consideration. Wow. Okay. So we're going to take a short break. We'll be back in just a few minutes.
Welcome back. We're chatting with Nikita Devlin, CEO and co-founder of Ric.
So do you think that the adoption of technology is kind of helping to break down some of the silos we've seen in traditional carriers and coverage, and how is it changing their coverage approach with their products?
Nikki Devlin (20:40):
Now, there's two ways to answer this. We can talk about it broadly and then immediately finding ourselves in an AI conversation, and I'm happy to go there, but if I want to just narrow it a little bit more on the parametric space, one of the things that technology is helping us do, and this is really tactical, we are working with employers across the U.S. And to do that, you need a really good tech stack to support integration with these employers and create a frictionless experience for the employer and for the employee who's ultimately buying our product. So technology supports all of that. And then when the policy does activate, how do we get information quickly to an individual who's living through an extreme weather event? The traditional insurance industry really relies heavily on the postal service, and they'll mail you your claims check. That's not how most modern folks live.
(21:45):
So you also need technology to support getting cash to folks fast. And that's one of the other areas of focus for us with our building our tech stack, is how are we making sure that we can get people money on a Cash app? We don't want to rely on the postal service because that's something that becomes incredibly slow after an extreme weather event. And how do we make it as easy as possible for people to get access to that cash? So technology helps support all of that in addition to the advanced models that we're running to be able to calculate the rainfall trigger for each customer. So I think that technology is certainly a way that when you talk about technology in the insurance industry, we really have to be looking at every single bucket that makes your company flow and how best to leverage technology in every step of the way.
(22:41):
And then one of the things that technology is helping us do is when you look at the catastrophe area of the insurance space, it becomes really constrained when you talk about capacity. That's going to be an insurer's biggest cost, and it's going to be its biggest constraint. And when you talk about flood and wildfire, they tend to be extremely geographically concentrated. So how can we use technology to help increase the spread of risk? And that's one of the things that Ric is doing in terms of working with employers. Employers are national companies, and we see the opportunity by making it easier for the employer and for the customer to purchase by leveraging technology to create a more diversified book of business that's appealing to catastrophe insurance carriers who are really concerned about that geographic concentration of selling traditional wildfire or flood policies. And one of the other ways that our technology supports that is that we can monitor aggregation in real time so that we know that when we're working with our insurance carrier partner that we're not overselling in a specific area and pushing their book of business out of bounds. So I would say that technology really has a role to play in every single aspect of the insurance value chain start to finish.
Patti Harman (24:12):
I totally agree. And when you look at how this industry has evolved, especially since the pandemic, I think it's almost really accelerated the adoption and the use and just collaborating with all of the different InsurTechs that are out in the industry. With carriers pulling out of various states, it's leaving policyholders either without coverage or significantly underinsured. I'm thinking of California in particular. What recommendations do you have for agents or brokers who are trying to help their customers find weather-related coverage in these areas?
Nikki Devlin (24:52):
Absolutely. I just want to highlight that, yes, insurance companies are leaving these spaces, but when we look at that, so the people who respond after an extreme weather event, it's insurance companies and it's the federal government, and we're seeing a mirror of that same exit happening at the federal level. So if you are a broker and your customers are coming to you panicked, this is a very real panic, so take their needs seriously because they have access to less insurance coverage and they know they're going to have less federal dollars for recovery. I think that one of the best, so I was a broker for many, many years, and I think one of the best things you can do is start educating your customers about all the types of products that are available to them to help them and not just sometimes. I think when people are purchasing insurance, they think, well, I bought my policy 10 years ago, that's the insurance that I need to have for my lifetime.
(25:55):
But I think for brokers, in particular, start educating your customers that there might be different products that they can leverage for smaller windows of time to help them get through these economic changes that are happening to them. I think that the role of the broker is incredibly valuable and incredibly important to someone who they're not an expert at climate change. So I think that one of the other things that brokers can start looking at is how do they expand the reach of who their customer is and how do we get in contact with more folks? And I feel like we always find ourselves back at that AI intersection, and I think that it's a good opportunity. So brokers are not going to be able to, they're not necessarily the ones creating new insurance products, but they are responsible for creating that distribution pathway. And I think that there's a massive opportunity from their side to look at AI and see how much they can leverage to increase their pool of customers and then turn around and say back to the insurance companies like, look, I've diversified our pool.
(27:07):
I've grown it even larger. You help innovate the new products. We have this huge group that we need to sell to and work in partnership with the insurance companies to help welcome them back into communities that they've left. And Ric in particular, we're built on that ethos. I think that for us, when you look at Texas, Louisiana, Florida, one of the markets where people are rapidly leaving the insurance space around things like flood, parametric insurance really allows these insurance companies to sort of dip their toe and come back in this really controlled, measured way with a 5,000 or a $10,000 payout to an employee that's more palatable for an insurance company that's left the arena as they have more control over, they know that their book of business isn't going to blow up because they're not underwriting a single $50 million building, right? They're dispersing their capacity five to $10,000 at a time. So I see parametric insurance, especially on the micro end as a way for insurance companies who've left the space to sort of come back slowly, maybe gain some additional data and figure out different ways to work in the communities that they've left.
Patti Harman (28:28):
And that's a really important way to approach that for them, and I think much more doable on several different levels. We've touched on this a little bit, but are you encouraged by the changes that you're seeing in the insurance industry around the adoption of new technologies? I agree they're still a little bit slow, but I see the
needle moving a little.
Nikki Devlin (28:54):
No, absolutely. And I grew up in the insurance industry. I've spent almost 15 years in it. And I think that for my lens as an MGA, everything moves really quickly. We want to see change happen rapidly. But I also know from my experience working in the industry that sometimes that change can be, it has to be slow because they have a large insurance company that just has so many things to take into account that they can't move as quickly. But I feel really good about the different tech startups that I'm seeing enter this space. And when you think about extreme weather and climate risk, I think that there's a lot happening in particular in the energy side to shift a little away from. So when we talk about extreme weather, it's not just impacting individual households. There's this entire energy ecosystem that is intrinsically tied to all of this.
(29:52):
And I see what's happening in the energy side of the insurance market as they're sort of pushing the boundaries and taking the next steps. And there's a lot that we can learn there. And that in particular, Ric looks to learn from that sector and then bring those ideas back to the P&C household renter section and improve our product and improve our way of thinking by looking at where they've succeeded, where the energy sector has succeeded or failed in terms of the new products that they rolled out and how they're accessed. So again, with energy MGAs in particular, insurance capacity is a big constraint. And what's happening in that vertical I think is really interesting. This year we've seen the first green reinsurer take shape. They're the first nonprofit green reinsurer, and to start, they're specifically centered around energy products. But if there's a lesson to be learned there is that, what can someone who's covering a wildfire or what can someone who's covering flood learn from that infrastructure that's being built out now? How can we take that information and apply it to what's happening in the P&C space?
Patti Harman (31:17):
Wow. Yes. And it's funny, I was talking with some of the other editors in our news organization and they were saying, well, in banking or real estate, we're seeing them adopt all of this technology. And I said, you guys need to understand the insurance industry underwrites that risk for all of your businesses and all of those industries. So yes, their approach is going to be more measured and they're looking at it from a lot of different angles before they kind of jump into the pool, so to speak. So along these lines, does anything concern you about how rapidly some companies are adopting new technologies or even how quickly things like AI are evolving? I was talking to someone yesterday who I had interviewed last year, and we were both commenting on how much just AI has evolved in the past here.
Nikki Devlin (32:13):
So I will preface this with, I am not an AI expert, but just my own for Ric in particular, we are looking to build it into, I think it would be a misstep for any company to not take a look, a very deep dive at AI and look at how they can integrate it in all aspects of their company. And I would say that if you can do it, I mean Ric, for us as a startup, we're really flexible, but if you're a larger insurance company, figure out a way to do a small pilot and play around with it. And even just using that mindset, where I found myself a few months ago was what do I do on the weekends for fun? Sometimes I'm such a nerd. I asked an AI agent to help me with some of the founding work that I do, that's just really kind of boring.
(33:10):
And I was like, well, in order for me to figure out how best to leverage AI in our company, let me get a little bit familiar with it. And I did. I built, I'm not selling it. This is not a commercial product, but I did it for fun and I built myself an AI co-founder that works alongside me. I've trained it how to think, and it's helping me develop a framework for how I'm going to implement AI within the rest of the organization. But one thing I will say in doing that personal internal pilot within my company is I also saw exactly where all the pitfalls were with AI, some of the problems we see with it and experienced it firsthand. So it's going to help me as I build out this strategy, incorporate that more deeply knowing where some of the pitfalls are. But no, I remain incredibly excited about AI and then some of the predictive weather models that are out there. I think they're going to become increasingly more important as organizations like NOAA, the National Oceanic and Atmospheric Administration, and some of them really receive less funding. I think the time is really right for the insurance industry. A lot of this technology has sort of been tested a little bit more. We're not in the early days of InsureTech. We've sort of matured and evolved, and I think that we're really well primed now to see incredible advancement at a faster pace.
Patti Harman (34:42):
I would agree, and I have a unique position because I cover the entire industry and just watching what other companies are doing and what they're focusing on, I find that very exciting, especially in terms of what's going on in the climate space. Are there any products or coverage options in the climate area that you would like to see developed or that you think could just really transform this space once they are developed type of thing?
Nikki Devlin (35:11):
Yes, absolutely. I think that extreme heat is really well understood at the community level because it causes the most risks at a community level. And I think that I want to see more development of extreme heat products. Ric is working on their extreme heat product, but our product is going to address a certain part of the market, and I think that the insurance industry at large, they should also be thinking about how they're either, if you're a large insurance company and you have an existing base of customers, where does extreme heat come into play for you in terms of like, is this an endorsement to expand your coverage, to give a bit of help in this targeted area because it impacts individuals. Like we said, there's a lot of deaths as a result of this extreme heat, but we're also seeing it impact infrastructure in really new and unique ways where buildings have been built to code and maintained, but they weren't built in a world that was taken into account lengthy, extreme heat days. So if you're a property carrier, are you analyzing your book of business for extreme heat exposure? We know a model for wildfires and for flood, but extreme heat, if you're a property carrier, is going to impact a really wide part of your portfolio, especially the part of the portfolio that you thought was going to run at a little bit more stable numbers. So I think that I would love to see extreme heat become a more common topic point in the industry.
Patti Harman (36:54):
Yes, and after what we've gone through, at least on the East Coast and the Midwest for the last couple of weeks, I can see where that would be a highly practical type of product to develop. We've covered a lot over the last 30 minutes or so. Is there anything that I haven't asked you that you would like our audience to know?
Nikki Devlin (37:14):
I think that what I would just love to say is that we are looking to get to market at the end of 2025 and to look out for us during open enrollment when you're absolutely thinking about insurance that you're going to purchase. And just don't be surprised if you're going to be looking to purchase a climate product.
Patti Harman (37:35):
Thank you so much for joining us today, Nikki, and sharing your insights with our audience. Thank you for listening to the DigIn podcast. I produced this episode with audio production by WenWyst JeanMary. Special thanks to Nikki Devlin of RIC for joining us. Please rate us, review us, and subscribe to our content at www.digin.com/subscribe. From Digital Insurance, I'm Patti Harman, and thank you for listening.