What’s Up everyone. Quick question. How often do you think about insurance? Insurance is one of the largest, oldest industries in the world but simultaneously, it is one of the least innovative. While a whole host of fintech companies have made their mark in payments and banking over the past 20 years, think companies like Stripe, Adyen, Revout, Nubank, Chime, etc. the insurance world has lagged behind.
As embedded fintech has gone from nonexistent, to mainstream, and companies have woken up to the power of distributing financial services through software - insurance feels like the natural next shoe to drop, which is why I am super excited to share today’s interview with Cole Riccardi, the CEO & Founder of Authentic Insurance.
Cole is one of the most thoughtful, forward thinking, and hardest working founders I know, and in today’s interview we discuss the business model behind captive insurance, how vertical SaaS companies can take advantage of captive insurance programs to drive revenue, and his early journey thus far as a founder. Let’s dive right in.
Cole! Great to have you on. First thing’s first, could you tell us a little bit about yourself, and about what Authentic Insurance is?
Thank you Dez! So excited to be here. Authentic is an insurance infrastructure company that enables any platform to start their own captive insurance offering. Customers essentially launch their own white-labeled insurance product, and get the economics of owning their own program. It’s very similar to launching your own insurance carrier, but very easy and all handled by Authentic.
I’ll give you an example: We recently launched a partnership with Mindbody, which sells software and payment services to 40,000 gyms. Every gym needs insurance (property and liability coverage), and Authentic enables Mindbody to launch “Mindbody Insurance” for their 40,000 gyms in a matter of minutes. The value proposition is Mindbody can create a new profit stream via insurance, while their SMB customers can purchase the right policy at a cheaper price point and also participate in profit sharing. We handle the entire insurance experience and process from A → Z.
Okay. Captive insurance. How does it actually work?
I’ve spent the last two years answering this question! A captive insurance company is an insurance company owned by its members or affiliated entities. What that would mean in the Mindbody example is that Mindbody would “own” an insurance company and the profits.
However, Authentic administers the captive insurance and gives the profit interests to our partner platforms, instead of them actually holding the liability of an insurance company. So on our back end, we’re setting up an insurance program for Mindbody and their gyms.
Another example that is similar to Authentic is an “association captive”. Historically, an association could set up a captive insurance company and allow small business members to purchase insurance from the group, instead of a traditional insurance carrier (State Farm, etc.). The association captive would keep rates low and give profit sharing back to members if there were limited claims. The problem is, setting up a captive is really hard and there are many moving pieces - reinsurance, pricing, claims, purchasing UI/UX, policy management etc. Authentic extracts all of this work away and delivers a turnkey solution to platforms in a matter of minutes.
So in theory, a company like Shopify could create their own captive insurance program.
Yeah, totally. Large platforms like Shopify are a perfect partner for Authentic. Given their scale, the revenue a Shopify could generate with captive insurance is very exciting.
Shopify’s reach can really benefit a lot of small businesses as well– especially in today’s market where insurance rates from traditional carriers continue to climb significantly. Given this market pricing dynamic, there is more value now than ever to launch an insurance offering for small businesses.
That’s pretty powerful.
Yes, we really see a really big opportunity to change where insurance is purchased and how it works. In my opinion, this is bringing insurance back to first principles. Centuries ago, insurance started out as these collectives'. Like individuals or businesses would contribute to a fund with other members that they know and trust. Authentic wants to return to this model of insurance where people prefer to buy insurance within a group or platform that they trust. All of these new “collectives” will be powered by Authentic.
Okay, switching gears a little bit. You had a pretty great gig at Aquiline where you got exposed to a ton of the nuances of insurance. Why give that up?
Aquiline was an incredible place to learn from great people. I’m fortunate to be very close with the Aquiline investors today, several as seed investors in Authentic. I wasn’t necessarily looking to leave to start a company. However, after going incredibly deep in insurance for a number of years, I had this “captive insurance infrastructure” idea. Candidly, I couldn’t stop thinking about it. It got to a point where I really struggled to do my day job or think about anything else. I always loved being an investor because I could follow my curiosity within investment themes. However, the curiosity around captives became obsessive. I also couldn’t find anything to invest in that mirrored my captive thesis. It took me a few months to realize I was the right person to go ahead and build it!
Was there a specific moment where you thought, “I’m going to be an entrepreneur. I’m going to start a company.”? I read a Fortune article about you that said part of your inspiration for Authentic stems from horse training and the Kentucky Derby.
I hadn’t chased too many ideas or thought about being an entrepreneur at a deep level prior to this. While at Aquiline, I enjoyed specializing in a given space, and becoming THE expert - I felt like that’s where a lot of the value was as an investor. However, once the idea of Authentic came along I had a different feeling. It was the first time I had truly considered taking an entrepreneurial path. Not only did the Authentic business model “pencil out” but I became truly enamored with the vision. I felt like I was seeing something so clearly that others couldn’t, and I had to go build it. There has to be that gut feeling towards the vision since you can’t have certainty around many of the assumptions - otherwise the business would already exist!
Why dedicate the next 10 years of life to the insurance industry? What underpins your conviction in the space?
Insurance gets painted as “boring” which can sometimes be the case to the consumer (we’re working on that!). But behind the scenes, insurance is a fascinating combination of data science, capital markets, technology, product manufacturing, customer interaction, etc. I’m excited to spend the next 10+ years working on each of these inputs.
Insurance is a very large and high impact market. The top 25 U.S. commercial carriers wrote ~$1 trillion in 2023 premiums. With an innovative and scalable business model, Authentic hopes to join the list of top property & casualty carriers in the U.S. in the coming years. The insurance market is only getting larger and as more of the talent ages out, there needs to be new companies and solutions that come onto the scene.
After reflecting on the past 2 years, my conviction has never been higher that there is so much to do in insurance in the coming decades.
So you think the majority of the fintech ecosystem overlooks insurance?
There are some incredible insurance businesses that are innovative that go under the general ecosystem / VC radar. For example, companies like Skyward Specialty, Ryan Specialty, Accelerant have incredible stories and business models but might be lesser known in the general fintech ecosystem. Some of the activity with asset managers in the life insurance space has also been fascinating and may be “under the radar” - investments / acquisitions such as Apollo / Athene or Blue Owl / Kuvare.
I believe folks in 2016-2020 were very excited about the general market size of InsurTech and pushed a lot of venture dollars into the space. There was a sharp retreat when some businesses struggled to show a path to profitability and poor underwriting results. I believe we’re starting to see a slow and healthy increase of interest in the space again with people exposing unique opportunities in the ecosystem… such as captives!
In your mind, is Authentic more similar to a Stripe or a Unit? Asking because there’s arguments for both.
Great question! We model a lot of our product design after Stripe. They’ve done such an amazing job at making a piece of financial infrastructure easy to use. Authentic has created a “Stripe-like” onboarding experience via our partner hub, that allows partners to create an insurance offering, completely self-serve.
Similar to how Stripe has mastered payments, we want to innovate and lead a similar transformation within insurance and be incredibly focused within that product set, instead of branching out into other financial services.
I’m less intimately familiar with Unit’s business model, but several of our customers have mentioned similarities on that front as well.
This is your first go as a founder. What’s been the hardest thing so far?
Continuing to evolve faster than the company. We’re still an early-stage business but I’ve already seen my role shift a few times. At first, I was pressure testing the vision, putting together an MVP with an initial team, etc. Then I became the founder leading sales to get the first few customers. Now we’re scaling quickly and I’ve had to shift into manager / delegator. Trying to be “ahead” or well-prepared for your next role has been a fun challenge.
Are you hiring? Who would you say would thrive working at Authentic?
Yes! We have a few open positions right now, mainly on the sales & GTM side of the house. We’re always looking for great people, and we continue to scale the engineering org quickly as well.
We’ve built a really strong culture of accountability and ownership at Authentic. We’re looking for high-agency people to come in and quickly scale past their title and make a meaningful impact. There’s the opportunity for so much professional growth and development at a company like Authentic. It’s incredible to see what some of our new team members have done in a matter of weeks or months!
Any fintech or non-fintech founders you look up to?
Great question. I’d have to name a few…
Peter Thiel as a visionary and critical thinker.
Hank Greenberg as an insurance innovator and financial services pioneer.
Jack Dorsey and Elon Musk as operators - interesting to me how different styles can have repeated success at major scale.
Love it. Okay so my last question for you, and this is something I do in every interview, is what is the single piece of advice you would give to someone who wants to start a fintech company or a startup generally?
If you’re thinking about starting a company, I would urge you to really think about what’s stopping you. If it’s fear or time, just take the next step. You can do the next step on a night or weekend. Talk to that prospective customer, try and build a working prototype, but either way just start. There is no downside to that. You might gain conviction faster than you think and you don’t want to let regret build over time. So take the next step.
