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Slide’s Lucas targets IPO within three years after $100mn fundraise

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Florida-based InsurTech Slide aims to launch in five states and begin writing $50mn in premiums at the start of next year, according to founder and CEO Bruce Lucas, who said he’ll look to take the company public in the next two to three years.

In an interview with this publication on Monday after the business completed a $100mn fundraise, Lucas outlined Slide’s ambitions, saying that the company would leverage a data set acquired through strategic partnerships, which he described as unrivaled in the InsurTech world, and would further the company’s mission to “change the way insurance carriers underwrite risk”.

According to the former Heritage CEO, the difference between Slide and other disruptive InsurTechs is that his company applies AI and machine-learning systems to reams of real-world underwriting and claims data.

“I would highly doubt they have granular transaction data,” Lucas commented.

He said the data set the company is working with includes records that cover 16 named storms, which detail how policies were underwritten, their risk profile at the time of binding (including modeled cat loss data) and granular information on associated claims, such as the frequency of claims re-openings and the nature of individual claims payments.

“There are literally trillions of combinations of data that you need [to have] to develop cutting edge AI and ML on the underwriting and claims management side,” Lucas explained. “And you’re not going to get that data from industry-level data,” he said.

“That’s not granular,” Lucas said of what most InsurTechs started out using. “That’s macro.”

“Nobody in the InsurTech set, at least as far as I'm aware, has access to data like this. If they did, they would be talking about it non-stop,” he added.

The CEO did, however, commend his new InsurTech rivals, saying “they’re onto something special,” but he argued that what Slide is doing “is different”.

Not just a Florida play

Starting early next year, the company plans to begin building a diversified portfolio of coastal property risk, having settled on New York, New Jersey, Rhode Island, South Carolina and Florida as the first states where it will launch.

“I'm looking for a balanced portfolio like what I built at Heritage,” he explained. By the time Lucas left the company at the beginning of this year, Heritage wrote 30% of its premiums in Florida, versus 70% outside the state.

Slide plans to market its products through the agency channel, as Lucas struck a deeply bearish tone on the direct-to-consumer route many InsurTech peers have taken.

“The customer acquisition cost for almost all of these companies is in excess of their premium,” he explained. “You would need a policy to stick with you for 10 years minimum to break even on that model, and let me tell you, homeowners’ policies don't stick with you for an average of 10 years.”

The executive said that four to six years of policyholder retention is considered the “gold standard”.

“I think that as long as InsurTech companies are using the DTC model, they're not going to turn a profit,” he argued. “I don't think it's possible.”

Lucas ‘comfortable’ with IPO on accelerated timeline

The executive compared Slide’s capital raising strategy to that of Heritage, which raised $60mn in its initial funding round before tapping the public equity markets in an IPO.

The purpose of such a big initial funding round, he said, was to allow the company to focus on building out its operations without the distraction of perpetually needing to raise money.

“Let’s take one big bite, let’s get the dilution out of the way, let’s get the funding in place,” he said in outlining his thinking. “Now let’s focus on the business.”

He acknowledged that such a strategy was contrarian, but one that had suited him well.

“I don't care what industry you're in, a $100mn A round is extremely uncommon,” he said. “It’s got to be the biggest InsurTech raise in the sector.”

When asked the rationale behind immediately beginning life as a full-stack, balance sheet carrier, Lucas’s response was simple.

“We’re not here to learn insurance,” he explained. “We're ready to take risk. That is something that me and this team have done for a long time in coastal markets.”

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He contrasted the approach with other InsurTechs, which may have entered the market with strong technological skills but lacked a granular understanding of underwriting.

“They’re saying, ‘let’s hedge the risk, we’ll write it on somebody else’s paper, and let them take the risk’.”

“I'm coming at it from a decade of experience of making a profit in these very markets as a full-stack operator,” he continued. “I’m not here to have a steep learning curve. I already know it.”

To that point, Lucas said that having enormous amounts of data at the company’s disposal would allow the business to scale faster than peers and traditional insurance competitors.

“I’m comfortable with an underwritten IPO on an accelerated timeline, provided it makes sense for the shareholders,” he said. Lucas added that his management team had not yet formed “finite plans on an IPO.”

“I would say that we’re going to be exploring that at year two and three, and just kind of see what that landscape looks like.”

Building an AI process

In the early goings, though, Lucas said it would take Slide some time to ramp up its business initially, as it works through its analysis to identify the most attractive slivers of the market.

“We’re going to take that data, where we’re figuring out what all those correlations are, and developing an AI-ML process that’s designed to capture less riskier policies,” he commented. “The riskier policies are ones we’re not really interested in writing."

The executive added that the carrier partner that provided the data had taken an equity stake in the company, and in exchange, Slide would license its technology to that firm.

He went on to say that he and his team were using that data to develop a more “cutting edge” point of sale underwriting process that involved modeling out loss ratios, reinsurance costs and expected returns, among other variables.

“It's a forward-looking underwriting model that is largely non-existent in the insurance world today.”

Lucas is undaunted by inherent challenges in the coastal property market, particularly in Florida, which has become notorious for underpricing and a difficult litigation environment that has led loss costs to soar.

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He stressed that profitability would be Slide’s core focus and that his track record at Heritage had proven it could be done.

“I made a profit every year, and that's not easy to do in coastal markets.

“The great thing about what we’re doing is that big data and real-life experience in these numbers are pointing us into the direction of profitability versus unprofitability. And that is a relatively new concept in the InsurTech sector.”

He also emphasized that Slide’s underwriting methods would be a departure from approaches commonly used across the industry, which he described as being mostly backwards looking.

“You’re using a loss experience from two years ago to underwrite a risk today,” Lucas explained. “A lot can change in two years, particularly in high-velocity markets like Florida, where geographic areas go from very attractive to extremely unattractive in 24 months.”

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