The Honda Civic of the Insurance World

[00:00:02.96] REID HOLZWORTH: All right. Welcome to The Insurance Technology podcast. I'm your host, Reid Holzworth. Joining me back again is Luke Madden. Luke, welcome, man.

[00:00:11.96] LUKE MADDEN: Thanks, Reid. Great to be back.

[00:00:14.12] REID HOLZWORTH: Good. So it's been a bit since we've caught up. It's actually been a bit since we've actually really caught up. We haven't really run into each other for a bit. So this will be like a really good catch up.

[00:00:23.22] LUKE MADDEN: Yeah, no. Looking forward to it.

[00:00:25.98] REID HOLZWORTH: In our last interview we talked about a lot of cool stuff you're working on. And yeah, man, just like tell me a little bit like what you been up to. What's been going on?

[00:00:34.46] LUKE MADDEN: Yeah. So I mean, I think the last time I was on, I talked a little bit just about my two cents about core insurance software, property casualty policy, administration software, stuff like that. And just that we had been a combined ratio. The company I co-founded and operate, we had been really-- we've always said, why don't we just give this software away for free?

[00:01:02.12] Why is it command the giant cost that it costs from a license perspective? Why are these implementations, so many tens of millions of dollars when it's just core commodity software? It had always been a wrap. It was an interesting thing to talk about on podcasts and in interviews.

[00:01:20.43] But since we've last spoken, we've actually done it. We've a product. It's called OS policy. We've done the official launch for it. We got marketing campaigns running for it. And we've got people using it now.

[00:01:37.79] REID HOLZWORTH: Hold on. So for the listeners, catch them back up. Say what you just said. It's like build software technology. That's a policy administration system.

[00:01:46.39] LUKE MADDEN: Yeah.

[00:01:46.89] REID HOLZWORTH: Almost give it away. Well, maybe, maybe not. I don't know. And then really, because that's really your business is helping implement and do all this type of stuff.

[00:01:57.99] LUKE MADDEN: OK. Let me give you-- yep, you're right. So since the last time that I was here, one of the things that we talked about was just our concept of combined ratio, that core software for insurance companies should be free. So like my two cents about that really quickly is you've got these big giant companies selling commercial off the shelf software for policy, administration, claims, all that stuff.

[00:02:22.51] It costs millions of dollars in recurring licensing. These are all SaaS products now. You're really paying millions of dollars a year to rent that software. Then on top of that, they're sort of shunting you off to their system integration partners, their SI partners, where you spend tens of millions of dollars to implement that software.

[00:02:43.05] REID HOLZWORTH: In some cases, hundreds of millions of dollars.

[00:02:45.13] LUKE MADDEN: 100%. And I will tell you, having spent my whole career in this space, it seems ridiculous. Like it doesn't seem that there should be that much money involved to that many different players out there. So combine ratio solutions, while it was never our dream. We started this company as a services company as a technology services company.

[00:03:07.30] And then we've been very good at that. We like the services work, but we've always stayed away from doing system integration with the big software companies. We didn't like it. It's a race to the bottom, and we're not crazy about many of those products out in the market. But we wanted to grow our services footprint. And so we were at this crossroads.

[00:03:25.46] And one of the things we said is-- we ended up with some intellectual property that we had built, fully built and architected for a cloud-based policy administration solution. And we looked at going to market. We were like, well, let's go to market like everybody else. Let's earn some money.

[00:03:40.24] And it was just exhausting as we went through what that would be. And one day we just sort of said, why bother with this? Let's just give this software away for free. It is a commodity. It's not sexy. It is back office insurance processing. Let's give it away for free. Let's let people completely own it themselves, take it to whatever they want, and then let's just offer the services around that. So as opposed to having--

[00:04:04.81] REID HOLZWORTH: I just want to say for a lot of people that don't know and know in a lot of people in the policy administration system space, there's a lot of customization that needs to be done to those solutions. So it's a huge pain in the ass for somebody to go and get the software. It's not like it just turnkey for people that don't know.

[00:04:23.57] LUKE MADDEN: You couldn't be more right. The biggest lie told on the sales cycle when you're selling these. And I've worked for a lot of different companies buying and selling these software is that, no, no, no, pay the money. We've got templates that will match your insurance products and we'll be out to market in three months. Like that is never the case.

[00:04:42.23] I typically don't believe that these big guys can do six months. I think it's 12 months. And it's because if it was so standard, like insurance would be a commodity business right now. Now, granted, I do more on the commercial side, more on the excess and surplus side. But those folks are out there making money because they've got very specific niches. They've got very specific secret sauce that they have.

[00:05:04.67] It takes time to implement all of that. And that it drives ridiculous budgets. And I'm sure many people, probably, particularly on the underwriting side, the people who own profit centers at insurers, they're like, well, I'm doing this. Let's just get it. They get everything done, and then they talk to IT. And IT is like, well, that's going to take nine months and $2 million. That's what we see everywhere.

[00:05:27.87] REID HOLZWORTH: Yeah. There you go. Yeah, no. 100%. That's what I'm saying, man. So OK. So what's happening? So like are you doing that?

[00:05:36.47] LUKE MADDEN: Yeah. So listen. OS policy, which is our cloud-based policy administration solution, we launched that a few months ago. It is out there. It is 100% open source, 100% free. You can go to combineratio.com. You could click the link. You get access to the GitHub repository for the technical folks there. But you can take that. There is we have no ownership of that any longer. We have given that to the industry.

[00:06:02.74] We've got a big push that we're doing for it. And then if you took it, we would love to do the professional services. We're very good at it. We do projects like rarely do we do a project that takes more than three, maybe six months, depending on what it is. We've got sort of like a hosting solution too if you wanted sort of enterprise hosting solution. We handle that.

[00:06:24.66] But really, our thought is that it doesn't make sense. For a risk averse industry, it sure feels like insurers are willing to give a lot of trust in these software companies and put all this money in and they own nothing. If it's a SaaS-based solution, you own nothing at the end of the day. Huge investment, that software company could change their mind. They could go in a different direction. They could get acquired.

[00:06:51.23] And then where do all those customers end up? We have seen this time and again in the industry. Our thoughts about it don't spend all that money on this investment. Don't take these huge risks. Take something off the shelf, use it as a starting point. Leverage us or whomever you want to help make it exactly what you want. And then you can own something. You can be done with it.

[00:07:12.07] This can be a checkbox commodity. And then take your budget, take your time and your thought, the room you've got for strategic thinking. And focus on the stuff that you actually think is going to make a difference. Go actually fund and focus on your AI strategy or your distribution technology or any of that.

[00:07:31.32] Back office insurance policy software, that is not sexy. And maybe people would argue, but I don't think it's ever helped anybody make any money in the real world.

[00:07:41.45] REID HOLZWORTH: I wouldn't go that far. Come on, man.

[00:07:43.45] LUKE MADDEN: Well, I think the software companies. I mean, listen, the software companies are making a ton of money, but I don't think an insurance carrier has ever purchased a policy administration system. And then all of a sudden, their combined ratio drops that next year. Don't think it happens. I think it is always just an expensive necessity.

[00:08:01.55] REID HOLZWORTH: Yeah. No, I'm with you. I'm with you. Man, somebody's going to throw a brick through your house.

[00:08:06.75] LUKE MADDEN: Let them do it.

[00:08:07.55] REID HOLZWORTH: When you wake up tomorrow. Sorry about that.

[00:08:11.47] LUKE MADDEN: And I appreciate-- I can appreciate that this goes against 30, 40 years of conventional thinking in the industry, and that a lot of people have built careers doing this. And that's not just like the software side. It's for every CIO that just signed a $50 million project with one of these big insurance companies-- I'm sorry, technology companies, one of these big consultancies. Like this is a threatening thing. It's an unpopular thing.

[00:08:39.27] I don't know what to say about it. There was a time when we all paid for email, and then all of a sudden, one day, all personal email providers were free. Nobody would pay $10 a month just for an email address anymore. I think this is the same thing. Policy administration solutions, specifically, is a commodity, and there's no reason it should cost you $50 million to get in the door.

[00:09:04.88] REID HOLZWORTH: Wow. Yeah. Well, the thing is man, to really unseat that, though, long term, there's so many big relationships between those system providers, let's just say, and all the SIs and the SIs with the C level and you know it, especially at the top-top level.

[00:09:26.40] I could see it, though. I could see it happening. I could see, like I said many, many years ago, this is what Acord should have done.

[00:09:36.76] LUKE MADDEN: Don't get me started. Boy, I don't know who's running that organization anymore.

[00:09:41.72] REID HOLZWORTH: I don't know. Well, Pieroni is out, apparently. I don't even know. I don't follow him. Somebody new, I guess. I don't know. I don't know.

[00:09:48.97] LUKE MADDEN: They should reach out maybe. Quite honestly, they should 100% reach out. Don't get me started. Take OS policy, put all of your record forms, both in an ingestion and an output in it. And then as part of that subscription to Acord, give everybody core software. They should do it. I would love to have a conversation. Software's out there. It's free.

[00:10:08.63] And then all of a sudden, you have a real asset that's not just fillable PDF forms. But to go back to your prior point, too, about the relationships, and your right. And for the record, what we have is not for everybody. If you were an insurer that had a very standard commodity line of business or book of business, that had a lot of content, there are software companies that make more sense.

[00:10:32.95] If you were writing NCCI workers' compensation, personal, auto, and home, there are maybe some faster, more expensive, but more turnkey solutions out there. So I think the big software companies will always have a place doing what they're doing. But I'll tell you, in terms of the relationships with the big SIs, this, to me, seems like a slam dunk.

[00:10:55.43] Why someone isn't picking up the phone? And I know many of these, SIs. And calling me and saying we want to start our own OS policy practice. They could cut out the software company. They could cut them out and do all this themselves. Because I think that many, many of these big projects really start with the SI relationships before they get to the software.

[00:11:14.75] REID HOLZWORTH: 100%, they do.

[00:11:16.69] LUKE MADDEN: Yes. I could have something and just cut that whole out, move faster, have more control for the relationships on particularly like bigger companies, the bigger CIOs. I mean, I think that's a tough one. I think that you've got people who have asked for a lot of money for a lot of years. And then to go and say, well, I like this free one now. I think that that's tough.

[00:11:36.11] But I'll tell you, I spent 10 years at a carrier in IT. I think that what we could give particularly the big guys an opportunity for is to once again run an IT organization that is an engineering shop. I think the insurance companies have ceded engineering talent to software companies. And I think that it makes me hard to understand what modern IT organizations do.

[00:12:02.40] I think they typically become babysitters of vendors, and they become like whiteboard architects of how systems plug together. Now, I spent many years as a whiteboard architect. I have a lot of respect for that. But I think that this is an opportunity for insurance companies to say, listen, we could have our real engineers really working on this ourselves. We could take control of this process and we would give you a starting point.

[00:12:29.22] So you're not trying to reinvent the wheel by building something from scratch for $30 million six years. Start with what we've got. And then you could innovate yourself. But that's just my two cents.

[00:12:38.94] REID HOLZWORTH: In order for that to work at all, it's got to be like an industry standard like everybody's behind it. People are contributing to it a bit. Don't you think?

[00:12:49.72] LUKE MADDEN: I do. And here's where we're focused on--

[00:12:52.42] REID HOLZWORTH: New lines of business are going to come out. There's just stuff you got to do.

[00:12:57.18] LUKE MADDEN: I think so. And honestly, where we're really focused, we're down market. I will say that our sweet spot is $3 billion on down in terms of the carrier side. And then MGAs, MGUs, program administrators, these are the folks who want to own something, have no patience for the big consulting view of this world.

[00:13:22.34] And those guys are willing to contribute to a community. And honestly, when you look at how mutuals have come together and some of these other organizations to build technology, Ivan's right back in the day was companies coming together.

[00:13:37.46] Listen, and some of this is optimistic still, based on what we're seeing, based on the deals that we're closing right now. I think that we're going to see a groundswell for these smaller organizations operating in niches who really focus on underwriting.

[00:13:52.09] I think that those guys want to underwrite. They don't want to worry about this nonsense. I think that we're going to get enough of those guys that all of a sudden, that's going to bring-- that'll be the community that sort of coalesces. And honestly, for me, I don't ever need the big guys. So we're here in Hartford, Connecticut. I can see the Hartford's building. I can see travelers over this window right here.

[00:14:14.99] Eight years, we've run combined ratio. I've never really gone after those guys to do any business. Despite the fact I work for 10 years over at the Hartford. Those big giant companies, they're not necessarily looking for us, and we're not looking for them. I'd hope. I'd love to do it. I'd love for them to come around.

[00:14:29.07] REID HOLZWORTH: I don't know, man. I will say this. I know those guys. All those guys, they're good people, man. They're not hoping for working with anybody for real. And so I don't think it's that. And I don't think that those relationships-- like I said, there's big relationships and whatnot.

[00:14:45.78] It just take a bit to disrupt that for that to fizzle out to where the value is so much more swayed toward the side of hey, now I own this data model, this software, this platform, whatever it may be, this is ours that we're wrenching on and working with, all these individual partners out there within the ecosystem to make it into our own solution. But it's going to just take time.

[00:15:11.38] LUKE MADDEN: It's going to take time, Reid. And I'll just tell you, if I were to-- and I don't know. Can I name names here? let's do it. So when I look at the industry, I will tell you right now. We don't have ambitions to supplant the big software guys. The Guidewires, Majescos established Duck Creek, those folks are big. And I appreciate the value.

[00:15:37.62] Whatever Duck Creek's doing for some of these big international companies, that's not a fit for us. Those guys will be there. But I was talking to an analyst a couple of weeks ago, and they were talking about they're analysts write up of policy administrations, vendors, 45 companies have policy administration solutions.

[00:15:56.24] Now here's just what I'll say. How many of those companies have more than three customers. And how many of them are dependent upon venture capital to survive? Here's what I'll say. What I want? I want to wash out a lot of that. I want that business. I want the guys that Instanda and Socotra are going out for.

[00:16:13.14] You have to talk to us as part of your buying decision before you spend that money. And then you could spend it where you want. But we are a very interesting, different decision. I want to go after all that. The big stuff is going to stick around. There will always be a place.

[00:16:25.76] REID HOLZWORTH: Oh, yeah. Yeah, yeah, yeah. That'll be. Yeah, it'll stick around for a bit. But it's funny. It's like a provocative conversation right. Because it's like, what would the industry look like if there was a standard solution like this for everything? Not even just policy administration.

[00:16:45.87] LUKE MADDEN: Reid, this is a conversation-- I'll talk to you for hours about it offline, I'm sure.

[00:16:53.57] REID HOLZWORTH: Tread lightly here.

[00:16:55.95] LUKE MADDEN: If a groundswell of people took the policy for free, why don't we, and I'd love to work with people if anyone's interested, give me a shout, why isn't there also an open source agency management solution? And then all of a sudden, if the technology driving the distribution chain was open source, maybe there's a not for profit in the industry or something that is managing it, we'd love to do it, then how do things really change?

[00:17:24.09] It goes back to Acord. If I was Acord, I would have open source agency management solution. I'd have an open source carrier solution. I'd have everybody just take it. And then what I would charge for is a very reasonable transaction fee to move data between all those systems.

[00:17:44.52] Everybody would be better. And then what we'd all be talking about, and I know it's what most people are talking about now, but we'd all be seeing real interesting strategic, visionary technology plays. You know what, AI, we would be seeing a lot more interesting things as opposed to just call center replacement or ingestion.

[00:18:04.74] We need to free people's budgets, time, and effort up from core commodity software and let them focus on the cool stuff. That's how the industry gets better.

[00:18:15.72] REID HOLZWORTH: Yeah. I will say, though, something you said earlier about how these carriers have just become like vendor babysitters and whatnot. That's not really that true either. Like, this is true. There is a big part of them that do that. But I do know some of these carriers that do rent on some really cool shit.

[00:18:31.30] LUKE MADDEN: And I will tell you. So that's interesting. Let's talk about that. So you are right. And you know where you see most of this cool stuff that they're doing, you see them in these innovation departments. You see them in innovation departments. You see they're bringing in real talent. They're developing real talent, and they're trying to do cool things.

[00:18:47.28] I will just tell you, those groups are the first groups that start getting cut when things get a little bit hard. And how many times-- for those on the software side, trying to sell cool, innovative solutions? How many times do you get that proof of concept with an innovation group, where they have the greatest proof of concept? And then it goes nowhere, then it doesn't change the world at all.

[00:19:06.60] And it's because, here's my opinion, those guys doing cool stuff, they hit their head against big enterprise IT when it's time to really get out there and make something happen. And it's the same story. We'd love to get to that. I think we've got spot in our roadmap in 20 months because we're in the middle of a Majesco implementation.

[00:19:23.80] REID HOLZWORTH: So freaking true. That's so true, so true. It is true. It's true. It's true across all of it. All of it. All of it at enterprise level.

[00:19:34.15] LUKE MADDEN: And again, my point is not that my enterprise is better than everybody else's enterprise. What I'm saying is that-- and this is something that I say often and I agree. I want to be the Honda Civic of policy systems.

[00:19:50.33] REID HOLZWORTH: You are Honda Civic.

[00:19:51.61] LUKE MADDEN: Yeah. Not everybody needs a luxury car. Sometimes, you just got to get a car that gets you from point A to point B in a reasonable way. That's what I want, a car that anybody could have, fades into the background and does 95% of what $110,000 luxury car do. That's what we want to be.

[00:20:11.33] And I think that if that was an option out there, that more people took, they'd be amazed at the other things they could do that are cool and innovative.

[00:20:20.67] REID HOLZWORTH: Yeah. Know it. Dude, I totally agree with you. I believe it. They don't have to sit around and wrench on the really complicated back end hardcore stuff. They can. But if you provide that and the connectivity for everything, and then you give them a platform to start to build stuff on top of, everybody will start building all this innovative stuff, just like you said.

[00:20:43.70] I mean, all this AI stuff, it's all smart document ingestion and all this and call center stuff like you're saying. It's true. What else could you do if you had all the data already stood up and you were already talking to everybody and already connected to everybody. It's a completely different animal.

[00:21:00.56] LUKE MADDEN: And I'll give you an example. If someone out there interested in buying a policy administration solution, let's say you buy one, it's going to cost you $500,000 a year. And then you bring on someone to do an implementation. Let's say it's reasonable. Let's say it's $2 million. You'll be amazed about how much of that money, time, and effort is going to, for example, let's say commercial auto.

[00:21:23.60] Figure out the user experience between states that are uninsured underinsured as a single limit, and states where it's split out into two limits. That kind of stuff is important. It's insurance. It's how the policies get done. But that type of thing has nothing to do with what you want to do to get out there and differentiate yourself. There's no AI thing that's going to be there. That is just commodity nonsense. Let's get it done. Let's get it out there and let's move on.

[00:21:50.54] REID HOLZWORTH: Yeah, that's a good point. It's a good point.

[00:21:54.98] LUKE MADDEN: And again, and maybe this conversation is getting long and boring and I get more excited the more boring these conversations get. It's very dangerous for podcast hosts, Reid. But I will just say, the opportunity for the industry to come around on something, I think, makes a lot of sense.

[00:22:16.67] Let's just say, take combined ratio out of it. Let's say everybody gets together in a room and they don't invite me, every big insurer, and they're like you know what, let's all use this the software. Let's all try to make it better. Let's all decide what we should work on and contribute back to the open source project and get it there.

[00:22:32.07] If there was a lingua franca for processing software, and let's take the data models aside. Let's take the Acord-y stuff like what fields for what products. Let's just say this is the platform. Everyone runs on it, to use your words. And then let's just all just agree, we want to stop paying stupid money for this and we'll come together on that.

[00:22:52.63] I don't understand who's hurt by that decision. It feels like such a win-win-win to me. I don't know. I mean, I know who's hurt, I guess.

[00:23:05.03] REID HOLZWORTH: Software companies are going to be hurt by that decision.

[00:23:08.07] LUKE MADDEN: My dream, Reid. And this is the most arrogant dream in the world. And maybe it'll never happen. Here's my dream. For these big software companies with core products, I want, in their year end financial statements, them to have to put a couple sentences in, addressing the proliferation of open source tools in their core space.

[00:23:33.86] This should be threatening to people. And I think it is going to be threatening to people. But as long as everybody is saying, it's not the way we do it or we've done it this way or everyone else is buying XYZ, let's do that. I think that there won't be any change.

[00:23:47.72] REID HOLZWORTH: Dude, I think all this shit is going to go this way in what you're saying. It's too easy to build technology these days, man. It really is. It's not that complicated.

[00:23:59.08] I mean, you get some really smart people that know what the fuck they're doing. You can turn out some really badass shit in a short amount of time for real. People coming together like Acord used to do in having meetings about standardization of certain stuff. That's not even that huge of a deal.

[00:24:19.34] There's platforms designed and built for that type of community that you can build. It's so different now than it used to be. So I think, yeah. I think it will go to that eventually. That's the biggest risk. When we're looking at acquisitions and stuff like that, the big risk is not like who else is going to do this. It's wow. How can the customer do this themselves in the future? You know what I'm saying?

[00:24:45.92] LUKE MADDEN: Yeah.

[00:24:47.11] REID HOLZWORTH: And it's trying to get in front of that and build badass shit in front of it. So because that's what they want. That's what they need. And if they don't have to build it, that's great. They can buy it. But there's going to be a bunch of them that are going to start building their own stuff, or they're going to build stuff on a platform that's nimble enough to do so.

[00:25:08.58] I mean, it happened many, many years ago. Salesforce was the promise of it. Salesforce didn't do it. Sorry, Salesforce, you still haven't done it in this industry. Same thing, dude. They got all bunch of people got in a room together. And we're going to change the industry. And Salesforce is going to be the platform for that. It's just it's not happening, but it will. I think it will.

[00:25:30.87] LUKE MADDEN: I think it will too. Our thought is it's going to happen at a grassroots level. Because you're right. Like these big giant companies are like, we're coming into insurance. And I will just tell you, as an insurance person, we all look at that with a little bit of skepticism. I think that if you don't grow up in insurance or spend like a reasonable amount of time, it is difficult to understand the complexities of insurance from a technology perspective. I think that our thought is--

[00:25:58.89] REID HOLZWORTH: By the way, I will say to that point, the software companies will always be around because of their expertise in that way. But I think that they're going to change-- their role will change as time goes on.

[00:26:12.67] LUKE MADDEN: I agree with you. But you look at the software companies today, particularly in the policy space. A lot of those companies are very light on real industry insurance expertise. A lot of entrants coming from outside, looking for an easy buck. But no, I think that it's a grassroots thing.

[00:26:30.92] I agree. There needs to be some level of-- I hate the word disruption, but disruption. And for my entire career in this industry, 25 years, I don't think we've ever really seen it. We've seen big players supplanted by other big players. But policy administration has been great to me because I had to learn it really, really well once, and nothing's really changed, except for the logos and some of the names.

[00:26:55.90] But I think we're coming to a place where this needs to change. It needs to be better. And I'll go one step further. I think that there's an industry's trend that I think that people are starting to talk about. It's particularly on the commercial side, which is about underwriting is going to start moving up the distribution channel.

[00:27:17.31] I think that we see it way-- we're seeing a lot of it now with a lot of these MGAs that are backed by fronting companies, a lot of program business that's coming through. Good groups of underwriters have value and can make their own stop in the distribution channel. These are the folks that are going to need core systems. Those guys don't care. They don't have a $55-million IT budget behind them to do things.

[00:27:46.18] I think that if we really did a great job at combined ratio, supporting these real underwriting-based organizations with core back office software that get them done, I think that there'll be less and less of that necessary on the capacity side of this. I think that we're going to see this need move upstream.

[00:28:05.26] REID HOLZWORTH: No, absolutely. That's awesome, man. That's awesome. Wow. It's a pretty provocative conversation we're having here, I'd say.

[00:28:15.50] LUKE MADDEN: I hope so. I never know, Reid. Or it's always one or two things. It's either oh, I'm being unpleasant and people listening to this are like, we're done with him, or I'm being boring. I always hope to find a middle ground, but I have no gauge on this. And then this will all be done, and you'll send me a link to listen to this. And I'll be like, I better find out how this goes. And I will hear myself talk for six seconds. And I'm like, I don't care what it sounds like. Just go. Like, I can't listen to me.

[00:28:41.33] REID HOLZWORTH: Dude, I'm not joking. I think I've listened to a few of these episodes. I don't ever listen to my own shit. It's like I just can't do it. I feel weird. It makes me feel like I don't know. I'm just not into it. Not my jam.

[00:28:56.27] What do you think is going to be the next big move in the industry. What do you think, will there be change in the industry? We talked a lot about this. I could see that happening. It's going to take quite some time, but I could see the industry moving to exactly what you're talking about.

[00:29:15.46] If the industry comes together around it, 100%, like some sort of-- because people are going to have to contribute, they're going to have to-- there's some geeky industry stuff that you need to be able to come together on. Not to say that you and your company can't do that. But you know what I'm saying.

[00:29:31.46] LUKE MADDEN: You're 100% right. Now, here's my two cents about technology change in the industry, is that I do not believe this industry is going to have big technological change. That's not driven by business factors. Here's what I will say. I don't think that a whole bunch of companies are going to come together and say, boy, that Luke knows what he's talking about. Let's change everything that we're doing.

[00:29:51.18] What I think is going to happen is that we'll need to see some real pressure on-- like I said, I think if underwriting and commercial and [INAUDIBLE] if underwriting moves up and it becomes more centralized with MGAs, wholesalers, program administrators, I think that with that means the capacity providers are going to have to drop expenses because there's additional fees that those guys get to charge for that.

[00:30:17.44] And I think that expense pressure is something that would make some of this happen. I think the other thing is new players that want to come in. So I don't want to speak about insurance capacity. I'm not the right person to do it. But there's a lot of interesting capacity floating around for MGAs and MGUs. There's Lloyd's fronting companies. There's reinsurance fronting companies. There's a lot of this where you've got big established players willing to give capacity to new entrants.

[00:30:43.62] But those new entrants need to check some boxes, from a technology perspective, to prove that this is like bulletproof enough to transact business.

[00:30:52.90] REID HOLZWORTH: Yes.

[00:30:53.62] LUKE MADDEN: We offer solutions to do that very, very quickly. And you own everything and then very inexpensive if we implement it. I think that if that starts happening more, more people will be interested in US and be there. Here's the change. I think. I think that the industry is going to stop biting off $30 million IT initiatives with dubious CBAs.

[00:31:15.41] If I had to say one thing, it's going to be to your point about people wrenching on cool stuff, I think we're going to see more people taking innovative, small, incubated projects and really funding them to get bigger, as opposed to CEOs who are interested in, given the green light, to a $50 million core system replacement.

[00:31:35.99] So that'll be the change. And I think that with that means everyone out there doing cool stuff, and I'm jealous of all of you, I think that you guys are going to start getting more and more traction. I think that lots of these AI startups look very, very interesting to me. There's a lot of cool stuff happening in distribution. I think that's all going to go, go, go.

[00:31:53.51] But on the boring, administrative back office side, I think that budgets are going to be very, very difficult to do stuff. And that's what we're banking on. We become very attractive in that light.

[00:32:07.99] REID HOLZWORTH: This is awesome. I love this conversation. Yeah, no. It's crazy times, man. I think, for me, when I think about all this stuff, like I said, I think it's just easy to build technology. And when you're talking about incubating stuff internally and building cool shit and bringing that to market within your four walls, it's also very easy to build enterprise grade technology these days within your four walls.

[00:32:36.98] LUKE MADDEN: I think so.

[00:32:39.36] REID HOLZWORTH: So people get mad at me when I say easy. Nothing's freaking easy. Let's be real here. You know what I'm saying.

[00:32:45.06] LUKE MADDEN: It's feasible. It is very feasible. I think that you're right.

[00:32:47.68] REID HOLZWORTH: Thank you. Yes.

[00:32:48.50] LUKE MADDEN: But I'll tell you what. None of those people are going to be building boring stuff. And if I were to say, with combined ratio, what we want to do is I want to corner the market on boring things, and I want to do boring things in such a way that nobody has to think about it, that it is a reasonable price and it moves at a reasonable speed, and it good quality. And we never have to talk about it again, because everyone out there is building enterprise stuff that is cool.

[00:33:13.80] That's what we're hoping for. And the fact that it's an open platform means that there's no ecosystems to navigate. We don't have to worry, build the integrations. We got a whole integration layer there. If it doesn't do something, it's open source. Do it yourself. We want to enable all that cool stuff. We'll just take care of the boring nonsense.

[00:33:30.70] REID HOLZWORTH: The Honda Civic,

[00:33:31.92] LUKE MADDEN: Honda. The joke that I make, particularly when we're-- depending on who we're selling to if at a high level, I'm like, listen, your kids might want a Porsche 911, but you're looking for a used Subaru for those kids. Go ahead with Guidewire. Beautiful, awesome, powerful But maybe for your 18-year-old, you just want to give them a Civic to get back and forth to work. That's what we're offering.

[00:33:59.18] REID HOLZWORTH: Yeah. Yeah. Hey, what do you think Salesforce's role is going to be in insurance moving forward? Do you run into a bunch of Salesforce stuff? Or it pop up like every couple years. They're doing this big thing in insurance, blah blah, blah, blah, blah, blah, blah. Now, there's all this agentic stuff, that's the agents and all this. And that's their big thing. I don't know if you get into any of this.

[00:34:19.33] LUKE MADDEN: Well, no. So I'll tell you. So yeah. We invested a bunch of money that didn't work out because we decided years ago that Salesforce and Microsoft Dynamics, just as CRMs were too expensive and crazy for insurance companies.

[00:34:35.09] We built and launched an insurance-specific CRM. It's floating around a little bit. It didn't light the world on fire. It's now going to be part of our premium hosting with OS policy. I like it very much. But what we realized is that--

[00:34:46.09] REID HOLZWORTH: There it is. OK. All right.

[00:34:47.53] LUKE MADDEN: Wait, wait, wait. But what we realized--

[00:34:49.07] REID HOLZWORTH: Premium model. That's what I just heard OK. Whatever.

[00:34:54.13] LUKE MADDEN: So what we learned was that-- listen, Salesforce, let's just take CRM like what it actually does. Salesforce is too much for insurance companies, but they're going to continue to bring it on. I don't know why.

[00:35:08.85] REID HOLZWORTH: It's too expensive.

[00:35:10.01] LUKE MADDEN: I think that it's too complicated. I don't think that-- I would have thought-- see, we thought the cost would be a concern. $170 a seat, whatever the heck it is. It's expensive in an enterprise level. I think it's not cost. I think that it is too complicated to do integrations, to make changes. And typically, today, it's so focused in the marketing side of it like that sort of agency selling type of side that those people don't necessarily get budgets for real software work.

[00:35:36.43] But what you're really talking about is well, on that force.com platform, are they going to be able-- when you see so many things right sort of built on Salesforce, all of this, it sure feels like if they were going to do it, they already would have done it.

[00:35:51.05] I feel like we've been hearing things for ages. There have been great, great solutions built on Salesforce. And I don't just say that because I'm talking to you. There are others for the industry, but it boggles my mind a little bit that it doesn't happen, but I think if it was going to happen, it would have happened.

[00:36:09.66] I| don't know what the going rate for a force.com developer is right now, but I think that that's a competitive market for people. So I think there's a talent thing. I don't know. My vote is they'll continue to do CRM, but I don't see them. I'd be surprised if they had a really compelling offer that an insurance that did a whole bunch more than that.

[00:36:33.02] REID HOLZWORTH: Yeah. I think it's tough, man. I mean, the Salesforce product, the Salesforce platform product, really platform, is pretty amazing. You can do a lot with it if you know what you're doing. And when people say, like, whenever I hear somebody say, oh, it's too complicated. We did that shit for years, man.

[00:36:56.84] It's complicated to build on. It's complicated to understand. Kind of similar to insurance in a way. But you can really simplify it if you know what you're doing.

[00:37:07.63] LUKE MADDEN: That last part's the magic part there, though, Reid. You got to know what you're doing. You have to be able to dedicate the time. I don't think that's why people-- I don't think people go into the Salesforce buying process, thinking that's the truth. Big enterprises do.

[00:37:22.23] If you're looking for a CRM to track how many times your agents, your salespeople talk to your insurance agents, I don't think they go in thinking, oh, I got to get smart about how to make all these changes and do it.

[00:37:34.03] REID HOLZWORTH: Yeah. It's complicated. It's big. There's a lot to do there. And I think where Salesforce has struggled on this for many years is they leverage the partner ecosystem, which totally makes sense. And the partners went out and they were on top. And they were OEM or just straight up ISV. And they crushed it in that way for a bit.

[00:37:53.73] But then Salesforce is like, hey, let's do this. And so they went and they bought Vlocity. Always going to mix up Vlocity, Vlocifier. I get them mixed up. Velocity, which is run by David Schmaier. They were like the first real vertical bet that Salesforce made.

[00:38:11.33] And insurance was one of their verticals run by really smart dudes like Raja, All those guys, everybody over there, real smart crew that David Schmaier put together. And they went after it. But it's interesting. Vlocity was building a policy administration system native to Salesforce. That was their big bet. And they got it in the hands of a couple of carriers. I'm not going to name names, but I know one of them, one of the last ones that's on it. And they're moving away from it.

[00:38:40.35] So the promise of the force.com platform was like, you can have the agency management system on there. You can have the policy administration system on there. Back in the day, that's what we did at TechCanary, obviously, on the agency side. But what's really interesting, Luke, is like when we would sell these customers in the insurance industry, we didn't sell just agencies, but carriers as well for all kinds of different things because of our data model that we built on Salesforce.

[00:39:07.22] We'd always be like, sky's the limit. You can build whatever you want to build. You can do whatever you want to do, blah, blah, blah, blah, blah. It's so easy. Look, it's declarative. You drag and drop fields and change your page layouts and do whatever the hell you want to do. And, dude, 98% of the people wouldn't do anything. They just wanted to use it as is.

[00:39:27.80] LUKE MADDEN: Reid, I'm just like you.

[00:39:30.06] REID HOLZWORTH: [INAUDIBLE] buyers too.

[00:39:34.70] LUKE MADDEN: I'm with you. I love a cool tool. And I love something that lets you do things that you would have had to ask other people to do. And so listen, we went through ages-- this company where I did the same thing. I would go in and talk to clients, prospective clients, and I'd be like, well, this is what we do. But we could do all this other stuff. Let's use our imagination here, blah, blah, blah. Can I just say my experience is especially in insurance.

[00:39:59.47] And it's not for everybody, but for most people. Fancy technology helping you make that much more money. We are checking boxes to keep up with competitors or to make sure processing works. They just want something that does what they want it to do, and they want it to be done the easiest way possible.

[00:40:14.63] And so again, I think that there's room for that innovative side. But I think that you need to start those conversations. Then you got to be coming to people who want to talk to you about innovation, trying to talk to people about just like core software and then get them excited about the innovation. I think it's tough. I've come around that it's appropriate.

[00:40:32.55] Sometimes you're just looking to put fingers in a dike and keep the river from killing you. And sometimes you're looking to really get out there and build ships to sail. I'm happy to be on the dike, just keeping things going and making it happen there. But I do agree with you. I don't know. It's difficult to get people excited about possibilities when I think that they're buried in 700 requests from the business that are six months old, that are getting yelled at every day, that aren't fixed.

[00:41:02.21] REID HOLZWORTH: Yeah. And I think that just in our industry, there's just the day to day. And it's tough, man. People are busy. They're just overloaded with stuff. And I think that's where you get a lot of friction because it's like what? Then now, what? Come on, man. You know what I mean. I think there's a lot of that. People are just busy. And then the change management around all of it is just gnarly.

[00:41:24.07] And so the innovation side, it's like they're open to it and they want to talk about it. People used to buy our solution back in the day because they love that idea of doing that. But our solution was so highly customizable, and it was kind of built in that way that people would struggle with it sometimes. Because it's like, wait, what? I gotta like, no. You're like, this is your thing that you got to go and build.

[00:41:48.63] And I think I'm kind of going back to this like free platform, free software, all these people, all this stuff. You'll always need the experts within the industry, I think, generally, that are going to help you build those workflows that have done it before.

[00:42:03.04] LUKE MADDEN: And that's what we have. And so Reid, I don't know if that was on purpose or that just worked. I think you're coming around for me here. Look, combined ratio solutions. We've been around for eight years. Let's say a little bit over 200 people. We only really do property casualty insurance. And we're all insurance people. This is what we do. We are experts in the field.

[00:42:22.90] The value of us is we'll go to a meeting and you just got to tell us what's the business side, what's going on. We can go out and run. We don't need hand-holding. We don't need to teach us insurance. We wanted to create a situation where we could make that more valuable to people. And so to your point, we got this open source platform. It's very configurable.

[00:42:43.58] Boy, howdy, like from an insurance perspective, you could do anything with it. But I don't know. I hope that some people take it, use it, love doing it that themselves. What I really think that that's going to do, though, is it's going to let people like us move very quick to take their expertise and instill that into an implementation for a specific customer, and do it faster and easier and better.

[00:43:05.61] And it's going to make it more affordable to deal with experts on this sort of platform than to go for some of these big guys or these big consultancies where you sure met the insurance A team when you bought, when you signed the contracts, but then you're now dealing with people who have never seen insurance in the world. We want it to be easier to deal with experts.

[00:43:25.81] And I'll just go back. That's why I think everybody who's an expert in this space, who's sort of a business architect or someone who really knows this space and is consulting or whatever in insurance. Why not take the open source? It's all documented. Bring the product up. Offer your expertise in a product, and save your customers from going down that terrible buying process.

[00:43:48.99] REID HOLZWORTH: Yeah. So what if one of the software companies, could one of the big, big companies just do this? What if they got-- I don't know. Maybe it's not fair to say, got their shit together in a way. What would their shit together look like? I guess, that's a question. Could they get in front of this? And they're like, listen to this podcast. And they're like, oh, shit, what do we do here? I mean, what do they do?

[00:44:14.41] LUKE MADDEN: I'll tell you what. They could get in front of it. They could get in front of it by dramatically dropping their prices by offering a better solution for customers to own the technology assets that they're paying to implement. And by having SI partners that are dependable, fast, and inexpensive, that make it easier.

[00:44:33.83] I think that quite honestly, I think that if somebody could do those three things, I think that our message would be a lot less impressive. But I will tell you, they will never do those things because the economics that they've built those companies--

[00:44:46.77] REID HOLZWORTH: I'm going to say, OK, how do you that and still make money?

[00:44:50.62] LUKE MADDEN: I'll go back to something else. So combine ratio solutions. We are privately held. I own half of it. I got a partner over here that owns half of it. We have no investors. We have no private equity. And we're not looking for an exit anytime soon. That is why we can do this. And we're making a gamble. No lie. Here's the gamble.

[00:45:07.10] This sort of makes sense. But the gamble is if we do something and we say, you know what, what's best for the industry? Let's do what's best for the industry and try to monetize around that and see what happens. That's the gamble that we're making. No company with bankers and masters would ever be allowed to make that gamble.

[00:45:27.26] That's why no one's going to be able to get ahead of it. I don't know. Here's how someone's smart is going to get ahead of me. And I'm going to support them every step of the way. Let's say a big giant consultancy like Deloitte, Accenture, they're going to check out this software in GitHub. They're going to pay us 100 hours of some expert to talk them through how this product works.

[00:45:50.17] They're going to build a practice around OS policy, and then that's finally going to let them move down market and have something inexpensive. And they'll snatch up every bit of that and they'll never deal with me. They'll have their own hosting. They'll do everything that we're doing, and they'll take all of it and run with it. You know what I say? And they should do that. The fact that no one's talking to me yet boggles my mind. I think it's lazy. And I think it's hubris.

[00:46:13.07] REID HOLZWORTH: I don't know. Well, I don't know. I haven't seen the software.

[00:46:16.77] LUKE MADDEN: It's pretty good. It's pretty good. And it's in production, running. People are happy with it. But here's what I'll say. If that happened, I say, let's go. I would support that. Like a rising tide floats all boats. And I will just tell you, combined ratio solutions does not need to take over this industry. What I'm looking for is to change the narrative and to be positioned well in that. And I got my own ego.

[00:46:40.29] I like the thought that we would help usher that in. But I would support anybody that wanted to get on board with this even-- or I'll give you another one. What if somebody else, they should get ahead of this by donating some of their intellectual property to the industry themselves.

[00:46:56.71] Agency management solution, give a little bit of it out. Sell the premium solution service, the premium on it. Sell the hosting. Do some of that. That's another thing where we'd be the first ones to help make the integrations, get out there and talk about it. Those are things people should be doing to get ahead of this. But what it really is is it's joining a movement as opposed to shutting us down.

[00:47:22.45] REID HOLZWORTH: Wow.

[00:47:23.17] LUKE MADDEN: We'll see.

[00:47:24.37] REID HOLZWORTH: Hey, Luke, you said don't have an exit anytime soon planned. What's the plan for that? Exit one

[00:47:31.87] LUKE MADDEN: Yeah. Listen, here's what I'll tell you. So I am 45, coming up 45. My partner here, a couple years older than me, and we talk about it. And we've certainly flirted with people interested. I don't know what then, Reid. So again, because we've never taken investment, we've had to be profitable from day one.

[00:47:53.90] The company's profitable. It's working. We don't have any masters. It's sort of a nice place to be. What if we exited, then what? This is what I do. I don't have great hobbies. I'm not going to go to some other industry. This is my hobby. This is what I like to do. And I'll just tell you, there'll come a point in time where I'm sure I would enjoy retiring, but it's not right now.

[00:48:17.96] And so what I would say is, and I'll say this to other founders or other companies maybe a little earlier than us, I think we wasted a lot of time and just mental capacity thinking about an exit and then entertaining exits. And at the end of the day, we always pulled the plug on it. We were always like, no. And I will tell you, I think that is a thief of your energy and time.

[00:48:43.20] I think that if you need to exit, then you should exit. Or if you've got a plan, you should do that. But it was freeing for us when we said no more. We're going to spend three more years. We don't want to talk about it. We don't want to talk to people. We don't want to do math on it. Let's just go and focus on what we're focusing on, which is the fundamentals of this organization. So like, that's why I don't care about annual recurring revenue.

[00:49:09.11] For those of maybe who don't like a software company is valued on their annual recurring revenue. Sometimes you get 10 times, let's say, on that when you sell your company. Services work when you sell your services company?

[00:49:20.14] REID HOLZWORTH: ARR are.

[00:49:22.01] LUKE MADDEN: If you got a services company, you get two and and half, three times. So that's why all these companies don't want to do services work. They just want to sell licenses. They just want annual recurring revenue that has driven the model that insurers now have to purchase into. That's bad for the industry. It was better when vendors did their own services work. They were closed. They had to eat their own dog food.

[00:49:43.15] We can do that because now I don't care about those multiples. I care about we're profitable. We care about the money coming in, but we can align ourselves better to what our customers want, which is that we are profitable. We will stay stick around forever. And we're not going to do anything crazy that's going to change the business.

[00:50:01.81] REID HOLZWORTH: Yeah, dude. I was watching this video yesterday on sport fishing boats of the boat manufacturer, Viking. Viking boats are so badass. They're such sick boats. Anyways, they're a boat manufacturer. And they've been doing it for a long time in New Jersey. And they're talking about how all these other boat manufacturers have gone out of business doing the same types of boats, and how they kept moving along.

[00:50:27.19] And the reason why is because they're a family run business. They could move. They could pivot. They made a huge investment back in the day when everybody was building boats and hulls out of wood and whatnot, and they switched to fiberglass. They're like, I don't know. This fiberglass thing seems pretty good. And so they went after that and make big investments where if it's a business that's run by yourself, you can say, hey, you and your partner, dude, it's all good.

[00:50:51.04] I don't need to get any profit sharing this year. I don't need that. I don't even need to get paid this month. Whatever it is, like, let's do that and let's invest in the business because this is what's going to be best for it in the future. Now that Viking does like close to $1 billion in revenue a year building yachts.

[00:51:09.20] LUKE MADDEN: And I would say, if this is the last thing, I say to everybody, I'd be happy with it. I'm surprised that when you're buying software, when insurers are buying software, they're not spending more time looking at the company fundamentals.

[00:51:25.46] I get that some of these companies get $60 million, $70 million of investment. But if these companies are burning that investment down and they've got a three-year ramp before they need to find another funding round, that would send shivers down my spine. I'm going to give you $7 million to get all this working, and then you could run out of money if someone else doesn't come in and buy them.

[00:51:46.07] It feels to me, again, for a very conservative industry, that people should be looking more about what the exit strategy for the company is. And Reid, these companies that sell, sometimes they sell and they win, but sometimes they just have to sell. And it's rarely good news for a customer when they have to sell.

[00:52:07.68] The customers of that selling company, that is not a good story for those customers. And I think that working with us-- and one more thing. Now you got me talking mildly related. You're in with these companies that have different motivations than you, and you're locked in. Everybody is always locking you into the companies you're dealing with.

[00:52:30.05] One of the huge advantages of having open source software is that you're not locked into anything. We tell everybody, everyone that comes on now, we say, we're going to start this project with you. We're going to do an amazing job, and no one ever leaves us.

[00:52:42.39] But you could wake up tomorrow. You can find new people to do this. You could hire your own people and everything continues. It's just not us anymore. It's new people. You are locked into nothing with us because you own the intellectual property. You own what you have. I think that that's another important thing. But that was a big tangent I went on.

[00:53:00.71] REID HOLZWORTH: I mean, I don't know. That would feel good to me knowing that I own it. You know? But I'm a technologist too. To some people, that's scary. Even owning that, maintaining that being responsible for that, everything's on this stack that you're using and building on. So to some people, that's horrifying.

[00:53:19.81] LUKE MADDEN: You're right. But you got to pay for the comfort. And that's why a Guidewire, that will always need a Guidewire, giant, publicly-traded. That's a stable excellent organization there. But they're there. A lot of these other guys doing business right now feels very fly by night. And you could say, I feel good because they'll be here, but they're going to be here assuming they get their next round of capital in the next two years. If things change in the private equity markets and who's interested.

[00:53:50.14] REID HOLZWORTH: You're talking about, yeah, all the PE-backed policy administration systems. I'm not going to name names.

[00:53:59.58] LUKE MADDEN: Which is most of them.

[00:54:01.34] REID HOLZWORTH: That's everybody, dude. But that's just the game. And I don't know. That game sucks, dude.

[00:54:06.72] LUKE MADDEN: That game sucks.

[00:54:08.30] REID HOLZWORTH: That game sucks. It's like, oh, wait, I have an idea. Oh, wait. Go find somebody to give me some money for my idea. OK. Now I got this person that gave me money. Now they want a return on their investment. That's where it starts. Then it's like, three years later, all right, what's the next thing? We got to do this thing. You got to go sell to this now. Now you're in venture. OK, great.

[00:54:28.28] Now you got venture capital back. OK, cool. Now you got a new master. Now, oh, wait. Venture wants to get a return on their shit. Now you're in private equity. Then you go down the alphabet, Series A, B, C. And it's just more and more and more and more masters, more shareholders. It's just a thing.

[00:54:46.53] And I think it can be good in a lot of ways when you need capital. I don't think you need it in the beginning like that. I mean, some people just don't have the money and can't afford it, and their idea is so expensive that they need humans to contribute to make that happen. Like get a loan for it in that way. I totally understand that, but I think they go too far.

[00:55:08.65] I mean, I've been involved in so much as M&A, and I know what those founders have at the end of the day. It's not a lot. It's the percentage of ownership is-- now granted, it's huge numbers. They get paid huge money. Don't get me wrong here. But it's not like people think.

[00:55:25.47] LUKE MADDEN: I agree. So to your point about not having enough, just like for us, we started this company. We wanted to be a software company. We going to build this seeding solution. I still think it's something that we need in the industry. But things changed. We had no money. We had to start services.

[00:55:47.09] I went on the road and sold consulting services. I still continue to do that. But we didn't start off with a pile of money. We had to get out there and do something, be profitable, and then decide to invest those profits into what we wanted to do. And I will tell you, I think it builds a little bit of-- certainly, it builds a little character, but I think it builds an organization that is more focused on keeping their customers happy than it is managing their capital partners.

[00:56:16.92] If we were going through all that, how much of my time of day would have to be spent talking to bankers? Now, 0% of my time is talking to bankers, all talking to customers.

[00:56:27.19] REID HOLZWORTH: So I will say this, though, I don't think it's bad. I've been there, done all the things. If you have the right partners, financial partners, I think it could be really good and it does work out really well. Sometimes you have really good investors and capital partners in that way, good bankers, where it's not like a huge pain in the ass.

[00:56:47.68] And when you need capital, I think there is a need there. But to your point, the scrappier you can be in the younger years of your business, one, you'll develop relationships differently with those customers because if you're honoring your word, doing what you say you're going to do, you'll start to develop a deeper relationship and connection with that customer in that way if you're doing like what you're talking about. So there's good on that.

[00:57:12.56] But you're bringing money in to keep the business going while you're figuring it all out, as opposed to having all of these partners that are then telling you how you should run the business and what is the best for the business in that way. And not to say they're always-- I'm not saying they're wrong all the time, but it's just like there's certain things that you want to pivot, you want to do and invest in that sometimes you just can't.

[00:57:38.16] LUKE MADDEN: Absolutely. And just like for the record, as I'm being very self-righteous, really, I have years of jealousy about everybody that was taken all that private equity. When we're scrapping through, we're not going to parties. Nobody's flying us on airplanes. We are in the ditches, digging with everybody else. I have this whole chip on my shoulder. And it is from jealousy about how cool that must have felt.

[00:58:06.26] And it's just only when we get to now where trajectories are different, and we look at what we're left with from an equity perspective, from a control perspective, that I get a little self-righteous. But it all comes from insecurity and jealousy, my opinions about that.

[00:58:22.00] REID HOLZWORTH: Thank you for sharing.

[00:58:22.92] LUKE MADDEN: Yeah, most of my personality does, Reid. So yeah. Don't be too offended by me.

[00:58:28.85] REID HOLZWORTH: Oh, man. That was awesome, man. All right. So I'm going to ask you a couple more questions, then we're going to wrap up. This has been good, man.

[00:58:37.35] LUKE MADDEN: It's a pleasure.

[00:58:38.69] REID HOLZWORTH: Always as good. I don't know, man. So what do you think about this AI stuff right now? I mean, I'll give you my opinion. Where I've seen the most value in AI in our industry is on all the ingestion, specifically around the underwriting side, speaking mid-market, large, small, middle, all of that kind of commercial side, generally speaking, but more swayed towards the mid large complex risk just helping streamline the day, if you will, for the underwriter in that. What do you think about that?

[00:59:18.37] LUKE MADDEN: I mean, I agree.

[00:59:19.45] REID HOLZWORTH: In general in our industry, where do you think it's going to go?

[00:59:22.47] LUKE MADDEN: That's a tough one. So let me start and just say that I agree with you. So here's how I think of AI today. If you had something that you have considered outsourcing to a BPO partner to bring in low cost people in other geographies to do, I think that AI is coming in and offers a different alternative, and sometimes it's often faster.

[00:59:43.14] REID HOLZWORTH: It's not perfect. Now let's be real. It's not perfect.

[00:59:46.68] LUKE MADDEN: No. If it was something that you've already thought about sending off to BPO, sending offshore, then I think there's some real interesting, compelling solutions. I don't think that I'm seeing a whole ton interesting beyond that. So here's what I will say.

[01:00:04.90] REID HOLZWORTH: By the way, you're like a science fiction nerd too.

[01:00:07.90] LUKE MADDEN: I am. Oh, boy, I am. I really am. And maybe that's why-- I'll tell you right now, I have this rap and I'll tell you I'm conflicted. I'm ambivalent about it. I am a curmudgeon about AI. I look at it and I say, this is just a clever parrot. These large language models, we see the limitations every day. And I'm like, this is something that is coming to a thing.

[01:00:31.70] But then I'm often amazed by the stuff, the practical things that people are doing with it. So here's just what I'll say. I focus on underwriting-lead organizations. The other organizations like if you're writing again, NCCI workers comp like personal auto, home, high volume stuff, you have so much automation around your underwriting decisions, your pricing decisions.

[01:00:54.28] I don't know where AI fits into that. I think you've sort of got it covered right there. Then for the really complicated stuff, I can't wait for someone to say, you know what, we're going to write crazy risks with an AI underwriter. Those companies will go out of business. The whole point of that niche is that you need real underwriters. And here's what I will say. I think that, and I don't think that this is what underwriters would say. This is just my opinion.

[01:01:21.24] Maybe 3/4 of being a great underwriter for complex risks is an understanding of the industry. And having seen it, I think a quarter of it is like a gut feel. I think that lots of these folks--

[01:01:31.23] REID HOLZWORTH: There's some art there, man.

[01:01:32.69] LUKE MADDEN: There's art to it. And I don't think a machine could ever do it.

[01:01:36.19] REID HOLZWORTH: I totally agree with you on that, 100%.

[01:01:40.05] LUKE MADDEN: I think that underwriting is just going to-- it is always going to be the discipline that makes money for insurance companies. And so with AI, what do I think? I don't know. Here's what I will say. You see a lot of these quote bond issue portals on the commercial side, make it easier to quote. Would it be better if it was just an AI agent asking questions and doing this a better way? Yeah.

[01:02:00.87] I mean, I can see that that makes sense. Someone will get there. It'll be great. They'll integrate with OS policy to do it, but beyond that, I don't know. I could be wrong. But you know what, here's what I'll say, Reid. Going big up against the frothiness in our industry hasn't hurt me yet. I was the one saying I didn't understand how blockchain was going to make a difference, and everyone told me how stupid that was.

[01:02:26.06] Web 3.0, was that a thing? I don't remember. I think we're going to see a lot of proofs of concept. I think it'll do some stuff. I think it's going to hurt the bad BPO providers, and it is going to absolutely elevate the good ones. I think that we should see turnaround times on the underwriting side for submission to quote speed up.

[01:02:49.70] Things that are pains in the asses, agents pulling loss runs. Like stupid manual stuff that I could ask my 11-year-old son to do. That stuff should all get better. But it's not going to change the fundamentals about how we do business in insurance. My two cents.

[01:03:06.86] REID HOLZWORTH: I 1,000% agree, 100%. And yeah, it does feel a lot like blockchain. It's like it's going to change everything. What are you talking about? Tell me how.

[01:03:20.32] LUKE MADDEN: Right. Walk me a day in the life.

[01:03:23.24] REID HOLZWORTH: Exactly.

[01:03:23.74] LUKE MADDEN: I mean, I can't imagine what ITC is going to look like this year. It's going to be 9/10 of that is going to be talking about AI. And it feels-- again, I'm not doing it. And maybe this is going to bite me in the ass. I'll tell you what. If everything turns out to AI and we were a slow mover and I'm out of business looking for jobs, I'll come back on this podcast and I'll tell you all the ways that I went wrong.

[01:03:46.28] But we all got jobs to do. That's all well and good out there, but people are still doing jobs. There's still things that we need. I'm going to focus on those things. And maybe if I were to say this in a better way, let's see a winner. Let's see somebody who moves up the insurance leaderboards because of a real great use in AI. I'll pick on my favorite company, Lemonade.

[01:04:08.64] Boy, howdy. We have heard about their AI processes a whole bunch for the last five years. Nobody wants that combined ratio. So if somebody gets out there and they move so quickly, so nimbly, so inexpensively, and they got good fundamentals, let's follow them. Let's figure out what we can steal and steal. But I don't see anybody. I don't see anybody doing anything where you'd say, oh, we got to copy this.

[01:04:34.73] REID HOLZWORTH: Yeah. No, man. That's a unicorn. Capture it, study it.

[01:04:40.13] LUKE MADDEN: Yeah. I like that. Dissect it. Yeah.

[01:04:43.33] REID HOLZWORTH: But no, I don't know. I kind of agree with you, man. Yeah, we'll see what happens. But yeah, it's interesting. You could see that happening and what you just said. And some carrier like doing it and really crushing it. The possibility is there. But nobody's done it and not doing it. And so maybe we'll get there but yeah.

[01:05:07.67] All right, man. Well this was awesome, man. This is a good back and forth. No plan, just kind of riffing on stuff.

[01:05:14.99] LUKE MADDEN: We'll see. It feels awesome to me, Reid. Your poor folks that are going to go through and do the editing and producing. They're going to be like, I don't know what to do with this.

[01:05:24.62] REID HOLZWORTH: We can't air this one. No.

[01:05:26.24] LUKE MADDEN: I love talking to you, though. Thank you so much for having me back on. And if I just like sum it up, I would say, let's take all of my nonsense aside. I was on here once, and I don't know how long, a year, two years ago, maybe. And we were thinking about doing something. And then this year, we actually did it.

[01:05:42.04] And it really went from, oh, just like a fun thing for us to talk about to no, no, no, this is happening and did it. I will just say that was a very rewarding thing. And having done some interviews and talked about it a little bit, and then to be able to say, hey, I said I was going to do that and look at how we did it, that was really rewarding.

[01:06:00.74] And it really taught me there's value in setting big goals and then just sticking through it, whether it feels good or not. Just saying, I said, I'm going to do it, let's do it. And it's been great, and I appreciated coming on here and being able to close the loop on that.

[01:06:19.26] REID HOLZWORTH: I think that as an entrepreneur, the number one thing you can do to be successful is to stay focused and actually you grab on to an idea, and you just go after it. You keep following it. Where people get into trouble is they go, oh, wait, I got this other idea and this other idea and this other thing and this other thing and this other thing.

[01:06:40.48] And if you have something and you feel it's good and you really believe it and you know it and you see it and you visualize it, that shit will 100% come true. And I think that that's not just in work. I think that's in life and everything.

[01:06:53.64] LUKE MADDEN: It's hard to stick to it. It's hard to keep that clarity of vision, but I agree with you 100%.

[01:06:58.76] REID HOLZWORTH: Yeah. Yeah. Awesome, Luke. Thanks again, man. This has been good.

[01:07:01.94] LUKE MADDEN: Thank you very much, Reid.

[01:07:02.84] REID HOLZWORTH: Next time. All right. Looking forward to the next one.

[01:07:05.70] LUKE MADDEN: Yeah, let's do it. Always a good one. All right. Take it easy, Reid.

[01:07:09.68] REID HOLZWORTH: See you, man.