Rogier van der Kooy Versteeg: "Insurers must change course"
Text Robert Paling, photography Erik van der Burgt, published in AM:Special Juni 2017
The story of Neerlandse is one of two friends from the south of the Netherlands who are realizing their entrepreneurial dreams. Despite the fact that their flood insurance is, after years of hard work, finally receiving praise from both friends and foes, co founder Rogier van der Kooy Versteeg sees no reason to sit back and relax. He feels that other insurance domains can also greatly benefit from accurate use of data.
Smartest region in the world
We meet van der Kooy Versteeg in the Videolab in Eindhoven - the place where Philips once created the first dvd- and blu-ray players and which has now been turned into an incredibly hip location for start-ups - where he welcomes am to: the “smartest region in the world”.
Van der Kooy Versteeg’s and co-founder Keramopoulos’ start wasn’t quite as hip and happening. After completing secondary school in Uden, van der Kooy Versteeg started at an insurance company in his home town Uden, first as an advisor, later as part of the managing team. “It was a typical traditional company. I enjoyed working there but Kosta and I were also already thinking about ways in which customer contact could be improved in insurances”, according to the entrepreneur.This thought would eventually lead to ikRijverzekerd, Neerlandse’s lesser known sister company, which mediates in car insurances through car companies all across the Netherlands. Keramopoulos started at Berenschot after college, the independent 75-year old advisory organization from Utrecht, that doesn’t necessarily remind one of a dynamic start-up culture either.
Van der Kooy Versteeg and Keramopoulos became inspired in 2007 after seeing the documentary Hoera het klimaat verandert (Hurray the climate is changing) (VPRO), about flood risks and the risks for, for example, homeowners. “We used to call each other all the time if we saw something interesting on tv, but in this case we both new we had to do something with this. Hans van Ommen from Eurolloyd had previously introduced the catastrophe risk insurance with flood coverage. Our approach was to introduce this insurance to the general market in a grand way, but it turned out that Eurolloyd had just been sold and the product was taken off the market. That is why we decided to do it ourselves”.
This was easier said than done. “Setting up a meeting with the right people at Lloyd’s of London by itself took two years”. Another complicating factor was the lack of a flood model for the Netherlands. The two co-founders teamed up with universities, TNO and an engineering firm to create a flood model. Van der Kooy Versteeg: “There was some data available regarding floods in the Netherlands but we couldn’t get much further than a simple accumulation of the different risks. You need a risk model if you want to offer insurance on an individual basis”.
The two co-founders teamed up with universities, TNO and an engineering firm to create Neerlandse's flood model
The risk data comes from the Ministry of Transport, Public Works and Water Management. It is derived from inspections that are undertaken by the different water authorities on a seven yearly basis to determine the flood risk in the almost one-hundred dike rings out of which the country is made-up. This information is then placed over all the addresses in the Netherlands. “That way you are not limited to just portraying a detailed overview of the actual flood risk, you can also connect this to a premium model”.
The flood model allows consumers to gain realtime insight into the flood risk to their house while simultaneously being informed about the cost of insuring this risk.
Water barrier failure in Wilnis
The flood risk in Eindhoven for example, is relatively limited. This may seem logical as the big rivers are all located at a significant distance from Eindhoven, yet, according to van der Kooy Versteeg, this is not always relevant. “In the case of the barrier failure in Wilnis in 2003, it wasn’t the ring canal that caused the flooding of a residential area, but instead, the flooding was caused by a break in the embankment. In that sense the flood risk in a city abundant in water such as Dordrecht, is not necessarily higher than in other cities. The premium in Dordrecht will probably be lower because the flood protection in this city is better prepared to prevent floods. In cities like Den Bosch however, the creation of flood protection was based on more optimistic scenarios”.
Other factors that can lower the premium are the possibility to place flood panels or sandbags in front of one’s house or choosing a lower insured amount. Neerlandse’s flood insurance gives everyone with a home within a dike ring area the opportunity to, individually, take out a flood insurance. “By offering this insurance we are implicitly distinguishing ourselves from insurance pools that exist to cover other catastrophes”.
“By offering this insurance we are implicitly distinguishing ourselves from insurance pools that exist to cover other catastrophes”
Dutch Association of Insurers
Still, the Dutch Association of Insurers resisted the creation of individual policies for a long time. They insisted on a collective solution in which everyone had to be insured for flood risks, in a compulsory basis. Van der Kooy Versteeg can understand the desire for such a solution. “After the 1953 North Sea flood, the insurance industry realized that a similar damage could not be covered. The association made a binding decision in 1954 which stated that members (of the association) were forbidden from offering coverage that protected against the risk of flooding. This binding decision was revoked in 1998 in accordance with EU competition law. After the creation of the Delta Works it was, once again, up to the insurance sector to find a solution”.
The Authority for Consumers and Markets (ACM) put a stop to the compulsory insurance in 2013 as it was said to withhold consumers from being able to choose between competitive products. Additionally, the compulsory insurance would affect those in areas with little to no flood risk, and the ACM felt this would be met by a lack of public backing. Van der Kooy Versteeg feels that an insurance on the basis of a collective structure would not offer the right solution. “A structure like this would only be able to cover the tip of the iceberg in a disaster situation. A disadvantage to collective solutions is that those affected never get what they are entitled to. Perhaps even more important, these solutions encourage a lack of risk awareness in Dutch society, which is a danger in itself”.
NVGA am: Innovation Prize
Still, Neerlandse’s flood insurance needed some time to flourish. “We started selling the insurance in 2012 using our own channels. Commercially speaking this wasn’t a huge success, most likely because we weren’t visible enough yet and too expensive. Back then, the flood risk data wasn’t as detailed and complete as it is now which resulted in higher premiums”. The flood insurance has since been fine tuned and the premiums have been lowered drastically. The insurance has, since 2015, been sold solely by intermediaries. Geerts from Oosterhout and Klap insurances from Amsterdam sell the insurance under their own label and serviceprovider DAK added the coverage to their assortment last year. “We now have a new product with new tooling. Winning the NVGA am Innovation Prize serves as an affirmation from the market that we, along with other parties, have managed to create a product that really meets the needs of the consumer”.
"Winning the NVGA am Innovation Prize serves as an affirmation from the market that we, along with other parties, have managed to create a product that really meets the needs of the consumer”
“It has become much easier to use all this data using the cloud-oriented technology of today, for example, the platform Amazon created for this purpose”. Van der Kooy Versteeg feels traditional insurances, especially car insurances, do not make the most of this yet. Sister company ikRijverzekerd uses vastly different acceptance criteria than the average car insurance. “The average insurer is merely interested in car type, driver’s age and postal code area and uses this information to calculate a premium, that is why a premium in, let’s say, Zoetermeer, will be higher than a premium in the eastern part of the country. I’m not just interested in place of residence but also in the way the car is used. If it’s a second car that is used sparsely chances are it will eventually be used by the kids to go out when they get their license. This could be a reason why we might prefer not to have this policyholder in our portfolio”. The entrepreneur feels that traditional insurers are still too trusting of the big numbers in trying to lower the combined ratio. “Research shows that controlled claims can be up to 30% more expensive than requesting three or four quotations using a smart damage auction”.
Innovation, according to van der Kooy Versteeg, is still too focused on changing existing business models and is too much like window dressing for the advanced. He sees so called safe-driving insurances as add-ons that will ultimately be paid by the (young) insured themselves. “If you want to create a viable future for indemnity insurances you must be prepared to change course. We really need to go in a different direction. I realize this is easier with a zodiac than a large oil tanker. While it is more common to work with minimally viable products in other sectors, you are often required to apply for licenses within the financial industry. This is why we don’t view ourselves as a typical insurance company, even though, naturally, we have a license. It gives us the opportunity to work with others to create awesome things and make quick decisions”.
Text: Robert Paling