[Raised $60 million] Ep.105 - The First 100 with Antton Pena, the Co-founder Flock Insurance | B2B2C model | Intermediation

Antton Pena, the co-founder and Chief Strategy Officer of Flock Insurance, a UK Insurtech on a mission to make the world quantifiably safer with connected fleet insurance that enables and incentivizes safer driving. Flock started providing drone insurance, then commercial vehicle insurance. Essentially the company uses the telematics of cars so that the vehicle only triggers insurance cover when it’s moving, not when it’s sitting on the lot, incapable of causing any accidents. Flock has raised to date $60 million from notable investors such as Anthemis, Social Capital, and Octopus Ventures.

Today, Flock has more than 600 commercial fleet clients, including Jaguar Land Rover, Europe’s electric car subscription company Onto and a third of the U.K.’s independent Amazon fleets.

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Transcript

Let's do it. Broadcasting from around the world. You're listening to the first 100. A podcast on how founders acquired their first 100 paying customers. Here's your host, Hadi Rodwan. Good to have you on the show Anton, how are you doing? Very good, thanks for having me Hadi Amazing, I'm always excited when I talk to guests who are insurance fellows because we can geek out on the good things and the bad things about the industry but before we dive into our podcast Anton Penna is the co-founder and the chief strategy officer of Flock Insurance which is a UK insurtech on a mission to make the world quantifiably safer with the connected fleet insurance that enables and incentivizes safer driving. This is what I like to hear because it's all about giving fair pricing to the individual. We've discussed this before we started recording that you started as a drone insurance then you shifted to commercial vehicle insurance. But you use telematics in the cars to trigger insurance only when you're moving versus when it's sitting in the parking lot and essentially you don't do any accidents there. And you've raised to do this around 60 million from notable investors like Antimus, Social Capital and Octopus Venture. Anton, a lot to digest, but take us back to your founding at how moment. How did you come up with the idea? It was totally different to the world we're living now. The whole genesis, the initial concept comes from a thesis that I was writing back at uni. This was back in 2014, the beginnings of 2014 and the end of 2020. 13 and I knew that drones were starting to become a thing people were starting to use them DJI, which is the biggest manufacturer of drones launched the first commercially available drone at the time And the cherry on top of the cake ended up being that amazon said they were going to start using drones to deliver parcels So it was going to be a big change for us. It was a huge industry that was emerging but there was a conversation happening in the geeky industry around safety and there was a little bit of concern around what was going to happen to us humans down on the roads and on in the streets when these things that were metallic and were big and heavy started falling off these guys. So that was the original opportunity. So I looked at it as a bit of a technocrat. I really believed in the opportunity that the drone space generated. but I accepted that it had a bunch of risks and a bunch of challenges. So I ended up building a solution, an initial prototype, to work on those risks. And the solution I was proposing was to use data, readily available data about population density movements, about weather, about where buildings and trees were, and use that to help drones understand how to reduce or mitigate that risk. So... That's the very, very beginning. That's the first prototype. When we built that technology, I initially thought that there were going to be ton of people wanting to get access to that technology and started talking to a bunch of drone operators, regulators, even in the UK. The CIA got really interested in the topic. But I very quickly noticed that those that knew how to use the tool, how to use that technology that was quantifying risk mitigating accidents were insurance companies. So we ended up talking to a few insurance companies and Allianz, which is and was the biggest aviation insurance company at the time, reached out and said, look, we're trying to launch an insurance product for the drone industry. We don't know how to quantify risk. And of course, we've built a business around quantifying risk. So why don't we partner? And that's how we ended up building the... the Europe's first drone insurance app, which of course was the blending of a well-known industry and brands, which was represented by Allianz and a young startup that had an ambition not just to reinvent insurance, but also to build a beautiful experience, right? So that app, it just creates a new way of buying insurance. And then from drones, we slowly developed and evolved. to where we are nowadays and I'm sure we'll talk a lot about that. Amazing and you mentioned that you moved to commercial vehicle insurance. You've implemented telematics. Telematics is not something new but we've seen a lot of insurance companies, they don't like the model pay as you drive which is I believe is a fairer way to quantify risk and make sure that the good risks don't always subsidize the bad risks and essentially that's why prices are either high. or they are stagnant. In your case, why did you adopt this and how did you make it successful? I think for us, the trick on what we do is to align our incentive with the customer's incentive. As an insurance company, and we are an NGA in the UK, so for those that aren't insurance geeks, that stands for Managing General Legend, which is something similar to an insurance company, a carrier like Allianz, like AXA. but that can also act as a broker directly. So when you are an insurance company or an MGA, you make money by reducing claims, improve your margin by having less claims. Customers usually want the opposite. They wanna be able to pay as little as they can, and they wanna be able to extract as much as they can from their insurance company when something goes wrong. What we've done is accept that Initially there was a bit of an incentive clash and changed it and said, look, if you miss the customer, manages to reduce your risk or you end up having less accidents or you end up driving less than your thought, we will return a bunch of premium back to you. And what that does is it puts the customer in a position where they know they're going to be incentivized if they end up having less claims and less costs for us. And we know that If that customer ends up costing us less, we are in a good position to return a bunch of premium back to them. So we end up building a bit of a win-win between customer and ourselves, which ends up leading to better retention rates and of course, happier customers. Take us back to your early days. So at the beginning, you were selling drone insurance direct to the customer. Later, you started doing commercial vehicle insurance. through I think third parties like brokers and agents, which is the B2B model. Both of them are different models that require different execution strategies. So take us first to the drone insurance. How did you acquire your first early customers? And then later to the commercial vehicle side. So this is a long but very natural story, right? We built a product for people like us, right? Like we had a couple of drones, we knew how to fly them. We knew what the experience was. So... The first product we built was for the B2C space, individuals that were flying drones. We very quickly realized that commercial drone operators who had a legal requirement to ensure the flights were the ones that were actually using our solution. So that was a two month in learning. Oh, we've got a solution that is built for Anton and Hadi. but we now need to build a solution for whatever, limited. We adapted the journey, we adapted the way we were covering customers to start covering commercial operators. So that was the first move. Once we were in that space, we realized that those customers started becoming bigger and bigger. So the first customers we were ensuring were a small one-man band or two people companies. but we started seeing how there were a bunch of large consultancies or larger drone companies that wanted our insurance products. They started reaching out, but they also were working with a broker. So we realised maybe we need to accept that this insurance market is relatively intermediated, which is a technical word we love using, and maybe we need to accept that we have to work with them. I think that realization that acceptance is what's really taken us to where we are nowadays because many, many young startups come into a very well established market, which is the insurance market. And they think they can just rebuild it all in a big monolith, right? In a big new monolith and do it all themselves and distribute and build products and own the digital layer and run claims, etc. The truth is that all of that A, is very complicated, and B, it's got many, many players. So, us accepting that we had to work with brokers is what enabled us to grow as fast as we did in the drone space, but eventually also get into a huge, well-established market like commercial mode of leaves is for us. Thank you for sharing these insights. What do you think are the building blocks of success to attract these? agents and brokers to sell your product? What are things that you need to nail so that they come and say, okay, flock, I want to work with them and not go and work with another MGA. Let's say. Great question. Well, first you need to understand that brokers are in the business of intermediating. They like positioning themselves in between a bunch of insurance company options and the customer. So their value proposition to the customer is to say, don't worry, Mr. Customer. You don't have to be exploring all of these insurance solutions to the detail. I can make a decision for you or I can make a recommendation for you and you'll end up buying, right? So first you need to understand that there's no broker that will want to get married with one single insurance company. The broker's job is to have as many insurance companies as they can to get them to compete against each other. and to deliver value to a customer because insurance company A might be very good for Anton, insurance company B might be better for Hadi and that's the job of the broker. So first you need to accept that. If you try to fight that, you will never get to work with brokers. And second, you need to understand that sometimes the incentives of the broker are slightly different to the incentives of the customer. We can build a great product for end customers. that brokers really struggle to buy or distribute. So you've got, and that's a really, really hard dilemma for any product-minded person, because suddenly you're building one single product for two very different and sometimes misaligned customers. So you need to understand what the broker wants to see, and you need to understand what the customer wants to see. And by balancing those two out, you end up creating some magic, because you end up building a product that customers love. and you end up building a product that brokers like distributing and like talking about. And that brings us back to I think you mentioned usage based products before. We don't deliver a traditional usage based insurance product, mileage based insurance product. Why? Because brokers are used to selling an insurance product and keeping part of that transaction as the commission they keep for the sale. If you charge a customer based on every single mile they drive and you're charging them 17p a minute, the broker doesn't know how much money they're going to make. The broker doesn't know if they're going to be able to monetize that sale they did or not. So that is one of those dilemmas where you might think that customers really, really want something, brokers want something else, but you end up compromising and saying, customers want to be remunerated for being safe. brokers want to be able to sell one insurance policy and forget about it, how do we find a nice in-between? And the solution is the product we've got nowadays where you sell one insurance product and then at the end of the year, we return a bunch of premium back to the customer if they become safer. Amazing. Thank you for sharing this insight on how to stand out in front of a difficult audience, which is the broker or the agent in that case. Can you share any specific proud moments you had or you still have a wild building flock and can you share maybe one challenging moment that was very stressful for you guys? I can probably share more challenging ones than proud ones, but there's a very beautiful moment at the very, very beginning of the flock. We didn't realize that we were about to launch. This is pre-launching the product, right? That we were about to launch a product into a heavily, heavily regulated market. We knew that we had to work with the FCA because we were selling a financial product, but we realized that we were also having to deal with the CAA, which is a civil aviation agency. When you insure planes, you need to file your insurance policy with the regulator and you need to get the regulator to give you a thumbs up to approve your insurance policy. when you're selling an hour long insurance policies that becomes really, really hard because the regulator wants 30 days to approve your insurance policy. So if you're flying tomorrow afternoon and you've got an hour long policy, it's really hard to live within the process the regulator has built. So we ended up engaging with the regulator. This was days before we were ready to launch our first drone insurance app. And we started back and forth with them. to see how we could get our insurance product approved and how we could almost change the process of the regulator to make sure that we had a market to sell a product into. After 14 different versions of something we ended up calling a cover note and having to hire a specialist lawyer, which was really painful on a company that had raised a couple of hundred thousands of pounds and meeting the CIA a couple of times. we managed to get them to change their process slightly and approve our document. So that was a big hooray moment, but it is even more beautiful when your competitors come in, copy your document, and they start using the process you've built with a regulator to then start selling products, right? So of course at the time it felt like, oh damn, they copied us, but I think there's nothing nicer than saying your competitors really copy you. And challenging was, I think insurance is challenging on its own. The one thing insurance has that I think is quite specific to financial markets is the constant contradiction. You want to grow quickly and you want to bring loads of customers in, but at the same time you need to be careful with your loss ratios, which is the number that measures the amount of claims you pay divided by the amount of premium you bring. So if you grow too quickly, your loss ratio worsens, and you start losing money, or you start losing your partner's money, or you launch a new product that suddenly has a ton of claims, and the product is fantastic for customers, but the claims are killing you in the background. So I think the constant challenge in the insurance space that I have to say I did not expect having to deal with, is that constant contradiction of KPIs. you live within. Amazing. I mean, we face the same issue when it comes to underwriting disability insurance because you're working with the humans and humans are unpredictable. So even if you underwrite perfectly, you cannot control the loss ratio, which is the vanity metric that we care about actually. That's what's most important. I think most of what happened in the past few years is so many insurtex who their valuation plummeted. they were focusing too much on the top line and not on the loss ratio, which is the proxy for your profitability. And we've seen it affect everyone else in the market. Talking about funding, you know, they say proximity is king. And previously every startup wanted to be in Silicon Valley because this is where the top VCs were staying. But then when COVID hit, the virtual proximity became the new norm. And that made it extremely... accessible to find a VC but not scarce enough because now the VC has their inbox full of noise and they started to reject a lot of good maybe pitches. You've raised in 2021 a large round from social capital led by Shamath and he's best known for being the SPAC investor. How did it happen? How did you reach out to them? How did you convince them to put money in a UK company? So look, Shamath invests. all over and he's got a relatively varied thesis, right? I don't think that's got a lot to say about Locke. I think that's got a lot to say about Chamath's foresight and open mindedness. As many, many things happen in the VC market, that was an introduction by someone that knew Chamath and knew us and really respected us. They had invested on us already. So it was just the value of the network you end up building. as an initial intro, obviously. And so Chamath's team ended up trusting that intro and we ended up showing them what we had. Chamath has always had big ambitions and has funded, let's say, dreams that he's believed on. I think that journey towards societal improvements and making the world safer, smarter, really, really triggered him. and got his attention. That doesn't mean that you don't have to prove a strong business case, right? Anyone that has raised money knows that it can be a draining experience and you have to be constantly convincing. So it wasn't easy and we had to really, really fight for a final timeship. We were quite lucky because we ended up with two timeships we really, really liked. One from a well-known UK VC and one from Chamath. We ended up going with the Jamaat one. The competition was hard, but we thought that would give us a little bit of longevity and we liked the idea of working with him and his team. So yeah, tough choice, but they weren't made. Amazing. Thank you for sharing this lovely story. What's the most important principle that you live by that has made you a successful entrepreneur? Oh, that's a great question. I think never give up. I don't tell myself that a lot. I really think I've got it in me a little bit and it doesn't take me much to stand up again when you fall and try again and keep going. I can work for a long hours and I'm relatively resilient to stress and challenges. So, um, if I had to choose one, I think never, never give up. I think nice ring to it. How did you train your, your mental model to actually never give up? Because this is. probably the result of a lot of things that you've done in the past, the resilience. How were you able to come up and build it? Because a lot of people would believe in this principle, but, you know, people, some people suffer from imposter syndrome. Some people find that there is no other route and they give up. So how do you stay that focused to not ever give up? I don't know. I can't. They say something that, that is a little bit in it on all of this and I probably had a little bit of that from the very beginning. But then you also learn to live in this environment. I know that I've got relatively to lose in this space, which probably makes me a little bit more risk-averse, put everything in context and that means that when you get slapped or you fail at something... you think that there's going to be an opportunity ahead of you and you keep going. So I don't know how I trained it, but I'm convinced that it's gotten stronger over time. Who's your hero? Very hard one. I am not someone that follows heroes, but let me choose someone I really admire at the moment. I'm going to choose someone I just read a book about, which is Bob Iger, the CEO of Disney. the second time CEO of Disney because he left and he just came back in. He's someone that is very stable, very steady, that develops a vision and is able and he's demonstrated to be able to dedicate a lifetime to that vision. It's more similar to a craftsman, a Japanese craftsman that dedicates their life to a craft than the... whippy snap her, move fast, break everything, do the next thing. CEO of Silicon Valley has told us or has taught us to make heroes of. So there's something special in the likes of Bob Iger that I quite admire as I choose him for now. One last question, Anton. What's next for your company? We're in a very lucky position with Flock. We're in a market we believe to be... 9 billion GWP, that's the metric we measure, so gross, written premiums, 9 billion pounds in the UK only. Worldwide, we believe that our commercial multiple space is 125 billion. So there are very few markets that are that large. And for us, that huge pound number is also an opportunity to continue delivering on our mission of making the world quantifiably safer. I think we'll continue perfecting the craft of what we're doing. There's a lot we need to master to make sure that those accidents we currently pay don't happen. And don't happen not just because we don't want to pay for them. Don't happen because we will end up building a better, safer world. We're in front of a lot of change in the motor space. We're seeing our roads flooded by electric vehicles. Some of those electric vehicles now have autonomy features. In 10 years, we'll be driving our cars in a completely different way to how we're driving them now. And if someone doesn't really take safety seriously in that huge transition journey we've embarked, I think we're going to have more dangerous roads. That's the mission we're in. And it happens that we're in a huge, huge market. I think we'll just continue improving what we can do and continuing the flop journey as we know it nowadays. And of course, growth will be strong as long as we stick to our fundamentals. And as you were saying, measure those large ratios. Anton, thank you for stopping by. This was an amazing episode. Two more questions. How can people reach you and are you hiring? Yes, we're always hiring. So definitely reach out. The best way of reaching out is probably on LinkedIn. My LinkedIn handle is Anton P. I annoyingly write my name with two T's, so that is A-N-double T-O-N-P. If you type Anton with a double T and just that, I also show up on LinkedIn, so that's probably enough. Yeah, just reach out like Hadi did on LinkedIn and I'll be happy to share more details and we can get it going. Thank you, Anton. We wish you the best of luck on your journey and good luck with Flock. Thank you, Hadi. And good job with the practice. Thank you. Thank you so much for listening to the first 100. We hope it inspired you in your journey. If you're enjoying the podcast, please subscribe to our podcast on Apple iTunes, Stitcher, Google Play or Spotify and share it with a friend starting their entrepreneurship journey. Leave us a five star review. Your support will help spread our podcast to more viewers.