Insuring out-of-pocket expenses

If you have ever been involved in a collision—or one of your clients has—you know how fraught with pain points the claims process can be.

At-fault drivers are faced with deductibles and potential rate hikes. And, regardless of who is at fault, anyone who’s been in an accident will see the value of their car diminish—an especially bitter pill to swallow for drivers who weren’t in the wrong.

The end result is often the same: customers who feel they’ve been shortchanged by their insurance policies. Why are they paying out-of-pocket expenses when insurance is supposed to cover them?

That’s a question Farhad Eslah has heard again and again after years of working in the industry.

“I’ve worked as a broker, I’ve worked as an underwriter and I worked in the government as a regulator, and at every stage I was always advocating for customers, always trying to make the process more fair,” Eslah told Canadian Insurance Top Broker.

So Eslah decided to take matters into his own hands. After years of working for insurers such as Aviva Canada, and a stint at the Financial Services Commission of Ontario, he now finds himself in a new role: founder and managing director of Out of Pocket, which launches in July.

Out of Pocket offers drivers coverage that fills the gaps found in traditional car insurance policies. Drivers can get reimbursed for their deductible when they’re in an at-fault accident. They can also get reimbursed $500 if their premium goes up, in addition to getting $500 to offset the diminished resale value of their vehicle if they sell their car within a year of the accident.

Coverage is available for $10 a month for drivers with a $500 deductible, $15 a month for drivers with a $1,000 deductible, and $25 a month for drivers with a $2,000 deductible.

“I’ve worked as a broker, I’ve worked as an underwriter and I worked in the government as a regulator, and at every stage I was always advocating for customers, always trying to make the process more fair.”

“At each stage of your primary auto insurance claim, when you have out-of-pocket expenses for things that aren’t covered, you would check with your Out of Pocket coverage to see if they’re covered,” Eslah explains. “If you’re in a collision and you get your car repaired and have to pay a deductible, you would just take a picture of your receipt and email it to us, and we would cut you a cheque for the $500 for your deductible.”

Drivers with a $500 deductible can claim a maximum of $1,500 in coverage over a 12-month rolling period. Drivers with a $1,000 deductible can claim a maximum of $2,000, and drivers with a $2,000 deductible can claim a maximum of $3,000. Policyholders can cancel their coverage anytime.

“If you have a premium rate hike due to the accident, take a picture of the old and new premium, and we will cut you a cheque for the $500,” Eslah explains. “For the diminished value of your car, if you sell your car within a year of the accident, it doesn’t matter what value you sell your car for—that’s fine with us. We know that there’s a loss, and we’ll cut you a cheque for that as well.”

Distribution through the broker channel

Eslah has partnered with April Canada to distribute Out of Pocket to the MGA’s network of more than 500 brokers.

“Farhad has got a great idea here,” says Nick Kidd, CEO of April Canada. “It’s a unique idea to solve some consumer problems and consumer pains in the marketplace, which is really tied into the DNA of April and what we’re trying to achieve with a number of our products.”

Although drivers will be able to purchase Out of Pocket direct at outofpocket.ca, Eslah is banking on brokers being the main sales channel for the product.

“He feels strongly—as do we—that broker distribution will be quite an important and, certainly, the primary distribution channel for his product,” Kidd says. “He will run the product and make sure it meets the needs of customers. We will try to house that in April as part of our distribution process.”

And Out of Pocket should be easy for brokers to sell, Eslah says, because it doesn’t require any underwriting rules for drivers to sign up—all drivers are covered.

“All they need to give is the owner’s first name and last name, the year of their birth—not even the birthday—and also the year, make and model of the car, and if they want the $2,000 deductible, $1,000 deductible or $500 deductible option,” he says. “I want everyone to have a 100% conversion ratio, because you should have this information off the top of your head.”

Eslah turned to BMS provider Brokercore to enable online sales and policy production for Out of Pocket. Drivers enter their information online, and Brokercore leverages technology from Stripe—an online payment processing system—to complete the transaction.

“Brokercore will automatically generate policy documentation and send the documents and transaction receipt to the policyholder’s email address,” explains Chris Farris, director of business development for Brokercore.

Brokers interested in selling Out of Pocket don’t need to be on the Brokercore BMS to do so—they can just embed some code on their website, and away they go.

“Farhad will provide a broker a web link that can be added to the broker’s website, like adding Google Maps,” Farris says. “Then business can be transacted, and at the end of the month, Out of Pocket is going to send the brokerage a cheque for the commissions generated from someone purchasing the policy through the brokerage’s website.”

Now, the commissions earned from $10 and $15 sales may not allow many brokers to retire early, but selling Out of Pocket requires little effort from a broker. They just need to plunk the Out of Pocket sales screen onto their website and tell their clients about it. Customers can then sign up on their own in a matter of minutes.

“Brokercore will enable MGAs to operate more effectively by automating the online policy transaction and providing a form that brokers can add to their website,” Farris says. “This capability makes it very easy for a broker to sell the MGA’s solution to their clients and not have to do any heavy lifting to collect commissions.”

And, while the commissions for each individual sale may not amount to much, they can add up in a hurry.

“Our ability to enable the sale of 1,000 of these at very low cost means that you’re suddenly profitable in this stream of business,” Farris says.

But it’s not just the prospect of easy commissions that makes Out of Pocket attractive, says independent broker Daniel Rajkovic.

“You’ve got the commission side of it, but I think more than anything, our business is about the relationship with our clients, and this helps that relationship,” Rajkovic says. “The direct writers for years have been pushing this order-taker kind of industry. As brokers, we’re more than order-takers. We’re almost like consultants in a sense.”

And Out of Pocket won’t hinder a broker’s ability to be a consultant. If, for instance, a broker decides to move a client to another insurer, they can do so without interrupting the client’s Out of Pocket coverage.

“The flexibility on that is pretty fantastic,” Rajkovic says. “As a broker, sometimes we have to move over a client to do what’s best for them with different carriers. Out of Pocket allows us the flexibility of maintaining that for them.”

From the outside in

Throughout his insurance career, Eslah always felt car insurance should be more fair, but it was only recently that he’d been able to find a way to effect change.

“If a client does have a claim and has the deductible paid for by Out of Pocket, then the broker comes out a winner here. The broker is a hero to their client, who recognizes the value of the advice that they’re buying.”

“I realized I had to do this from the outside in. The best way to do that was through brokers, and getting brokers to make insurance fair,” he says. He describes Out of Pocket as a product that will “improve our standing in the industry, and make me proud that I’m an insurance professional.”

And Eslah is not alone in thinking auto insurance could be more fair to policyholders.

“Given how much you’re paying for your insurance, maybe as a consumer you would expect to be a little bit better compensated—or a little bit less penalized—when you make a claim,” Kidd says.

Kidd believes Out of Pocket will allow brokers to fulfil their role as a trusted advisor to clients.

“The more brokers can take the pain away from their clients when they have a loss, the better,” he says. “This is what brokers do. They offer value to their clients in a bunch of ways beyond just finding them more competitive insurance or more choices on insurance.”

But, more than that, Kidd says Out of Pocket will allow brokers to be heroes to clients in their time of need.

“If a client does have a claim and has the deductible paid for by Out of Pocket, then the broker comes out a winner here,” he says. “The broker is a hero to their client, who recognizes the value of the advice that they’re buying.”

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Copyright © 2018 Transcontinental Media G.P. This article first appeared in the June/July edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.