Shortly after Willem Roos joined insurer Aegis in the mid 1990s, he and two colleagues, Howard Aron and René Otto, realised that there was an opportunity to start a new direct insurer in South Africa.
Aegis used brokers to distribute its products and Otto argued that if they could approach clients directly, they could reduce the acquisition cost. Roos, an actuary by training, also realised that a direct model would give them access to high quality data, allowing for a far more accurate risk rating and financial upside.
They grabbed their opportunity when Aegis organised an investor day for shareholders. At that time RMB Holdings owned half of Aegis.
“Everybody gave their presentations and we had the graveyard shift, so René gave the presentation. I was the guy who pressed the space bar on the Power Point presentation,” Roos quipped at a Leading Insights discussion hosted by RMI Investment Managers.
Aegis felt the idea was in conflict with its distribution channel, but RMB’s Laurie Dippenaar thought it might have legs. However, when the team pitched their business plan to him later, Dippenaar advised that they were busy with various other ventures and wouldn’t have the capital to do all of it, so the team went back to the drawing board to scale down their plans.
“We actually thought we could build a profitable, decent size business with about 80 000 clients and generate a good return on capital for the then-RMB.”
But while RMB provided it with capital to launch OUTsurance, Roos believes its most important contribution was the effect it had on the culture.
No debates around ethics
He says while there is no ‘right’ or ‘wrong’ culture, very few businesses don’t have a unique and strong culture. RMB’s message was clear: there would be no debates around ethics and reputation. The firm would be run like a public company from the outset.
While there was a focus on governance, good systems and checks and balances, the challenge was not to be bureaucratic. If there’s one thing that frustrates intelligent people, say Roos, it’s red tape.
“We wanted to run the business like – let’s call it a professional sports team. We like the saying ‘We are a team, not a family’.”
Although family-run businesses are great and often take a very long-term view, it gets difficult if a family member doesn’t perform. Running a business like a professional sports team emphasises that it takes different skill sets to build a great business. A great culture enables a business to attract really good people, he adds.
A lot of bigger corporates don’t really have an owner-manager culture.
“It is obviously a lot more difficult in a bigger business but if you can create a place where there is an owner-manager culture – where people aren’t micromanaged, where they are given the opportunity to try new things, to fail, to experiment … I think you just have a much better chance of success.”
There were a lot of lessons along the way.
Six months after the launch, brokers were lining up to sell the product. OUTsurance agreed and all the founding principles almost went out the window, Roos recalls. Six months later they had far higher loss ratios than budgeted for, and realised they had made a fundamental mistake.
The business reached a point where its viability was under threat. As part of their efforts to stay afloat, the team drew up a daily list of ‘what-must-happens’. This included how many policies it had to sell, what claims ratios had to be, ratios for marketing, leads, sales and other targets.
“Fortunately, we recovered well.”
Data and facts have been a defining part of the firm’s culture and people were incentivised according to key metrics.
“If you wanted to make a case for something you had to pitch up with your big Excel spreadsheet with lots of numbers trying to justify it.”
Roos says while there were a number of day-to-day business mistakes, their biggest mistake was to get comfortable with their technology and systems at a time when it was far superior to those of the competition. They stopped pushing the boundaries for a while.
“I suppose you can summarise it as ‘Don’t become complacent when you are successful’.”
Roos left OUTsurance in 2017 after 22 years, many of them at the helm, to join a new disruptor – data-only network Rain.
Why leave a company you have been helping to build for so long?
If you want to build a great business, you need to employ great people, he says. There is a lot to be said for a fresh pair of legs, and the time came for somebody new to take it forward. On a personal level, he also wanted to relocate and came across an interesting opportunity in a new industry.
He compares the move to Rain to drinking out of a fire hose.
“If you think there are a lot of three-letter acronyms in the financial world, wait until you get to the tech world.”
Rain, which launched its network in June 2018, hopes to disrupt the data landscape with its 5c per meg offer.
Roos says the team at Rain includes extremely clever engineers – people who really understand the industry – and believes he can probably add the most value by trying to establish the right culture.
One of the first things they did after he joined was to define their values or credo – the set of guiding general business principles by which they want to operate in a very competitive industry.
“I am very blunt to everybody … [saying] look, we are not there yet. Not by any stretch of the imagination, but this is what we need to aspire to.”