This is the latest of the Insurance Innovation podcast. Join Alan Edgin and Jon Karlin, CEO of Churchill Innovative Holdings and IMO Neo Insurance Solutions as they discuss creative ways to go to market and build a profitable business.
Get ready to hear how a super creative, entrepreneurial and energetic marketer blends traditional parts of the business in new ways to drive innovation. Jon talks about how Churchill and Neo uses focus on automation, consolidation of data, and mixing many aspects of the insurance business together to create and market unique insurance products. Jon stitches together products from 20 carriers with MGA, IMO and downlines, leads, financing, and TPA services as needed.
Insurance Innovation is hosted by e123’s own Alan Edgin. Alan’s experience from carriers to IMOs guides the conversation in a way that anyone interested in marketing and selling more products will appreciate.
Insurance Innovation, brought to you by e123 - the premiere life and health distribution management system.
Transcript:
Alan Edgin:
We're focused at the moment on what happened in open enrollment ‘22, what went well, what needed improvement and how we will think about the next season. We're glad to have a great thought leader with us today. Today's guest is Jon Karlin. Jon, 33 is founder and CEO of Neo and Churchill, as well as a board member of Fuego. In addition to guiding the overall strategy and success of Neo, Karlin is responsible for key executive functions, including maintaining relationships with distribution partners, product design and carrier negotiations. Prior to Neo, Karlin worked in the private equity space, including a stint at seven and seven and seven partners, the Miami-based private investment firm that invests across high growth verticals, with a focus on financial services. At 777, he focused on evaluating and overseeing the due diligence process for multiple opportunities, several of which were in the IMO and insurance agency space. He graduated from the London School of Economics with a BSc in government. Very impressive resume, Jon, thanks for joining us today. So, before we dig into open enrollment, let's get everyone a bit more acquainted with Neo, and what do you do?
Jon Karlin:
Sure, so we own company, the holding company's Churchill Innovative Holdings. We've got a bunch of subsidiaries under us. Our big organization, Insurance Solutions, is insurance marketing organization (IMO), a platform, an agency, and really what we do is we're conduit between insurance carriers and distribution. So insurance sales, distribution and we sit in the middle. We build products, program, manage products and products, we house them on our system, we connect them to sales organizations. We've also created sort of an ecosystem through our holding company. So we also own and operate a leading technology company, and a commission finance company. We also have an outsource customer service and servicing company, and so the goal is to basically be an all-in-one shop for insurance sales agencies to come join our ecosystem. Get marketing leads, technology products, commission advances, financing and customer servicing support. And so we kind of do all the operational servicing in the middle. And also, in parallel to that, work with insurance carriers to try to innovate and build products that move the needle for us in our market and then obviously we work with e123, which is our primary technology platform that we use for both enrollments and commission reconciliation and cost accounting.
Alan:
So who's your end user, your client?
Jon:
So that's really great question. So I think it's bifurcated between two. So our real customers likely are the insurance agency distributor right, typically a telesale agency that has 15 or 20 agents. They sit on our platform. They get products from us. They are now getting the commission advances from us. That leads in marketing from us. We do service the user, which is the consumer. That's what our servicing company does. But obviously those are also clients of the insurance carrier as well. But I would say that our main client is the agency that sort of distributes our products, that we manage, program, manage and.
Alan:
So, Jon, what products do you sell or offer?
Jon:
So we're right now primarily in two markets. We're in the under 65 individual health insurance market with a focus on the non-major medical market. So, the short-term medical market or supplementary market. We sell a lot of short-term medical products, fixed indemnity products, things that basically are for consumers that are either priced out of or need first dollar coverage and are not, looking to have high deductible health plans. We're also in the Medicare market. So we operate in the over 65 market and we do kind of similar things in the media market and we we sell both. It's called Medicare Advantage and Med Supplement, which are similar but different products.
Alan:
Are you? Do you have a preference on the under and 65 to over 65, or have they both been proving successful for you?
Jon:
So it's really interesting. So I think the O65 market remains an underpenetrated high growth area. There's some volatility in that market just because it's you know there's things that are sort of out of the control of the distributor of the carrier. So, for example, there could be a COVID special election period which drives consumers into the marketplace for insurance. There could be, you know, Medicare changes, that people lose coverage. So the under 65 market is a sort of individual markets, ever-changing market. But it still remains woefully underpenetrated. There's not a lot of really good strategic distributors that have penetrated the market. It's still really hard for a consumer to consume and get insurance products they need or want, and so I still love that market, but that the Medicare market remains also woefully underpenetrated. I think the best way to think about the insurance space generally is that there's a lot of room for disruption and so actually think both markets are fantastic and I think the Medicare market has a lot of opportunity just by the sheer volume of people that are entering and turning 65. You know we're watching the digitalization of that space in real-time.
Alan:
So all right, let's talk about open enrollment 22. As we know, for many people in our business open enrollment is a very important piece for our yearly success. It's essentially our superb. We prep for it all through the year, deal with last minute surprises and then it's got and it's interesting. Both the under 65 and the over 65 have open enrollment period in the fourth quarter. So for 22, open enrollment, was it a typical year for you or did you have some unusual challenge?
Jon:
So I think that it’s actually sort of yes to both! Open enrollment has a few sort of predictive realities. The biggest predictive reality is that the high sales volumes really happened the last day or two of open enrollment. Right. These people wait to the last man to acquire their coverage. I think the challenge of the open enrollment is that there are things that are sort of out of the control of the distributor, the carrier or the technology platform. So for example, last year, and this year as well, they extended open enrollment past December 15 to January 15th, and so I think this was actually a relatively predictive open enrollment. It looked pretty similar to last year. It was a very consistent sale volume, open enrollment with high volume sales days, you know, the first of the month, the 14 and 15th of January. But look, I think that it's a really good opportunity to acquire customers at you know, typically lower-cost because the volume is just much higher for people that are looking to buy health insurance and are in the market for health insurance. We didn't know for sure if they are going to extend the opening run through January, but I think it it's become relatively predictive.
Alan:
I know in the last few open enrollment term that's well used and in our industry is the cost per acquisition, and it seems like previous open enrollment. The cost per acquisition or CPA has gone up just because the cost of acquiring leads and the cost of doing business keeps going up. But what did you see in the last open enrollment?
Jon:
So, we actually own a lead company, [one of the] largest lead companies is ours in this space. And so you know, our company is doing self-generation, meaning we don't just aggregate third party marketing leads. We're really the ones that have landing pages on Google and Bing and we're doing paid search to acquire customers that are really high intent consumers looking for health insurance. It's very expensive, it's expensive from origination. So, what I mean by that is it's actually incredibly expensive for the lead company, us, to actually bid and acquire customer digitally, and so it's even more expensive as it filters through to the agency. And so we are dealing with the reality of a rising cost to digitally acquire a customer. And I don't think that's really just the insurance space. I think that is the digital customer acquisition space. Broadly, I think, in any vertical, whether it's commerce, whether it's anything, I think it's just much more expensive to acquire consumers digital cause everyone's doing it. The market's very saturated. It's a bidding system and the Google and the Facebook and the Bings are making a lot more money in advertising revenue. So we are challenged, I think, with high customer acquisition costs in the digital distribution market place and it's something that's not news to a lot of the large carriers. You know United Healthcare has this FMO advisory committee and that was really the topic of discussion during that committee. Was: How do we handle the reality of distribution partners just dealing with a cost per sale and customer acquisition cost that's 300-400% higher than it was five years ago? And this Open Enrollment was not different. The acquisition cost was very high. The consumers are good, I think you know we're dealing with a better product ultimately, but it's becoming challenging. For sure. It's something we have to continue to think about, have to think about ways to generate higher lifetime values with our customers. You know it's just we have to build better mouse traps to deal with the acquisition costs reality, because I don't see it going down any time soon.
Alan:
Yeah, I think it's you know, it's a simple supply and demand theory, but I think you're spot-on with trying to extend the lifetime value as much as you can and so that it offsets the rising costs. So, John, what did you do to insure preparedness across the organization for the open enrollment?
Jon:
Well, first and foremost, we put a kind of road map together, both from an operational perspective, to make sure that we've tested any and all-new systems, new products. We have to make sure that we've onboard it and everybody is sort of ready to go and open enrollment starts November first, and so we'd like to get everything done in October. But our big challenge is getting all the products launched in time, and so that was what our focus was on and was making sure that we built them, that we had commissions correct, that we tested that. We basically did all the sort of check. It's almost like a pilot in a cockpit right. You got to run through all your checks for takeoff and so making sure that all gets done in a timely fashion before open enrollment starts and then giving yourself enough time to make sure that the totality of the distribution is comfortable and ready for the new products we're launching for open enrollment, and so really it was a very challenging process and a really tough reality. But it's something that we focus on and we leverage data and analytics from e123 to understand what we need to build from a programming product side, how we need to be ready for certain days during open enrollment for higher volumes. We share that data with, obviously, our sales organizations, and so it's an iterative process, but you know it's not an easy thing to be prepared for because there's a lot of moving parts and it's very, very, very challenging.
Alan:
What would be the biggest lesson you learned?
Jon:
I think the biggest lesson is that earlier is better. I think that even you have a conversation with an insurance carrier in August, or you have it in, you know, June, July. You need to prepare for open enrollment, even really a year in advance, to make sure that you have enough time to sort of go through that pilot's check-list in the cockpit and think you know leveraging and understanding. And I think this is the most important thing, that really understanding what will work based on predictive data, you can't launch and do everything all at once, and so I think that for open enrollment, leveraging technology to finish one or two things that you know will be successful is the most important thing.
Alan:
I would think that understanding your data and better each year would make your model a little more efficient. If you sowed amount five years ago and your CPA was there and your lifetime value was there, I would imagine, last season was a little more efficient just because you've got your understanding your data more and you're using your data more.
Jon:
100%. And even at like a very, very broad high level. Right when we talk about rising customer apposition costs, if we know that the customer lifetime value is just using easy maths: 12 months, you know we might be able to justify writing at a higher cost per sale because we know that the actual product or the customer rather, is worth a certain amount of money. And so this type of data and reporting is sort of essential to run the business because we deal with a lot of unknowns. We're in a subscription-based model. Right, I think, the biggest difference between this type of business and what I would describe as cost of sale. Businesses like you know, restaurants and stores where he's you know there is a customer lifetime value. That is predictive, but you know you're really focused on the one time swipe. We're a subscription business and so we need to know everything about our customers and all the data at all times to make informed decisions. Because you know from a distribution perspective you're typically losing money on the front to make money in the back, and so without that data, that requisite data, how do you know what to pay to acquire that customer and how much you could lose at the front?
Alan:
So if you could wave a magic wand and get a new capability for your organization, what would it be?
Jon:
So this is kind of a generic kind of statement. But I think when you think about the insurance technology space and you think about medicine, everything over and under 65, we operate in a world of modular technology, disparate players, and so we want to integrate. We want to collapse the value chain and vertically integrate the chain. And so if I had a magic wand, I would have an integration magic wand where you know we were able to integrate with everybody, pull data from everywhere you know, pull everything into sort of one consumable reality, and we're working towards that goal, and that's something that we've made a lot of a lot of strides on. But to me that's everything, right? If we were able to integrate with Sunfire and Health Sherpa, for connecting with the claim systems on the claims, paying side, to understand loss ratios, to connect with customer service, the lead companies, the sales organizations, the enrollment platform, the cost accounting, the commissions, everything sort of integrated, I think, would create even better access to data and reporting and a better understanding of our market, our customer, our products, how they perform. And we're moving towards that goal. But it's not easy. That's why it's a magic wand right? Because that [data] passing capability, believe it or not, in our market doesn't fully exist. Where I think e123 and Churchill, Neo, we're moving towards that reality. But we’re not fully end to end yet and we're end to end from parts of the business. But when you think about the totality of players that exist in the value chain, we want to integrate with everyone, because that's the only way when and again not to be redundant. When we think about how do we saw for high customer acquisition costs, how do we solve, for you know, smarter technology decisions? It all starts with gathering and having all the data at our fingertips and understanding everything.
Alan:
At e123, we think a lot about innovation and love to learn how others in the insurance industry experiment with new products, new distribution and business models. Now you kind of touched on it earlier, but what do you do to innovate that?
Jon:
So the investment thesis when we started was: manual process creates complexity, creates risk, creates errors, creates redundancy. So, want to leverage automation and as the least amount of finger touching as possible from an operational perspective. We want the system to really do almost all the administration and operations, and so we were really one of the first to look at the commission, the cost, accounting and the enrolment sort of operationally and from a systems perspective. Most of our competitors were doing manual, they were manually doing reconciliations, they were manually dealing with files, they were deleting rows in Excel and you it doesn't work, it's very hard to scale, and so we kind of innovated at first, operationally, we built a lot of automation with e123, automate a lot of the process around administering these health products, paying commissions, doing the reconciliations around commissions and doing the cost accounting right. So that, I think, was one of our larger innovations.
And as we've sort of evolved over time, we're innovating on the sales and distribution side. So we're partnered and own a lead company. We're focused on innovating and providing high quality leads and marketing to our distribution channels. We're thinking about the technology around the lead company, where we, you know, can understand agent close rates, what's driving close rates. We can pick and choose ways to route both calls and leads to the right distributors at the right time. We also think about product innovation.
You know this market is so right for disruption and we're so far away from a product perspective, and so we always are thinking about how do we innovate on the product side, not even just the technology side, or how do we integrate technology with products to provide a better offering to the consumer? So, we're working on that right now. That's sort of the next iteration of our company is leveraging systems and technology to provide a better offering to consumers. You know, through disruptive products, using disruptive technology. When I think about this marketplace, you know to kind of go back to the question you asked earlier, when you think about this market, you know, look at medical, to get a book of business report from Medicare in the media business it's a CSV file, it's not in a system. You've got to go to five different carrier portals, pull five different CSV files and upload it maybe into a system if you have the sophistication. It's incredibly hard to even see your book of business reporting. So, understanding data from you know just the carrier side is incredibly challenging. So, we're innovating here to do a lot of the stuff that I think the insurance carriers are just ill-equipped or having done, or they're too big or too antiquated to do. And we want to do it. And I might be redundant here around. But end-to-end right from the leap from how we originate a customer on Google or Bing, all the way through the process of providing consumer product, all the way through providing an agency and agent, their book of business reporting and data and commissions and commission reporting all the way through to the carrier to make sure the carrier has the requisite data and systems and understanding. So we're trying to innovate the entire chain. Our system is pretty much fully automated. There are a few manual parts.
Alan:
You know I've had a very career all in the insurance industry. I guess now 40 years, and I've worked for large insurance companies and have had my own companies. But you know there is an arduous task with working with insurance companies. It could literally take 18 months onboard a product and I think in the last few years that that timeframe has been shortened significantly. And you know, I think, with some of these carriers and with bright marketers like you, we can onboard a product a lot sooner. You know, and I think that's comes a long way and it helps you be nimble and flexible and responsive to what the market is. And if it's adding a new ancillary product to shore up your products, I think that's improved substantially over the last few years. So, besides the carrier reference we just made, what other barriers do you have to roll out products?
Jon:
When you think about, we build a lot of the products, we're actually an MGA managing general underwriter. We program, administer, and manage. We're also a third-party administrator on the billing and collection side - actually forgot to mention that as part of our ecosystem, one of our companies. But one of the challenges is also just the reality of having multiple entities in the kind of to launch a product right. So you know we'll go to an actuary. We’ll price and build a really innovative program. We then have to bring it to an insurance carrier who signs off. We then to bring it to a claims paying TPA who has to price it and sign off. Then we've got to go file the product. That takes forever right and then you got to make sure that you can connect the claims and the carrier to the enrollment platform and you got to make sure that it all sort of flows together. So, it's just a lot of disparate players and entities that are part of the process and I think the biggest challenge is there's no universality to it, right. Some people use API’s, some people don't. Some people like flat files, some people like this, some people like that, and so it's hard to build systems and technology that are not uniform. So when we think about the future and we think about what we're building, it has to be flexible to deal with kind of a, just, a very, very differing sort of challenging environment. And you could have a player or a carrier that's technologically sophisticated and likes innovation and you can have one that’s MS-DOS. Literally you know, manual process and no systems, no tech. And we have to deal with all the above.
Alan:
So we talked earlier about persistency and ways to improve upon that, and one of the things I learned early on in my career in the insurance business: if you were able to have a client that has two or more insurance products, the likelihood for them to stay on the books was much greater than if they had a single product. So I think you guys have embraced that as well, but talk a little bit about the bundling of products and how you guys do it. What your thought process is, how you choose what products go with which products. How's that help your model?
Jon:
I have two comments. I'm going to make 2 sort of sweeping claims. So, Stephen Tucker was an innovator. His vision that I think made a lot of sense was to take the digital individual health insurance distribution model and turn it into a full-fledged insurance agency, like you'd walk into off the street and get your home, your auto, your health. You know all the above kind of professional commercial and that's the way to generate as much yield as possible and deal with. You know, rising customer acquisition costs is to offer multiple verticals in one and you could take one customer and you can have infinite lifetime value because you're not just selling them one product and that's a very common reality in the broker space and the face-to-face field marketing space. But it's not very common in the high-volume digital customer acquisition space. Technology and systems to sort of get to that goal is something that we think about and something that's essential to the growth and future of our business because we're dealing with higher customer acquisition costs now.
The second sort of claim is: how do we bundle health insurance products? So we think about ways in which we can create more comprehensive health coverage. So, let's say, someone's buying a short-term medical product with a high deductible and we give them a secondary product that has now first dollar fixed in-hospital indemnity plan. So, if there's a high deductible, they can immediately get first dollar coverage and then they can also include an accident medical expense plant planned product for them. So, you include that into the mix and then you include unlimited consult fee, telemedicine and you can sort of create a bespoke program for a consumer based exactly on what they need and you can leverage sort of bundling all of those products in one and when we think about our value in the value chain, one of the things that really makes us unique is what I would describe as the shopping cart experience for a customer.
Instead of a customer going to one insurance carrier, that and being relegated to one insurance product or one insurance carriers’ product suite. We, you know we've got, you know, almost 20 insurance carriers housed on our platform, and we can pick and choose different products to put in the shopping cart for the customer. So we can sell them United Healthcare short term medical. We can sell them in Allstate health cancer stroke program/critical illness program and we could sell them a guaranteed trust-like accident/medical expense program, and we can do in one bill and one shopping part, one customer service, organization and one sort of servicing apparatus. And so you know that's an integral part of what we do in the individual health insurance space, is take different products and create bespoke offerings that fit the needs of the customer and they're, and I use the quotation here, archaic. You know I'm going to United's website. They've got three offerings and they've got a dental and they've got a fixed indemnity in dental and short-term med, and we could pick and choose from the best of everything to create the best possible know program for a customer in this quote un-quote shopping cart experience and when we think about it we acquire, you know, millions of customers. Truly, we've got a database of millions, we've got hundreds of thousands of customers and when we think about these customers, why are we only selling them one thing and why are we only in one market?
So it's an iterative, long process to get to that reality. But we want a leverage technology so that you know, consumers can get everything and anything they want with, you know, relative ease and it benefits us because we're able to generate yields in you know, in places that we normally wouldn't be able to and we can deal with a rising customer acquisition cost.
Alan:
So have you tried innovating with your distribution, with any kind of unique commission modelling or advances?
Jon:
Of course! We own a finance company and yeah, we've done everything from traditional factoring arrangements, to lifetime value deals. We think about it very, very holistically. We've tried a bunch of different models. There's no right or wrong in any of them. There's a lot of really good opportunity in the financing space. These are really predictive receivables and you know they're great and so we have a lot of flexibility to do a lot of stuff.
Alan:
And you can do that based on the data that you're getting.
Jon:
The data is that when we go and raise a bunch of capital to do financing, we have to have the reporting data to do it, and one of the ways in kind of the secret as to how we're able to deploy so much capital is our access to data and our ability to sort of present it and understand it. But it's also the system and the controls in place that we have in the automation and the fact that we're able to manage. You know, you know tens of thousands of insurance policies and reconcile them with relative ease. You know, if we were doing this with my hand, you know it'd be really tough. Candidly, it would be a really tough thing to do and we don't have to do that.
Alan:
So, touching on data, the data that you have now, are you able to evaluate, say, some performance metrics for certain downlines you have or certain agencies? Yeah, of course, and how are you? How are you taking that and trying to make it a better mouse trap?
Jon:
So, for starters, we know we can compare the performance of agencies against each other on our platform. If we see some outliers, we can retrain agencies to make sure their sale process is better or their customer acquisition process is better. So we're it's everything from sales reporting and persistency data. But you know we're we're you know, refund percentage, canceled percentage and then on the other side. You know. Does it agency do really well selling certain products or say higher attachment rate or higher premiums? What's driving these higher premiums? And so, yeah, we're able to provide the reporting to the ecosystem we here and it is able to allow them to know how to run their business better right. Maybe someone has an agent that's underperforming, maybe they have an agent that's over performing, and we're able to provide all that data to allow them to operate their business in the most efficient and high-functioning way possible.
Alan:
Yeah, and I think you have x amount of down line agencies you're working with and some of them are under-performing and you know, just getting them up to where you want them to be is going to be a big feather in your cap, both for that organization that you're helping and, quite frankly, for you as well.
Jon:
Yeah!
Alan:
All right, thanks for filling us in on open enrollment, and your approach to innovation. So what advice would you give a new college grad who's looking to enter the insurance industry?
Jon:
Yeah, I think it's the world's best kept secret. Frankly, I think it's for starters. I think it's a great industry that's going to be here for a long time and there's what. What I would tell perspective person is that this industry has so many verticals within it and I'm not just talking about versus health versus me. I'm talking about: do you attack insurance from the sales side, from the technology side, from the claim side, from the bode, from the patient advocacy side? There's so many different avenues that you can come and enter this market, and so I would tell a potential perspective: college student, figure out what you really like. You know in terms of whether it be the technology side or you know into sales, and then you can attack this space in so many different ways. And if you're really into sales or you really into technology, I think that you can find your path. And the one comment I would make is: you know it's an antiquated but changing industry and I think there's so much room for disruption and so much room for innovation that you think about how to make this entire process easier and smarter, and you're always going to do well because there's so much room to do things smarter and easier and better, and that, I think, is kind of the M.O. or mantra that we have here.
And I think that a potential person entering the insurance industry can just look at it holistically and find ways to do it [in a] smarter, better, more innovative fashion. And, as I said, it doesn't just have to be as an insurance agent selling a product. It could be thinking about what systems to build or what systems to work for. It could be, you know, creating a product or service that doesn't exist or is needed to exist. There's so much opportunity here and there's so much need for different things that you know there's not just one path and I think that's what's so exciting about being in this market. You know, Neo and Churchill, we're not just an insurance marketing organization. We're a finance company we’re a customer service outsourcer. We're a leading technology company, we're a program manager, you know - product manufacturer. We do so many different things and we're going to continue to do more and it's never stale or boring here. We're not just solely a marketer distributor and that's the way you got to think about it right. You don't have to just do one thing and you can innovate and do things better.
Alan:
I absolutely agree. I think there's many facets that they can get into, but I think the insurance industry, historically is, is a little behind the times from a technology standpoint, but I think they're gaining ground and I think you know people like you, young grades that come out of school. They can help perpetuate the evolution of technology in the insurance industry. I think it's I think you're spot-on John. I want to thank you so much for spending a few minutes with us and sharing your thoughts. It appears to me that, no, you guys are rocking it and you've figured out a really good mouse trap and I look forward to watching you and your organization to continue to grow and be more successful. So, thank you very much and I'll see you down the road.
Jon:
Thanks so much, Alan