Australian businesses using QuickBooks Online can now buy 10 types of insurance through their accounting software at prices up to 20 percent cheaper than market rates, claims partner ExpenseCheck.
This is only the second type of financial service that Intuit has offered through the QuickBooks Online platform, and the first outside of the US. The ability for businesses to buy auto-updating insurance, and through accounting software, is to my knowledge a world first.
Expense Check says that the premiums are so much lower than market because the insurer can calculate risk much more effectively by analysing the businesses' accounting data.
The insurance is backed by the largest small business insurer in Australia and New Zealand, CGU. QBO displays in-app messages offering plans to relevant businesses that are pre-qualified using the data in the accounting file.
Premiums automatically update based on relevant triggers in the business. Insurances that cover employees will increase or decrease in line with the number of employees listed in QuickBooks Online payroll. Insurances that cover stock will rise and fall based on inventory.
The word within Intuit is that QuickBooks Capital, which provides in-app loans backed by Intuit and a small group of anonymous lenders, has been a huge success. QBO analyses the accounting data in a file and knows when a business needs capital, for example to cover a shortfall in payroll.
The in-app messaging is highly targeted and the loans are pre-approved. With a couple of clicks, a business can get a chunk of cash in its bank account the next day. And, Intuit claims, QuickBooks Capital has very low default rates. With 80% market share Intuit is very likely to know the credit rating of a business’s customers and whether they are likely to pay their invoices.
Expense Check’s integration follows the same model.
For Intuit this is a very attractive way to increase share of wallet – how much money each QBO business is willing to spend with Intuit.
This will be a very attractive white label market for insurers because it should reduce the risk across a very risky category, small business. It also happens to be the largest in numbers of customers. The downside is that Intuit owns the customer.
As far as I know this is a world first – auto-updating insurance premiums for small business. Effectively you never need to review and renew your insurance contract because it is constantly being reviewed and the premium adjusted in line.
Ironically, Xero previewed this back in 2015 at Xerocon when Rod Drury did an on-stage demo with an insurer – in fact, the same one backing Expense Check.
Now that this global proof of concept is in the market we should see similar moves in other markets. Apparently the biggest blocker is upgrading the insurers’ systems so that they can calculate premiums on the fly. Upgrading systems costs a lot of money.
I caught up with Expense Check CEO Nigel Fellowes-Freeman to find out the backstory behind this major move for Intuit.
Digital First: When was the deal signed?
Fellowes-Freeman: The deal was signed about five months ago. We did a Beta trial in the last quarter of last year to get interest and buy-in. We proofed up all the theories of metrics in terms of how interested small businesses would be. So, that then progressed to a multi-year contract with Intuit Australia.
Digital First: When you say went to trial, was that with Intuit?
Fellowes-Freeman: With Intuit inside of the platform (QuickBooks Online). It was just a proof of concept really so it was not fully embedded but it was using some of the concepts and in-product display messages. It’s just a little message targeted at specific users to say "would this be interesting for you?".
We were asking: Would Intuit customers love to see fully automated insurance inside of QuickBooks Online? Yes.
Digital First: It really shows the power of in-app messaging to sell financial services.
Fellowes-Freeman: It’s incredibly powerful, especially in terms of getting the right message to the right business at the right time. That's the really important component, that contextual message. And you can do that with a really good view of that data.
Digital First: How long has Expense Check been in the market?
Fellowes-Freeman: Expense Check as a business has been in the market for three years. But the insurance proposition itself we have been building for 18 months. It takes a long time to get an insurance proposition up. The first release for insurance was in the last quarter of last year, and then the actual line product with Intuit has been in the market now about twelve weeks.
Digital First: I didn't realise. So the first time it appeared in market was within QBO?
Fellowes-Freeman: Yes. The first time it appeared in the market was within QBO; it’s the only kind of software that can provide insurance to small business customers using their data to automate the entire flow. A small business can get a quote and buy the quote, i.e. get protected, in about 45 seconds.
Digital First: What's been happening since you signed the deal?
Fellowes-Freeman: We've built the full integration out from that trial phase into a full integration so it is inside the interface and accessible from the Tools menu (in QBO). So from a customers' perspective it's like they're interacting with QuickBooks but it is obviously powered by us.
We also built a part on the dashboard for advisors, i.e. accountants and bookkeepers. It gives them an insurance wallet for every client. They can help their client never miss a renewal day., have the right policies in place, and they can transition to an advisory role around insurance services as well as other services they offer.
Digital First: And who's providing insurance on the back-end; are you using one supplier or multiple suppliers?
Fellowes-Freeman: We use one supplier. We partnered with CGU, the biggest business insurer in Australia and New Zealand. We had to get them to build a piece of infrastructure for us to have a dynamic insurance product.
A key part of the product is that it changes with the business. So as your business insurance stands today, you buy a policy on July 1, and you guess what your business is going to look like for the next 12 months in terms of your revenue, your wages, and your number of staff, and your stock levels and that's what you'd get insured for.
The product we have created changes with your business. If your wages go up, or if your staff numbers go down, if your stock changes then the policy changes to match your business. So you never have to have a renewal date because you are always perfectly protected for your business.
And so to be able to do that we had CGU work really close with us over the last 12 months to be able to deliver that product.
Digital First: If memory serves me rightly, CGU was the insurer that demoed with Xero in 2015.
Fellowes-Freeman: Correct.
Digital First: They had an integration then. So how did this come about?
Fellowes-Freeman: Yes. So obviously the CGU-Xero deal fell over. There wasn't enough buy-in from both Xero and CGU, I don't think was deep enough, and so they did not get enough traction.
If you looked at the user journey it was basically a click-bait inside the product and everything was managed outside by CGU. And so it didn't really utilise the data or (the best) user experience.
So we approached the innovation component in IAG that allowed us to (develop) a new business structure. They understood the value of data and how it could underwrite much more specifically and therefore price much more aggressively.
From a price point of view we are about 20% cheaper just because we can underwrite so much more specifically. We know the exact revenue, and there is no margin for error, because we know the data in the small business's file.
Digital First: Has CGU said that if businesses buy through Expense Check and QBO that the price will always be lower than going direct to CGU, because they have that quality of data?
Fellowes-Freeman: They can never guarantee anything, but we compare our data to CGU and all the majors (insurers) and consistently, over a period of time, our premiums are 15% to 20% cheaper.
Digital First: Is that purely because CGU can minimise risk the more data we have about a business?
Fellowes-Freeman: Exactly. Underwriting risk is all driven by data, so the better data you've got, the better understanding you have of the business, so the more aggressive you can price (your premiums).
Digital First: Can the insurers get the same quality of accounting data from anywhere else?
Fellowes-Freeman: From banks, potentially, though it's obviously much harder to understand the transaction data. So accounting software is a gold mine for underwriting data for small businesses.
Digital First: Because of the overlaying the chart of accounts over the transactions?
Fellowes-Freeman: Exactly. It's the heartbeat of a small business. That's how you understand risk very well. There's some things you need as an outsider you can't understand so we use some other data sources to do that as well.
Digital First: So what types of insurance are available and what's the roadmap?
Fellowes-Freeman: As it stands today, we have 10 products available. General public and product liability, Property and contents, General property (tools of trade), Business interruption, Glass, Electronic equipment, Theft, Money, Employee dishonesty and Tax investigation.
Two on the roadmap that are about eight to 10 weeks away are Professional indemnity and Auto commercial. Once we've got those two we've got a pretty robust set that small business needs. After that are Cyber and then Employee insurance, which insures against an employee suing an employer.
Digital First: So, to date, there have only really been two products that have any deep integration with QuickBooks Online. Why do you think you guys were chosen? I presume that they're running the same kind of in-app tests for other products, why Expense Check?
Fellowes-Freeman: I think the proposition is very different to anything else in the market. None of the other accounting software can do this. All the accounting apps are sitting now on a pretty level playing field in terms of features so this is something I think that they saw as really setting them apart.
Obviously QuickBooks Capital has been very, very successful in the US. Intuit has seen the value of having a financial service embedded in the product. Obviously they see this as an adjunct to that. I think that's probably why we were able to jump up the queue from a feature and a revenue driver point of view. Obviously there's a really good revenue opportunity for the insurer as well.
Digital First: Are you going to take the idea to the US and UK?
Fellowes-Freeman: Yes, it is in the pipeline, and we're speaking with QuickBooks around both those options, yes.
Digital First: Fantastic. And, where does it go from here? I mean you say you've got the complete workflow already in the product. Is it just a matter of adding more products, or is there more development left to do?
Fellowes-Freeman: Yes, there is a heap more development in adding more products, the breadth of product. Getting even better at targeting the right product to the right customer and using the understanding that we have of small business in how we can put the right product in front of them.
Employee dishonesty, for example. Generally, how you insure (against) employee dishonesty is that you have a number of staff and therefore some are part-time. But we can see from the data the employee contracts they have and the type of industry, how long the employee stayed with the business, how much they're paid. Those things connect to the risk profile of that employee and therefore also to the premium that the business is going to pay.
So we are doing a lot of work in turn using a heap of machine learning to understand how we can better understand risk and can therefore perfectly protect the small business.
A really good way of thinking about it is that today insurance works on the model of protect and repair. So you protect a car and you repair it if it gets broken.
We are working really hard to use the data to predict what's going to happen in the future and therefore give advice to that business about what they can do. For example, they could install fire alarms, work with different employees, improve their employee tenure, so those losses don't happen.
And so that's how we are thinking about insurance. We want to make insurance visible and avoid losses, not just provide protection to small businesses.
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