Hashching launched in August 2015 as an online marketplace connecting borrowers to a local mortgage brokers. It is a pure Fintech play operating an Uber style model where consumers are connected to a mortgage broker who comes direct to their home.
Dexter Cousins of Tier One People caught up with HashChing CEO, Mandeep Sodhi. He shares a compelling story and the secret sauce to making a Fintech startup a success.
Mandeep: In August 2014, I decided to buy my first home. As a loyal bank employee, I reached out for the staff discount. At the time, I would boast to my friends about the special discounts I was entitled to as an employee of the bank.
A few days later I found out from a friend that they had secured a better rate from the bank I worked for. How come when they were not entitled to a staff discount and had never even worked for the bank?
I was infuriated, so I reached out to my bank asking how my friend managed to secure a better rate.
The bank simply replied, ‘Because your friend used a mortgage broker.’
Their answer made me even more frustrated, so I started to look at the mortgage broker model in greater detail.
From my research, I could see how much value mortgage advisers were providing their customers. Not only were they saving customers more time by taking away the hassle of completing documentation etc. brokers were securing better rates.
Initially the idea for HashChing, when we joined H2 Ventures in January 2015, was to work with the banks. We approached four of the banks who basically said;
We are happy to work with you guys, but our advisers are only available from Monday to Friday during operating hours only. We do not call clients on Saturday and Sunday or nights.
Consumers need the convenience of a broker coming to their house on the weekend. So, we quickly pivoted the model to service mortgage brokers. More than 50 percent of loans are written by mortgage brokers so we had a huge market to target.
HashChing went live August 2015 with nine brokers. The platform has 586 mortgage brokers across Australia. Each borrower rates a broker based on the service they receive. Any broker who receives less than a 4-star rating is expelled from the platform. Brokers understand.
The brokers have strict KPI's and must call customers within 12 hours of an enquiry even on a Saturday or Sunday. Today an Uber driver can turn up to your house for a ten-dollar ride within five minutes. Borrowers can be making a million-dollar decision, they expect a first-class experience.
Mandeep: Year one, just two confounders, Atul Narang and myself. I was responsible for the broker/customer support and CEO, Atul CTO. The reason for keeping the business so lean was to understand firsthand the customer’s needs.
The approach helped in building the right product first. After year one we expanded our team from two to five people and now we are ten full time staff and one part time. It is a lean business even though we're growing fast. As a tech business, you don’t need an army of people. We are not a call center selling home loans.
HashChing is a technology business with bank level security in place. Brokers use the HashChing dashboard to collect bank statements, loan documents etc. to be lodged to the lender. The information consumers provide to us is completely secured and protected, even our staff cannot access the information. All information is encrypted, we have to make sure we hire the right technology people.
Mandeep: I was lucky to have a Tech co-founder. As Hashching has grown we've hired a CTO from a big four bank. It is their job to make sure we continue to keep taking security to the next level. And hiring a Senior Architect from a Telco has really helped in making the business scalable. We have grown 10x this last year but the team has not grown. It was always the vision to build a technology platform that can scale quickly.
Equally as important as the tech, is the relationship with mortgage brokers. We hired a Chief Operating Officer, Siobhan Hayden, who came from MFAA. We have not spent a single dollar on broker marketing and the reason for that is the trust Siobhan has within the mortgage broker community.
The final piece of the puzzle is marketing. How do we make the consumer aware of HashChing? If you google hashching you will see, we are in the media quite a lot. The PR has been great for brand awareness. That's because we have the right marketing team in place. When I call it a marketing team, it's a team of two people.
What we need in the future are specialist skills in certain areas of the business. People who can help us continue that growth trajectory. When you start scaling you need to grow your team accordingly, otherwise people will burn out. New skill sets need to come into the company as it continues to grow.
Mandeep: I realise that top talent do not leave a cushy job at a corporate to have the same experience. We can attract better talent than a bank because we give employees the flexibility to do their job. There are very clear expectations and KPI's from day one. We remove all bureaucracy.
HashChing empowers employees to make decisions and offers an accelerated career path. People who joined Hashching six months ago have already moved up because they are performing well and show passion for the company. This doesn't happen at a corporate.
We have a unique environment with diverse backgrounds. Everyone is treated in the same manner. The intention has never been to hire for diversity, only to hire the best people. They just happen to come from different backgrounds. However, diversity is critical for innovation. When I consider the backgrounds of our people, they reflect our customer base. The team isn’t measured on innovation, it happens naturally. We think like our customers because we are just like them.
The environment at HashChing is like coming to work with your cousins. Going to see your cousins is fun. We have a bond with one another, where we can have fun and feel like we are a family. But at the end of the day, we can go home, so you don’t get the arguments like you might with your siblings. Our people love being here.
They're not getting paid top dollar. I know they can get paid a lot more in corporate world. But it is the satisfaction they get from working with a startup, building something special that keeps them motivated and hungry.
Most of the team approached HashChing directly, explaining how passionate they were about the company. Importantly, they understood the nature of a startup. They did not approach us looking for a fantastic salary and work life balance.
I was on the stage at a conference recently and someone asked me the secret sauce of the company. I thought about it for a while and I realised the secret sauce is your team. It's not the technology or the algorithm. Technology is an enabler. The team makes the vision come to life. And if you have the right team, even if it is a small team you can out play a bank.
HashChing is fortunate to have super smart people who get on with the job and don't need to be managed at all. The team owns the culture. In fact, it was the team who came up with the HashChing values after two years in business. Culture is critical in a startup and if you hire the wrong person it has a huge impact. You need to act swiftly and decisively. We have made a hiring mistake in the past and I regret not acting sooner. But it was a good learning lesson.
Mandeep: It is a very exciting time for HashChing. We have grown 10x in the last financial year. That level of growth is across revenue, number of mortgage brokers on the platform and number of mortgage applications processed. It's enormous growth.
Our first home loan product has been launched and is being distributed via our mortgage brokers. We designed the product based on the needs of the broker and the consumer. It is a product that provides same day approval. Brokers and consumers are loving it because now they don't have to wait five days for approval.
The team is continually looking for the parts of the home loan journey that are broken. If you compare home loans from the 1990s nothing has changed. We have 1500+ home loan products in the market but they're all the same. The question we ask ourselves everyday ‘How can we give the consumer more choice and help the brokers more easily fulfill a customer’s needs?’
Mandeep: HashChing is not exclusively for the Australian market. Today, Australia is the biggest market for us and we need to stay focused. But we are looking at other geographies who have a similar home loans model and regulatory framework. Before going into the other markets, we want to make sure that the model is scalable.
The UK, Canadian and New Zealand markets are the countries we will be exploring first. In the geographies where mortgage brokers do not have a significant presence, we will look to operate a direct model launching our own products.
Mandeep: I'm not thinking about exit at this point. I know a lot of investors do not like that answer but I do not want to sell to the banks. There's a reason why we're going with equity crowdfunding and that is to make sure we stay independent of the banks.
A lot of our competitors are backed by financial institutions. Some have openly disclosed their investors, some have not. Two of the big four banks have approached us in the past. We've politely declined their offers. It's just not the right model for us.
Why would a bank want to invest shareholders money in a startup? It stands to reason that they want to influence their own products on our customers. So how can we claim to be independent if there is a conflict of interest?
What we're seeing with the Royal Commission clearly shows you that banks and financial institutions have very different KPI's to HashChing. Our KPI’s are all based around customer satisfaction and we have a very clear review system to measure that. Where as banks and financial institutions base their KPI’s on sales.
Mandeep: The regulators clearly want to work with startups. But they are not clear on how they want to engage. My view is regulators are setting too many boundaries around innovation which makes progress very difficult. Startups are not trying to disrupt the industry they are striving to give more choice and transparency to consumers. To do that, we need to disrupt existing models.
The regulators seem to think startups present a systemic risk. Regulatory bodies need to acknowledge that startups do better job than the major financial institutions in certain areas. We need the support of the regulators.
Yes, regulators must ensure startups do not cross certain limits or mislead the customer. But regulating a startup in the same way as a bank or financial institution is not going to work. We just don't have the resources or funding to compete.
The royal commission has been a real eye opener for ASIC and APRA. They have openly identified that the banks have done some terrible things. Maybe the regulators can now work with the startups and find ways to solve some of the issues the banks are facing? We are happy to show our tools and share our knowledge with the regulators.
Ben describes himself as a tech nerd (although he is anything but a nerd). Make no mistake, Ben is a serial entrepreneur and a pioneer in the digital space. Ben was first introduced to the world of insurance when Simon Monk hired him at Travel Insurance Direct. Back then, Ben recalls making bets on the platform selling 10 policies in a week. In 2017, the business is writing over 10 policies every minute!
A family man hailing from the Northern Beaches of Sydney, Ben breaks the stereotype of a hyped up digital disruptor. He brings a humble, fresh and unique perspective to the world of Insurance.
Ben kindly shares his journey and secrets on how to bootstrap an Insurtech.
"I'm an advocate of starting your own business and bootstrapping it. So not taking any external investment. I will always want my children to start their own business."
BEN WEBSTER - INSURED BY US
Insured by Us is a white label travel insurance platform. Travel insurance tends to fall to the bottom of the list for general insurers, mostly due to the tight margins in travel. A motor or a home policy can make you hundreds of dollars in commission per policy and there is also an annuity stream. Using discounted cash flow models, insurers can predict, based on their churn rates, how much profit they're going to make out of each individual customer.
Travel insurance is a one-off purchase. Consumers don't have a lot of brand loyalty. They shop around and that means travel insurance falls to the bottom of the priority list. We built the platform based on the lessons I learned at World Nomads. It is low touch for insurers, underwriters and brands who are distributing the policy.
The Insured By Us platform allows the brands to bypass all the technical problems and focus on distribution strategy. We enable the brands on the platform to establish a distribution strategy and model that works. A brand like Woolworths is after high volume to enable cross-selling to their higher valued lines. A brand like RACV or RACQ are looking to drive benefits back to their membership base and earn solid commission as well. Some brands have broader products with features and benefits, but also a slightly higher price. That is the Insured By Us platform, we simplify distribution and make it easier for the consumer to purchase Travel Insurance.
Together with Peter Richardson, I have another business, 365 Roadside Assistance. Peter was previously part of the roadside team at ISOS so his knowledge was invaluable in this area. We are growing 365 through brokers, fleet services and retail partners like Midas. I personally like roadside because it has a nice predictable model, we know the frequency and severity of claims. Roadside is also not a regulated product, which is why insurers use it as a ‘foot in the door’ product.
In 2017 we launched a Lloyds agency called Agile Underwriting. Together with the help of Robin Barham Agile took on a slightly different model. We're attracting underwriters by providing some equity in the business. By offering 'skin in the game' we can attract people away from large insurers. The Agile business is growing, and the goal is to become a $100m GWP agency within five to seven years.
We see Agile as a counterpoint incubator for the large incubators. If someone has an intuitive idea we have an AFSL, access to the Lloyds markets, access to all kinds of capacities across all lines of business. Agile is across most lines of business, even space underwriting, as this is one of Robin’s areas of expertise.
Since launching Insured by Us I've been working four days per week. The first two years I worked from home, so I could be there when our first baby was born. The structure and flexibility we offer our employees is very attractive to both women and men. Surprisingly, it is not as attractive to younger people. They don't see the value in the flexibility and prefer to work in a place where there’s beer and vodka in the fridge, people stay back for drinks or go to the pub.
That is not Insured By Us. We always say we work to live and not live to work. Our team is distributed around the world. Remote working is the priority. In Australia, we have teams in Sydney Canberra, Melbourne and Broome, it is all about flexibility, for example our team member who now lives in Broome came in one morning and said,
'I'm moving to Broome, my partner has got a job and we're moving there.’
She knew her job wasn't in jeopardy and that she could just pick up her life, move to Broome and still have a job. She wasn't saying "I'm moving to Broome, what can we do about it?" She was just telling me she was moving to Broome. On a Friday, she packed up her house. moved over the weekend and on Monday morning she was at her desk on the Zoom. There was no productivity issue at all.
We have people in Cape Town, London, Scotland, Japan and will soon have someone in the US. Flexibility also works for the people who don't have kids. I have someone in the team who has no kids but wants flexibility, so the last two years she's taken a couple of months off in the middle of winter, this year she went to Thailand.
It's a mix. Our designer is in Japan. He moved there with his family. One of our senior developers lives in a remote part of Scotland. The team here in Sydney often call him The Code Fairy, because they go to sleep and in the morning, they wake up and he's fixed their bugs. There was an old IBM study about developers, that if you get four hours of good flow out of a developer, in a day you're doing very well. Having developers in time zones where they overlap is positive for our business.
Video meetings really help because you do need body language to communicate well. There's a small amount you do miss by not having the opportunity to go to lunch or drinks after work as a team.
Because we're remote first, all systems and tools are online. It is easy to know when someone is not being productive. We use Zoom and Slack a lot. Everyone’s activity feeds into Slack, so there's always a way to monitor what people are doing. But I don't want to monitor what people are doing. I don't want to hire people where I must look over their shoulder. I want to hire grown-ups who can get on with their job without me.
We are very Developer heavy because we are a technology platform. The make-up of the team is changing as we seek to own more of the value chain. As an example, we have just built an online claim system and gradually we aim to bring more of that in-house.
‘Travel with Jane’ is one of our brands where it makes sense to own the entire customer experience. You really don't experience an insurance product until you claim. It's simple for us to build a slick front end and a slick purchase path. But if we don't have a slick claims process and first-class customer engagement it's all for nothing. Customers won’t come back and buy again.
We're finding that when you outsource the claims function to a third-party administrator it doesn’t suit your business as well as if you bring in-house. World Nomads went through this very issue, so I'm not reinventing the wheel.
In a large insurer, you have many kinds of people. What we're looking for, from people leaving a large insurer, is an entrepreneurial spirit. People who are frustrated with the internal structure, who want to get sh#t done and are frustrated by their current environment.
It's not hard to find claims people who want to do claims, it's not hard to find content and marketing people. It's very difficult to find good developers who have any domain knowledge about insurance. It's very, very difficult to find any actuarial skills or anyone with any data science or machine learning skills as well. These people are very thin on the ground. Someone recently fell into my lap with data science and machine learning abilities. I snapped her up as quickly as I could.
I'm an advocate of starting your own business and bootstrapping it. So not taking any external investment. I will always want my children to start their own business. My wife and I would be at dinner parties and someone would say ‘I've got this idea’ and I would respond 'do it leave your job now, do it, do it, do it' My wife would be kicking me under the table. Then we'd leave the party and she'd say ‘you know John, who you just told leave his job? He is the worst person to go into business for himself. He's going to totally fail.’ And she was right.
I've learned this the hard way, going into business for yourself is not for everybody. Every day is a grey area. Some people can thrive on and hack it and other people can't.
People come to work and they don't realise that there's a whole bunch of infrastructure to allow them to have a chair, a desk, a computer, the internet connected, payroll, all those things. When you start a business, some people don't realise that you must wear all those hats until you can afford to pay someone else to wear the hat for you.
The reason Agile exists is a desire to broaden the portfolio of products away from travel. We did launch a couple of products with large insurers here in Australia. Those products were live, selling and had customers. But they were pulled from the market because of internal political reasons within the insurers.
To get those products live involved a two-year journey and after just a few months they were pulled. That is when I literally threw my toys out of the cot. I called Robin Barham, who at the time had just finished up running Arch in Australia and we formed Agile. I called him up and said ‘Robin, I'm done dealing with large insurers I need access to capacity.’ Lloyds gives us the flexibility to do really niche products.
The lack of appetite for risk from large insurers is my biggest frustration. A perfect example: Agile picked up most of a large insurer’s Aviation book, worth around $15m in premiums. This insurer was prepared to drop that business altogether.
For Agile $15m of premiums, that's an entire business division and they we're just going to drop it because it just wasn't worth their time. This insurer couldn’t make it profitable even though there was only a team of two or three people working on it. I find working with large insurers and the incumbents massively frustrating. They're so risk averse to trying new things which makes it difficult to get any venture off the ground.
Legacy systems are a problem, but those challenges are solvable, if we're collecting the right data. When we started Insured By Us we were sending data in multiple formats to multiple underwriters. Now we've built our own data warehouse, we give each underwriter a single feed coming from our data warehouse exclusively for their data.
From our perspective, the client owns the data and they need to get it in real time, in a raw format or they can get it in a pretty dashboard format from our live web service. Initially, this was a tricky problem to solve, but it is just data. We find it interesting that large insurers have trouble consuming data, aggregating across their book and then using the data in an intelligent way.
There is a significant barrier to entry. I was fortunate in that I had domain knowledge both in insurance and in technology. I also had contacts in the industry. But the first two years were hard. We’re four years old now and I've only just started paying myself a proper wage and super for example. But that's the life of a start-up. Right? I was underpaying myself for a long period of time.
Many people will point to regulation as a barrier and it is, but I'm more of the mind that regulation is a good barrier to have and that you need to earn your stripes. I don't find regulation a big barrier, I find the appetite for risk from the underwriters is the biggest barrier. Even within the products that we're offering now. Looking for an innovative way to sell travel insurance and getting underwriters to buy into that idea of selling travel insurance in a different way is almost impossible.
I have only recently, in the last six months, started worrying about another Insured By Us coming along and leapfrogging us. That's what worries me. I'm not really worried about a large insurer waking up and getting their tech in order because I'm not sure it is possible to be honest. Insurers are increasingly looking to partner with technology start-ups. Maybe that is the way forward for them because to get things done rapidly you need to do that outside of or at least at arm's length from a corporate environment.
My biggest worry is another Insurtech coming up while Insured By Us becomes mired in the compliance frameworks hampering large insurers. When this happens, you get stuck and inevitably miss the opportunities to innovate.
To launch the Future of Insurance series, we welcome Brenton Charnley who is lead and co-founder of Insurtech Australia.
Brenton was previously Head of Innovation at MetLife Australia and is now Chief Commercial Officer at CoverGenius.
Insurtech is now an industry in its own right with over $6.3bn US invested in the sector globally. Although the majority of deals have occurred in the US and Asia, Australia has a rapidly growing Insurtech scene. Insurtech Australia formally launches Thursday October 26th 2017.
BC - We are a national, not-for-profit organisation, run for the benefit of our members and partners across all corners of Australia. Insurtech Australia is a division of FinTech Australia.
Insurtech Australia aspires to make Australia one of the world’s leading markets for Insurtech and insurance innovation.
We do this by collaborating with insurers, startups, regulators and investors to create the best possible regulatory environment, and by fostering an ecosystem of supportive partners and networks so Insurtech can thrive and grow in Australia.
BC - Back in 2016 I was working with Metlife as Head of Innovation. I could see the changes that were happening in the insurance industry, and the potential opportunities ahead. For innovation to occur, you need to gain as many external views as possible and not look at change through the myopic lens of Life Insurance.
So I decided to set up the Meetup group ‘Insurtech Sydney’, just to encourage discussion across the insurance and tech sectors. I expected maybe ten people would show up. There were almost 300 people at the early events. Lots of interest from incumbent insurers, but there was not a great deal of representation from the tech/startup scene.
At the same time, Sarah Fountain, Senior Associate at DLA Piper set up an Insurtech Melbourne meetup, and gradually the word spread to the tech scene.
Within six months we were partnering with insurers and ecosystem partners. In March 2017, we partnered with ANZIIF and Stone and Chalk, holding the Insurtech pitch event at the ANZIIF Insurtech conference.
Insurtech Sydney became a diverse community of insurance innovation and collaboration by bringing together insurance practitioners, entrepreneurs, technologists, innovators, and industry stakeholders across Australia.
By early 2017, we had demonstrated there was a clear need for the platform across insurance and insurtech.
So we went about the process of formalising a national non-profit body. ANZIIF and everyone in the industry has been super supportive, and we are excited to be launching Insurtech Australia officially this week.
BC - Globally the mood is very positive. Investment in Insurtech has exploded over the last few years. And the largest investors are incumbent insurers, so they clearly see opportunities.
There is so much talk in the industry surrounding disruption. My take is that incumbent insurers view most tech startups and Insurtechs as enablers, not disruptors.
We can already see technology improving many aspects of the value chain and distribution model. The tech is there to empower the industry, not replace it.
And it makes complete sense. Most Insurtechs have to partner with underwriters as they are not regulated or licensed.
BC – If we look at global funding, according to CB Insights only 1% of that has come to Australia. Many of the major VC firms are US-centric, and it is a massive market. So of course, a VC will invest in the largest market. The biggest Insurtech deals last year were Zhong An in China (US$931m) and Zenefits in North America (US$584m).
Australia doesn't have a big enough market (yet perhaps?) to attract that type of investment.
However, when we compare Australia globally against other metrics, we are quite advanced. Australia is quite far ahead of North America for example on digital/online distribution. Australia is moving on to what I call innovation 3.0
BC – Put simply, it is a world in which we are not just replicating old processes and digitising them. An example may be an online application for a policy. The customer has the same experience, they just don’t have to post the application in the mail.
Innovation 3.0 is a world where protecting your assets, insuring your health, your life, your holiday can happen in real time, on-demand at the push of a button. Innovation 3.0 is creating an environment where insurance is bought NOT sold. The insurance product is integrated into the asset/thing to which we seek to protect.
BC – Insurtech Australia is here to support and grow the Insurtech community and help the entire insurance ecosystem thrive. We are involved with technology startups, hubs, investors, brokers, advisers. Insurtech Australia is there for the benefit of both the insurtech members and corporate partners.
There is a lot of change ahead so we provide an environment where ideas and relationships can incubate and be nurtured and ultimately succeed.
We see Australia as the ideal mini-market for global insurers to launch new products, new ideas and new initiatives. So our goal is to make Australia one of the world’s leading markets for Insurtech and insurance innovation.
Insurtech Australia seeks to advocate on behalf of its members and partners and become the champions of change with the regulators. Australia has to accommodate new technologies, new models and innovative ways in which insurers can manage their capital if we are to compete in a global market. That being said, we must ensure that we retain a strong regulatory environment that continues to protect the consumer. Insurtech Australia seeks to work with the regulators to create the environment where insurtech innovation can thrive.
