Operating embedded insurance with Surround

Surround Insurance is a Cambridge, MA-based insurance agency serving young adults needing insurance as they encounter innovative platform-enabled products and services. Founded in 2018, Surround has raised $5.7M in venture funding, including a $2.5M Seed round in 2022 that saw investment from Newark Venture Partners. MassMutual, Cameron Ventures, and Aperture Venture Capital.

In an interview with The Financial Revolutionist, Kate Terry, Co-Founder and CEO of Surround Insurance, outlines the startup’s core mission, describes the operational lift to make embedded insurance a success, and details the future of mobility insurance in the US.

This interview has been edited for length and clarity.

The Financial Revolutionist: What is Surround Insurance?

Kate Terry, Co-Founder & CEO: We are a digital agency that serves young smart adults, so people whose lives are different from what lives might have looked like 20 years ago because they're using tech-enabled platforms. The platforms don't want to sell insurance, and traditional insurance companies have not adapted quickly enough to serve these customers. 

For example, we have arrangements with both Go and Kyte for their long-term subscription car services. This is not different from Toyota Motor Corporation leasing your vehicle, which is a traditional auto insurance policy, but because the frame around it and the perspective around it are different, traditional insurance hasn't caught up fast enough to cover it.

We can plug into the quote flow for companies that are that are selling services to younger adults mostly, and then offer a highly tech enabled experience but also a personal touch. “Embedded” means a lot of different things, but embedded doesn't work if you mean straight through digital processing for something that people have questions about, because they're buying an intangible product to protect themselves from fear.

What does that personal touch mean in terms of staffing, whether for you or for partners?

It's on our end. People assume that younger adults in particular don't want to talk to anybody when they buy things, but I think that that is really wrong. It vastly simplifies buying processes in the modern economy, putting buying t-shirts on Amazon in the same category as making sure that a subscription car is covered. 

We use Ironman as the imagery for our sales reps: They’ve got this suit of technology around them that keeps them from having to do all of the repetitive boring tasks like typing things in forms, work that would have been done back in the day. That lets them talk to the customer—we text most of our customers—and right at the point of sale answer the questions they actually have, and make sure they understand what they're getting and that they have the right thing. It means that our sales reps are all highly educated about what our partner is doing, but then also about how to find that overlap between existing insurance policies that actually are pretty highly customizable.

How many partnerships do you currently have?

We have eight partnerships right now and two more in the final negotiation stage. We've got subscription car vendors, landlords who have highly tech enabled platforms and sometimes vehicles on-site for tenants to use, and we have a partnership with NerdWallet that's been publicly announced—we’re their exclusive supplier on all of their non-owner auto pages. And then we've got a couple of college and university partnerships as well. 

When you're setting up new partnerships, what does it take to then have your support team actually be knowledgeable about that partner?

There are three things that are really important to us in choosing a partner. The first is that it's a tech enabled business that's growing with a growing set of customers. The second is that there needs to be a compelling reason for why customers are going to buy insurance. The third piece is that the partners that we work with need to be able to explain and modify their customer sales process so that we can plug in well.

Doing really well in embedded insurance is not just having the technology so that you can drop your link and or drop your landing page and drop your widget. It is also making sure that the customer experience is holistic from the point at which you get the handover from the partner, through to dealing with the customer, through to looping back to the partner with whatever other information they need. So partners who are not able to make that handover process smooth are not going to be able to successfully embed insurance. 

The last piece piece is that we look for the risk manager or whoever's responsible for the partnership from the partner’s side to be able to explain if they have requirements. If it's a leased car, for example, maybe you need to have comp and collision on the car with a deductible no higher than a certain amount. We then program that all in so that it pops up for our representatives so that they're never hunting and pecking for information about when a lead comes in. 

It’s really more about organizing information so that people aren't doing repetitive work than anything else. That's the part when it seems magical, because you've got your information sorted out in an orderly way. That's really what the win is in embedded insurance in some ways.

You seem pretty selective in terms of the kinds of partnerships that you have.

We actually turn away more partners than we work with. Because either we don't feel that they're ready for a partnership, or their customer base doesn't match ours, or there’s no clear rationale for why a customer would want to buy insurance in that context.

That almost becomes a form of scope creep, in that your support agents are explaining the first-principles need for insurance.

It almost becomes us trying to sell the partners’ products to their customers, or their potential customers, and we're just not in a position to do that. It doesn't make any sense for us. People who are considering partnering with an insurance agency or an insurance company need to really think those things through, because they can end up harming their own customer experience, too, by tacking on something that either doesn't work or that they don’t have the resources to make sure that it's smooth on their end. The handover has to be smooth too—customers feel it when it's not.

I'm interested in why, at least from your perspective, incumbents aren't moving into this space, whether it would be too large of a lift for them to accommodate relative to market size, or some other variable.

There are three ways to grow in any market: you can battle your competitors for market share, you can buy competitors, or you can take root in new segments and grow with the new segments. Traditionally, both the incumbents in the agency and the carrier space—and also most insurtechs, actually—have focused largely on battling for market share.

The fact that long-term car subscriptions are less than 1% of the auto market, even though they're growing at 400% a year, doesn't make for an attractive segment yet to spend money on for a $20B business. In the context of having call centers that have thousands of employees, your individual employees might see one of these long-term car subscriptions a month, which makes it really hard to train for. It lends itself to newer startups like us, or smaller players who can be a lot more flexible. You can then sign these partnerships so that you get focused—our folks are seeing multiple leads in this space every day.

But what's interesting is that the mobility market is so disrupted right now. McKinsey studies suggest that more than 40% of the premiums in the auto insurance market will not come from just car ownership or long-term leases within 10 years. So if the incumbents don't step up their business pretty quickly, they're going to find that they're losing big segments.

What do you anticipate for Surround in the coming year? You mentioned two partnerships that are in the pipeline now—

Those are under negotiation right now, and we’ve got many more higher up in the pipeline. We're growing very, very quickly, like 80-90% month-over-month every month, and partnership strategy is a major part of what we're doing. We just posted a Head of Partnerships role, so that somebody can really dig in and do this full time. So we're anticipating continued fast growth. 

If the partner is ready from their side, we can actually get up and running within the week, which is pretty amazing. We operationalized it in that way to make it quick and easy so that we're also easy to work with. We are also expanding quite dramatically in the content that we're putting out to our customers. We’ve done a lot of blogging and writing, but then we also launched our YouTube channel and TikTok channel, and it’s starting to generate leads for us.