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State Auto riding insurtech wave as industry evolves after 'years of mediocrity'

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State Auto riding insurtech wave as industry evolves after 'years of mediocrity'

➤ Culture changes at the Columbus, Ohio-based carrier have fostered a spirit of cooperation and innovation that has transformed a nearly 100-year-old traditional insurance company into a trailblazer in insurance technology.

➤ 80% of State Auto's products are now digital.

Michael LaRocco, chairman, president and CEO of State Auto Financial Corp., felt the winds of change blowing in the insurance industry almost two years ago with the emergence of insurtech. Bucking nine decades of traditional insurance ideas, LaRocco opted to switch up the way his company operated and reshape how State Auto provides its products in the span of about 18 months.

LaRocco, who came to State Auto in 2015 after serving as president and CEO of The AssureStart Insurance Agency LLC, talked with S&P Global Market Intelligence about those changes, the relationship between insurance providers and insurtech companies, and what lies ahead. The following is an edited transcript of that conversation.

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Michael LaRocco, chairman, president and CEO of State Auto Financial Corp.

Source: State Auto

S&P Global Market Intelligence: Your transition to insurtech has been built from the inside out. What have been the key elements in that process?

Michael LaRocco: We have our own group called State Auto Labs Corp. We also scan the external marketplace to look for partners, whether to invest in them or become strategic partners. In terms of the core change to the company, which was to go completely digital, we built that in house. We used key software partners and an implementation partner, so we did not build it ourselves. We used software that was out there, but we directed it. The biggest single change we made was with our digital platform, which we built with the help of a software company. As far as innovation and insurtech, we partner with a number of companies that are out there today.

During your panel discussion at InsureTech Connect 2019, you talked openly about what you have learned while fostering those partnerships with insurtech companies. What have been the biggest problems you've encountered?

There are flaws on both sides. A lot of insurtechs do not respect and take the time to understand the complexity of the insurance business to make sure they are more effective when they integrate. On the carrier side, you have got a lot of traditional bureaucratic cultures; their ability to integrate with innovative partners is hampered by the fact that they have a bunch of steering committees and layers of management that slow down decision-making. It's an awful experience for the insurtechs.

What has been different about State Auto's experience?

Because we are so committed to this space and we have been kind of racing down this both internally and externally, our innovation process has been really effective. We have about nine strategic partners in the insurtech space, and we work with them very well. People seek us out because we make fast decisions and are willing to test ideas and try different things. So it has been a good process. I think there will be many bumps along the way, as some of these very slow-moving companies try to integrate into this space, but it will be fun to watch.

At InsureTech Connect, you talked about creating a culture that empowered people to move quickly, with no steering committees, and just cutting everybody loose to innovate. How did you do that with State Auto?

The culture is one where we encourage radical transparency. If I know something, I share it and we talk about everything. Another component is candor. We want everyone speaking up and challenging us and no matter who or where they are in the organization. If I say something they disagree with, I want them to tell me. Getting more specifically to some of the issues that impact insurtech, such as innovation, we want people to be empowered. We want them to be willing to take risks, though obviously calculated risks, and know it is OK to fail. That is a good learning opportunity too, to learn from your failure or "fail forward."

How has this helped as your company rides the insurtech wave?

We wanted our people to be as innovative as they can, very nimble, very responsive. If you embed that culture into your company, then when change comes from the outside, whether it is a new way of doing inspections, a new way of handling claims or a new way of processing payments, the organization is more suited for it so there is no resistance to that change. It actually fits with the evolution of innovation in our industry, which is finally coming after many, many years of mediocrity.