Podcast with Andrew Robinson, Executive in Residence of Oak HC/FT

Kylie Francis (Wharton MBA’18) chats with Andrew Robinson, Executive in Residence at Oak HC/FT, a premier venture growth equity firm investing in healthcare and financial services technology, where his focus is on Insurtech. In this insightful podcast, Andrew talks about his foray into the insurance industry and shares his perspectives on what’s driving disruption in the insurance space today. He also offers valuable career advice.

Full interview transcipt is available below.

Kylie: [00:00:00] Hi, everyone. This is Kylie Francis, and you’re listening to the Wharton FinTech Club podcast. Today, we are joined by Andrew Robinson, an Executive in Residence at Oak HC/FT. Andrew focuses on developing insurance technology businesses through a combination of building from scratch and new investments in early and growth stage companies. Andrew has over 30 years of experience in the insurance and financial services industry.

Andrew served as Global Chief Operating Officer and EVP of Crawford and Company, the largest independent claims services company, where he oversaw Crawford’s core businesses with revenues of $1.1Bn. Prior to Crawford and Company, Andrew served as President of Specialty Insurance, EVP of Corporate Development and Chief Risk Officer for the Hanover Insurance Group, a $5.5Bn international property and casualty insurer.

Andrew currently serves on three boards; Terrene Labs, [00:01:00] Groundspeed and WeGoLook and has served on Chaucer, Breckenridge Insurance Services and Brainspark. He is also on the advisory board for Wellnest.

Welcome Andrew, and thank you for joining us today.

Andrew: Thank you for having me.

Kylie: To start, tell us a bit more about your background and your role at Oak, and what made you transition from an operating role to an investor role.

Andrew: Sure yes, so real quick my career spent 20 years in strategy consulting. The pinnacle was I was the head of the insurance practice for what today is PwC. It was a company they had acquired that I was a co-founder and we grew it to quite a large company, publicly traded, ultimately bought by PWC, and then I left consulting around that time. Entered industry, had a fantastic 10-year run at Hanover Insurance Group which I joined at a point in time where Hanover was really coming through a very difficult period. [00:02:00] CEO shared a vision that I happened to agree with and asked me to join and help him with that turnaround and in the process of really kind of co-architecting and co-leading that turnaround, he gave me the opportunity to start to take on P&L responsibility and ultimately ran one of the four businesses for Hanover Insurance Group while also being the Head of Corporate Development, Chief Risk Officer and that business was sort of a complex, you know casualty and liability business, that we grew from scratch to about three-quarter billion dollars over a ten year period. Ultimately started to get involved towards the end of my time at Hanover in a number of venture/ tech things and was really excited by that, but had not elected at that point to make the full commitment and try to do something in the world of insurance technology. I did [00:03:00] move on to another role for the largest independent claims services company, Crawford, and was responsible for their four businesses, a little over a billion dollars in revenue, and I got into that and I thought to myself this really isn’t what I want to do and at that point elected to pivot and pursue the world of Insurtech and concluded in the conversations with the team from Oak that this would be a great platform to do it and we had a shared view on about a half a dozen key themes where we thought technology was going to fundamentally change the insurance industry, and we agreed that we should go after those and I should be part of the team and the thinking behind there really is not a great deal of talent that has real deep understanding of the industry, the economics of the industry, the structural elements and also a good [00:04:00] strategic view about how technology can start to transform the industry and Oak concluded that me being part of the team would be an asset and I concluded that they are just an outstanding group to be affiliated with and try to do some really interesting things and so about four months ago we agreed to come together, and I’m very pleased to be part of the team. It’s been a great experience so far.

Kylie: Ooh very interesting. The insurance industry has traditionally been seen as quite archaic and you went into it very early on in your career. What motivated you to pursue a career in the insurance industry?

Andrew: I think everybody in the insurance industry doesn’t actually target to go into the insurance industry, certainly not in my generation at least and mine is really simple. I was working for a strategy consulting firm and was asked to go apply the thing we were doing in manufacturing [00:05:00] which were kind of lean manufacturing back you know 25–30 years ago before it was called lean manufacturing, to try to do it in the back office of insurance. Got assigned to an insurance client, and then the next thing I know, I’ve been raising my hand to go overseas and we had an international opportunity, it happened to be in the Lloyd’s of London and once I got inserted into that specific opportunity, it really developed in a way where there was almost no turning in my career because I got involved in some very complex technical things and became somewhat of an expert early on and so by the time, I was probably in my mid-20s, I was almost fully committed to insurance at that point and spending 20 more years in strategy consulting, before going into industry. It was all but said at that point right because almost every project and how I developed my career, and ultimately became partner and so forth was all on the back of insurance, but it started early on just by a set of circumstances.

Kylie: And so you mentioned [00:06:00] that at Oak you have come up with a number of themes that you see affecting the insurance industry. Can you discuss some of those themes, what they are and more generally, how is the Insurtech landscape evolving?

Andrew: Yes, so I think you have to step back and almost understand the macro characteristics. There is a lot of really interesting things that have been happening in the insurance industry in the last few years. I think structurally, the industry has really done a very poor job of returning its cost of capital in the last 15 years. Only in one year has the industry in total United States returned its cost of capital and only in three years has it delivered higher than a percent return on equity, which is an astonishing characteristic for a capital-intensive industry so that is a problem to be solved.

The second thing is that in the last five, six or seven years, there’s been this dramatic change, where insurance is viewed as an asset class by sovereign wealth funds, by hedge funds, by pension funds, and so there is a huge amount of [00:07:00] capital that has come into the market that is part of a structural change where there’s permanently going to be excess capital chasing insurance risk, and you know it’s so actually risk bearing capital. So that’s going to put further pressure permanently on the insurance industry.

And with that as a backdrop there’s not only a need but quite honestly given the desire for all that capital to be put to work and returns that are better than the industry has historically performed, there’s actually a requirement. And so it’s in that framework where we see the opportunities, and look I think they run across every aspect, but in the most basic level, you know the key levers within the insurance industry is that you select and price risk and how it is that when a claim occurs you actually ensure that claim ultimately is paid for an amount that’s appropriate to the claim and on both sides of the equation, there is a tremendous amount of [00:08:00] leakage and under performance and there’s also a lot of friction. And we’re attacking all of that in the places where we aim to make investments. You know I think on the underwriting side there are new datasets obviously sensor technology is becoming omnipresent. You know the amount of information that’s available that can inform underwriting, but actually fundamentally drive new product design is almost an unlimited opportunity. Interestingly if you look at where the venture capital money has been invested in insurance, very little of it has gone to the kind of things that I’ve just described. This past year about a billion one of venture capital went into sort of the Insurtech space and in the United States and in Europe and you know two-thirds of that was focused on distribution so think about you know all the changes that happened in travel or in financial [00:09:00] services, which is a lot of online and consumer-facing kinds of capabilities. That’s really where the money has gone, and it’s really not attacked the more fundamental aspects of where true economic opportunity exists, and so that drives our thinking.

Kylie: Yep, so you mentioned all the funding that has been going into the Insurtech space and since 2012 to the first half of 2013, global insurance tech startups have raised 7.2 billion across 620 deals. What do you think is driving this and do you think it’ll slow down in the coming years?

Andrew: No is the answer to the last question. I think it’s most definitely going to increase for a whole range of reasons, which I’ll explain in a second. Look, I think the things that have been driving it is probably a couple of very important items. One is, you know the Fintech world has matured unquestionably, and so [00:10:00] traditional domains within financial services, I think that a lot of money is going into areas like payments and so forth, and the capital that’s been behind those investments is still looking for good opportunities, and there’s less of those good opportunities today than there was five years ago, so there’s unquestionably a leakage or bleed that’s coming into insurance.

I think that you know that the potential here driven by the kind of characteristics I described would suggest that you know there’s going to be more capital that comes in and I think it’s not just that sort of the VC money in the Fintech world partly redirecting into a new insurance, there has been a real serious increase in corporate venture capital.

We’re taking a look at some statistics and nearly every quarter, I think for the last 17 quarters, there’s been at least a 10% increase in the growth of corporate venture capital in [00:11:00] insurance, and so I think that the insurance companies themselves, the carriers and the brokers, are looking to evolve and so they’re putting capital to work in a way that looks like you know some of the other CVCs in other industries, and we’re really at the early stages of that. And I think what goes hand in hand with that is an increasing focus that goes away from a lot of these investments and distribution to solving core issues around underwriting and claims and the way the new datasets can be can be utilized. Obviously, there’s a lot of money that’s going into IOT and the role that IOT can play in insurance. The list goes on and on, but those are much closer to the core kind of enterprise issues that the industry faces, and I think that will be a big driver in this as well.

Kylie: And so you mentioned corporate venture capital and the insurance industry giants kind of investing in these startups. Having been on the other side, what do you think is [00:12:00] making them invest in startups versus actually acquiring startups? How do you think they are thinking about the rise of Insurtech startups?

Andrew: Well, I think it’s really early days, so I think there’s a lot of fear. Quite honestly now because there’s been just an incredible level of attention and at some level, there’s a bit of need to. You know, there’s very few examples of corporate acquisitions. One of the only examples was while I was at Crawford. We acquired a relatively high-profile company called WeGoLook and it’s one of the few instances where an existing incumbent of size acquired one of the earlier stage companies.

I think we’ll see more of that over time, but I think there’s a lot of development and investment that’s going to happen before we start to see real frequency. You know what’s driving it right now, I believe is fear, but I think over time it becomes greed simply [00:13:00] because if they’re not going to do it and start to deliver the value that they promise to their shareholders, you know then their businesses really, and I think the shareholder support for their businesses is certainly going to wane in some way. Then there’s a competitive dimension here that you just can’t ignore. It’s just the nature of the cycles of how technology develops in any industry.

Kylie: And so you sit on the board for several early-stage startups. What do you look for in an entrepreneur or startup?

Andrew: I think there isn’t a single set of things, it’s very situational, but I am personally of the view that in this industry, at least in the domains that I am personally involved, which tends to be solutions that are focused towards the existing enterprise world. So this is not a “I’m starting up something that is going to disrupt the incumbents”, but rather really interesting solutions to help the incumbents perform better. I do believe that you need somebody [00:14:00] who’s got the experience and perspective of how the industry operates, what’s on the mind of the the C-suite, you know at the top of the house at carriers and brokers.

And I think that’s a really important attribute. You need somebody who’s maniacal about the problem that they’re going to solve right and you know in every single instance of things I’m involved in, the CEOs of those businesses are really the torchbearers around. This is a really important industry issue, it has to be solved, passionate about about the way they’re going to address that problem because that kind of real commitment to the issue that they’re trying to address there’s no level of investment that can make up for that passion right. I mean, you just need somebody who’s really committed to that and really understands the nature of the problem. If it doesn’t start with “Hey, here’s the problem that we’re trying to solve”, it’s nearly impossible to build a really good business. I’d like to think and you know all the businesses that I’m involved in are through their Series A [00:15:00] investments, but they’re not yet at their Series B investments, I’d like to think that a critical aspect of this is having the wherewithal or at a minimum being able to surround themselves with board members and advisors who can help them really think through the key points in time in which they need to step up and and broaden the capabilities of the organization and have that perspective and context.

I think that in the case of things I’m involved in, those CEOs are all first-time entrepreneurs who are trying to figure it out. But I do believe they’re all deeply experienced people who have hopefully enough perspective to listen to that guidance and also be just thinking about this stuff themselves as the companies are growing about when they have to make you know big talent upgrades and take big steps forward on the organizational front.

Those are the kind of things that I think are important. Not the only things, but they’re certainly the kinds of things that I’m thinking about today as it relates to the stuff I’m involved in.

Kylie: And I [00:16:00] guess converse to that — what do you think makes a great venture investor?

Andrew: Well, I will say watching Oak right which I think leads both the Fintech side and health services side with just an amazing track record and watching them work, I think that there is a whole bunch of attributes, but in the end, I think that fundamentally the orientation is about “how do we make management better?” and everything kind of starts with that. So you know if you’re thinking in those terms, which is “I really want to make management more effective in what they do”, that kind of compass is really important.

And I tend to see that at Oak and I know that for example right now, probably by the time this gets published we’ll have you know, early part of next year, an announcement of a really interesting Insurtech company that we’ve been actively working on and through the course of the process, we’ve been very interactive around thinking through a product development [00:17:00] plan. One of my colleagues has worked very closely with helping them on the talent front and thinking through you know the person who’s basically going to be their product development and the profile of that person, getting the right kind of CFO in place. Those interactions didn’t start when we got the funding done. They actually started almost at the outset and it became very interactive, you know “here’s what we see that the business could use, how do you feel about that… Okay since there’s now alignment, what can we do to help push those agendas forward.”

So even before we’ve closed the round, we’re already starting to add a lot of value and then if you just want to use your connections and your standing and presence in the market, to help the stature of the company which I think in many regards, in the two areas where we’re involved, we are better positioned than many simply because the track record and the profile of the people you know at Oak as compared to other firms. Not all the firms, but many of the firms, [00:18:00] and I think that’s been a real attraction for why some of the entrepreneurs want to work with us, and that’s the case in this example that I just described as well.

Kylie: You’ve had a breadth of experiences. What are some key leadership and life lessons that you have for MBA students?

Andrew: So, the first thing I say to almost every person who’s early in their career, and I think that to your typical Wharton MBA, these things might come more naturally, but I am a big believer that context is worth 50 IQ points, so you know whatever role, whatever industry or situation you get yourself into, immerse yourself with anything that can possibly give you context because it will give you a 360 view of what you’re doing. And that 360 view will make you way more effective in your professional [00:19:00] performance and your ability to make decisions, and how it is that you seek support and guidance and direction and that’s kind of top of the list from my perspective.

Kylie: What do you mean by context? Do you mean seek exposure to a wide variety of experiences?

Andrew: Well so I’ll go back to the question that you asked me at the outset, which is why is what’s happening in insurance happening in insurance, and I shared with you ok, let’s start with the most fundamentals, that the industry has returned cost to capital only one time in the last 15 years, has only delivered a 10 percent or better ROE three times in the last 15 years.

You know context is that — it’s really knowing the things that frame almost anything that you’re doing and with that it’s a lot easier to focus on what’s really important. But a lot of people particularly early in their careers, they’re given a role, they’re given a problem, and they go after it versus stepping back and asking okay, why is this important? what are the contextual elements that will help me really [00:20:00] understand more about this problem? that is really critically important and a lot of times, it’s just simply missed.

There’s an intellectual curiosity part to it, it’s kind of widening your thinking before you hone your thinking, and it’s just a fundamental aspect of being effective, and it’s something I advise everybody who’s somewhat early in their career on whatever they’re doing.

So that’s I think a key thing. The second key thing is and it might sound a little bit gratuitous, but my belief is it’s a heck of a lot easier to really achieve your potential if you’re really excited and really passionate about what you’re doing and a lot of times particularly for people coming out of top-tier MBA programs who’re given great opportunities, they follow paths that are well trodden with the banks or with the consulting firms, but really knowing that those are the things you want to do versus that’s the path that many have taken, it’s the path I should take as well as instead of stepping back and saying hey, [00:21:00] what could I be doing? what am I really excited about? and I’m going to direct myself towards those things. I think is really important and sometimes just simply overlooked.

Kylie: Makes sense. Thank you so much for all of your time and your advice. This has been a great conversation.

Andrew: I’m really pleased that you asked me to participate and I certainly look forward to following future podcasts as well, so thank you.

Kylie: Of course. Thank you.