We’re delighted to launch the fifth episode of ECI’s podcast, “Building Successful Businesses,” in which we speak to CEOs about the building blocks of success and the lessons they’ve learned along the way.
In Episode 5 we chat to Mark Eastham, CEO of Avantia, the virtual insurer with a world-class decisioning platform, about the role of tech and data in the future of the insurance industry, the best sandwich to get from the supermarket, and what he’s learned throughout his career about hiring and retaining the best people.
Listen to Episode 5:
Listen to Episode 5:
Transcript:
Fiona: Welcome to ECI’s podcast “Building Successful Businesses,” where we speak to CEOs about the building blocks of their success, and the lessons they’ve learned on the way. I’m Fiona Evans and today, I’m delighted to welcome Mark Eastham, CEO of Avantia, the tech-enabled virtual insurer. Hi, Mark.
Mark: Hi, thank you, Fiona. I’m very pleased to be here.
Fiona: So, tell me a little bit more about what Avantia does. I mentioned tech-enabled there, which gets talked about a lot. But what does that mean in practical terms for your customers?
Mark: Yeah, so if I go right back to basics, we’re the leading provider of digital non-standard home insurance. So, what is non-standard home insurance, I hear you ask! Really, it is the sorts of risks that are a bit more unusual that most of our competitors don’t quote for. Or if they do, they might ask you to be involved in a phone conversation, or ask you to send some paperwork in. We automate and digitize all of that process, and we do that through our underwriting engine. So, in effect, what we can do is quote for all of the risks that present themselves through comparison sites and our own website without the need for human intervention.
There’s a second aspect to our technology that’s important, which is we’ve built our own data-science decisioning platform, that we call the Cortex. In effect, what it does is ingest lots of information from right across the insurance value chain and uses machine learning to make decisions in real-time. And that real-time is quite important for our markets because the comparison sites give us about 700 milliseconds to respond with, do we want this customer? What are we going to charge them? Behind all of that we’ve got to work out their future lifetime value, we’ve got to work how likely they are to claim, what for, how much will the claim cost? And we need to do all of that in real-time.
So that decisioning platform has been a huge driver of growth in our business. Because unlike our competitors, we’ve been able to look at data from right across the customer journey, and tie that all together into real-time decision making. So, the tech is two-pronged: automated underwriting and a decisioning platform. The reason we built the platform was because we’ve collected lots of data in our 10-year history. With comparison sites we’ve quoted for every home insurance quote that’s ever been done, so you build a huge amount of data up as a consequence of that. We wanted to invest in the technology, to extrapolate the value from that data, and to improve the decisions that we were making as a business.
Fiona: How has the investment in tech changed in Avantia over the last 10 years?
Mark: So, the business was founded in 2009 in its current guise and the technology kind of split down into the two aspects I’ve just described. The business back in 2014, when ECI invested, had a very strong automated underwriting platform, which could do a lot of automation on the kind of risks it was seeing from comparison sites. What the team have done over the last four or five years is build that out so that almost every risk can be sold without human intervention. But really, it’s only over the last three or four years that we have realized the potential of our decisioning platform and doubled down in terms of the investment that we make into that.
That includes borrowing technology from outside of insurance. For example, there is a streaming technology that was invented by LinkedIn, and we’ve borrowed that and repurposed it for insurance. And the really attractive thing about it is, every time we get a quote, we convert that into what’s called a stream, and then we can connect to that stream lots of other information, either about that customer or customers like them. And every time we quote, that stream brings in more and more data. When the data scientists come to model and refresh the model or build a new model, they’ve always got a better-quality pool of data, and that’s proved very valuable to us.
The best insurers are starting to use machine learning more and more, but they have lots of individual solutions. So, their risk engine might have a machine learning solution; their retail pricing might have a machine learning solution; their CRM platform might have a machine learning solution. But what our Cortex does is it sucks data in from all of those different parts of the technology into one place for the purposes of modeling.
Fiona: And when you think about what next for Avantia in terms of technology, is it a case that because you’ve invested in so much machine learning, and you have all this data, it will just continually improve by itself? Or is there scope for the future where you’d like to invest more in tech?
Mark: Yeah, we started at the front end with retail pricing, we moved into risk pricing, and are about, I don’t know, 20% of our way through product build, and journey design, using our decisioning capabilities. We are very excited about the potential in the claims supply chain. The easiest stuff is to automate high volume, low-value claims using this decisioning technology. But you can take it a bit further and almost suggest a next best action for a claims handler as to what to do to settle a claim at the lowest cost, but also in the most satisfactory way for the customer. We’ll go deeper into the areas where we started, but there’s still lots of really interesting areas in the value chain that we’ve yet to exploit.
Fiona: Especially as I presume most people would rather not pick up the phone and speak to people – everyone likes doing everything online.
Mark: That’s right, increasingly. So again, our business model has been very suited to the current times and we saw quite a material market share uplift because a lot of our competitors, particularly in non-standard, had to close contact centers for a period of time and weren’t set up to work from home. And because they rely on that to close the sale, they gave business to us, which could all be done online, without the need for anybody else to be involved.
Fiona: Yes, crucial, especially at the moment, but also the trend in how people want to interact with companies. So, if we go back further in your career to the very start, what was your first job and what did you learn from it?
Mark: Technically speaking, my first job was working for my mom and dad in the convenience store. That was a fabulous grounding in retail, and I was a retailer for the 20 years after that, until I joined insurance five years ago. That was my first job, and it taught me quite a lot at a relatively young age.
Fiona: In his podcast episode, Gurman actually mentioned that he worked in his parents’ shoe shop. So, I wonder whether there’s something around CEOs where they’ve seen their parents work and worked alongside them, whether it creates long life lessons in terms of how to run businesses?
Mark: I think it does. I mean, I don’t think you realize it at the time, but when you process it later in life, I think you understand some of the benefits. You know, it’s a face-to-face interaction in a shop and customers can spend their money wherever they want, they don’t have to buy from you. I think it makes you very customer-focused. It’s also good for teaching you team working – you have to learn how to get on with people from all sorts of different walks of life.
And also, you have to prove that you’re not there because you’re the boss’s son, you’re there on merit, and you have to work harder than anybody else and prove yourself. I think those kind of life lessons over what in effect were my teenage years were really, really valuable. My first job out of university was to work for Marks and Spencer in the food group, in Baker Street at the time. Obviously, no surprise given my family background, I was passionate about retail and at the time, M&S was the retailer to go and work for.
One of my buying jobs was the sandwich department and I suppose M&S was the market leader at the time. We were looking at things like automation of making sandwiches, we had Pret a Manger launching at the time and starting to really innovate – I think it was the crayfish and rocket sandwich that was the absolute benchmark product in our market. We had to -from a factory, not from a kitchen – replicate that level of innovation, quality and value. It was, yes, some really happy times.
Fiona: This isn’t a business-related question at all. But what is the best sandwich to get from a supermarket?
Mark: Oh, I mean, I’m pretty boring. And I would just go prawn mayo, the classic one, but still to this day, the best. But that time M&S was actually really interesting, because, again, they were going through huge changes. It had been a business that was very driven by the product development side, and rightly, the quality of raw materials, but it never had a very strong commercial instinct applied to it. And as a graduate, fresh into my first job, coming into that scenario and working with some really good outside consultancies to think about how we buy, procure and get the value from our volume, was actually a great grounding for me coming off the back of my studies.
Fiona: Yes, that was actually going to be my next question is, how did you move from that sort of background into tech?
Mark: I’ve always been really interested in gadgets and technology, and I went into 10 years at Carphone Warehouse. My main desire to go and work there was that it was a fast growth retailer, selling great gadgets, laptops, mobile phones, etc. That gave me the interest in the product, and that was my first experience of technology. And at the time, lots of retailers were trying to find a way of taking a subsidy, an airtime subsidy, and giving the customer some hardware for free. We gave away game consoles, laptops – in fact, the very beginnings of talk within Carphone was off the back of a free laptop promotion. Get your broadband connection, get a free laptop.
That hardware subsidization, and the commercial model behind it at the time, was interesting to me as well. Insurance is quite similar in many ways, because you’re predicting what the customer is going to pay you in the future. You don’t know. And you’re also predicting what the costs are going to be in the future; you don’t know at the point of the transaction. I had 10 years with that commercial model at Carphone, which is why the board at Avantia must have obviously seen the parallels and the synergies that might come from that experience.
Fiona: Yeah, it must be quite interesting working out the customer lifetime value, as there’s so many things you must feed into it in terms of risk and different customer types.
Mark: Yeah, that’s where the technology comes into play. The decisioning platform in real-time is thinking about all those things. How long will the customer stay? What will they cost me to serve? Are they likely to call my contact center? Are they going to take an add-on product? Are they going to pay by Premium Finance? So, there’s all sorts of propensity models that have to decide what’s the combined impact on lifetime value?
You also get lots of really interesting spin offs. Our performance marketeers were trying to find a way of driving their paid search, using lifetime value, not margin or selling price, as in a recurring revenue business like ours, they are quite a poor proxy as to what the future value of a customer is going to be.
They spoke to the data science team, who said, “We have a lifetime value model that allows us to decide how to price, why don’t we repurpose that model, so you can use it to drive your paid search?” It was then relatively straightforward for us to connect our lifetime value model to Google’s paid search algorithm.
So that kind of real-time decisioning in paid search was just an early spin-off. We were actually shortlisted for a Drum Marketing Award for it, getting recognized outside of insurance against lots of other different industries for a paid marketing technology that we spun off as a consequence of trying to do insurance better. That’s what makes me so excited about the potential applications for the decisioning platform in the future.
Fiona: It’s amazing really, how much data there is in these businesses, but it’s actually being able to leverage it and use it to make better decisions. I suppose for lots of companies, it’s often underused.
Mark: Yeah, I mean, the challenge we all have as insurers is the core technology of any insurer is called the policy administration system, and they tend to lock information away in lots of different parts of that system that make it very hard to access. A good example would be if a data scientist wanted to understand the renewal price that a customer paid, and the final trigger for them to stay or go. If you ask a policy administration system for that information, you’ll get three or four different versions, perhaps the first price that was sent out to the customer, you might also get the price that the customer got when they called up and changed something about their policy, you might get the price that the customer negotiated, because they said, “Look, I’m going to leave unless you lower the price.” But having all the data in one place and easy to interrogate by data scientists mean that you can very quickly build models that answer the questions you need.
Fiona: In terms of the advice you’ve been given along the way, is there anyone across your career who’s given you really valuable advice? And if so, what was it that made the most impact?
Mark: I’ve been lucky to work for some really good organizations over my time and I’ve definitely had good mentoring and good advice. I think the one that resonates most for me would be when I worked for Graham Stapleton, who was the CEO of Carphone at the time. It’s a bit of a cliché, but it boils right back to hire world-class people that are the best at what they do. I hesitate to use it because it is such a cliche, but Graham was passionate about it, and you have to do that at all costs.
Initially, when you’re building and forming a team, it can be quite disruptive. But having seen what happens when you hire people who are the best at what they do, they can do some incredible things. And really, business success is almost entirely built on assembling a group of diverse people that are really good at what they do. And it wasn’t just advice for Graham, he lived by that mantra, and we saw the results of that during our time at Carphone.
Fiona: And as a business grows, and this must have been especially the case at Carphone, how do you keep that mantra throughout the business? Because as it scales, it’s hard to control that process. How as the CEO do you make sure that you only hire great people across the whole organization?
Mark: Well, I think you have to go back to reward and incentivization, because you have to be able to attract the best people. We’re competing in some very in-demand segments, as you can imagine, data science and machine learning operations are hot fields, where supply is limited, and demand is high. I think you have to go back to recruiting and incentivization and reward. You have to create the right culture, look after people and make it an attractive place to work. So even before COVID, we had a Flexi Plus approach to work, and you could work when you wanted, where you wanted, on the basis that you got the job done. And increasingly, those kind of things are important to people who know they’re in demand.
I think the other thing is you have to increasingly be clear on what your purpose is overall, as an organization. So for us, we want to make every decision intelligent, and that’s why we get out of bed in the morning. That’s what’s important to our employees and we’re able to sell that vision into people who want to come and do more than just crank the handle on an operation. And then I think you also do have to be good at performance management, so if people are not living up to the very high and demanding standards that we set as a business, then that is something that we have to deal with. Because otherwise it’s not fair on the rest of the business or the rest of the team.
Fiona: Obviously, building successful businesses isn’t always easy. And you probably wouldn’t learn that many lessons if it always was. What do you think the hardest lesson you’ve learned is?
Mark: It’s maybe not the hardest, but it’s the most valuable, which is the benefit you get when you empower people rather than tell them what to do. I say that as somebody with a bias towards hands on operation, so it’s a kind of watch out for me to give people the space and the oxygen. But I’ve seen it now so many times, when you put good people into a space with a clear concept on the business’s vision and mission, just how much they can achieve when they’re driving the things they’re passionate about.
Fiona: It can be quite hard, though, I think, if you are by nature, the sort of person who wants to get involved. And I don’t want to use the phrase control freak, but certainly, it can be quite easy to fall into those traps when you just want to make sure everything works really well. How do you manage to separate that out and was there a moment of realization where you went, I really need to get this right?
Mark: There was a moment. Really, I think it’s when you make the transition from functional leadership into general management. So, I was in effect, the Commercial Director of Carphone and was progressing into General Manager, which meant I was no longer the functional expert. You know, the guy that knew more about the ins and outs of the role than anyone else, and therefore I had to rely on more leadership and less on functional expertise, because I had the online channel, the planning team, the category management team, etc., all reporting into me. I think it was at that point in terms of my development, that you start to know that you have to make that transition.
I was very fortunate to get some business school support with making my transition into that general management role, and I think that was the crunch point where you’ve got to go on a different journey. How do you do it if you know your natural tendency, your strength in a way, is hands-on delivery and execution? How do you not overplay that strength? For me, it’s about being clear on the vision and the mission because that’s as important for me as it is for any employee in our organization.
And you need the ability to be able to step back and go, frankly, does it matter if it’s turn left or turn right if actually broadly, this is contributing to the overall direction that we want to go in as a business? I think it’s the really interesting part of motivation and leadership that you need to constantly work on, practice and learn lessons from the way you’ve done it before, and hopefully, try and do it better next time around.
Fiona: Yeah, I think that’s the interesting thing. as you’re growing the business, the business itself will evolve, but also so will the leadership style as the business changes. And so, certainly you wouldn’t want to just rest on your laurels and go, ‘Right, I think I’ve nailed it.’
Mark: No, I think that’s a really interesting point. I think businesses go through evolutions. I think, when you’re still working out what your best strengths are and how they fit into the market, then it’s great to be quite flexible and pivot and adapt, and just let things really flow. And it’s really when you start to get clear on what this thing can be that you get the extra value out of a bit more deliberateness in the way you approach things. So, again, I think it’s situational. There’s no one right approach. It depends what stage of evolution your business is at.
Fiona: Mark, thanks very much for joining me today. It’s been great to hear about how Avantia has developed through tech and data, and it sounds like there’s so much more potential there in terms of where it can take you. And also, great to find out your favorite sandwich.
Mark: Thank you, Fiona. It’s been an absolute pleasure.
Fiona: Thanks, Mark.
