Bought By Many’s co-founder on launching an insurance start-up
Steven Mendel has tried to turn the insurance market on its head with a collective scheme that tries to secure better deals for individual.
Steven Mendel is searching for a stage hypnotist.
Fifty, in fact – and not because he wants to put on the party of the century, but because he wants to help them find fairer terms on public liability insurance.
His business, Bought by Many, brings together communities of people who have similar, but niche, insurance needs. By negotiating for the group as a collective, the company tries to secure better insurance deals than if the individuals went it alone.
Better, he says, could mean cheaper, more appropriate or better tailored cover – or a combination of all three. But the business works in such a way that it’s a win-win for both sides of the table, he explains: “From the insurer’s perspective, it makes sense, because we help them get access to the precise risk segment that they want to target, on a larger scale.”
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Consumers, meanwhile, score the insurance features that they need at a sensible price point.
The company currently has 296,000 members and 300 groups live on its site, covering health, pets and professions to sports and specialist hobbies. Once a group hits a certain number of people (usually 100), the business will begin negotiations with insurers to get the best offer possible.
So along with 50 stage hypnotists, Mendel’s team is also on the lookout for 20 yoga instructors, 50 scuba divers and a handful of Norwegian Forest Cat owners.
At the heart of company is search and social media data, which is used to create new groups and tailor the insurance terms that Bought By Many takes to market.
“We’re interested in how consumers describe themselves and their passions and problems,” says Mendel. “That could be a medical issue or that they live on a floodplain. Traditionally, [companies in] the insurance industry would say: ‘oh, we know this consumer and what they want’. But we don’t go in with any preconceived ideas; we listen to how people describe themselves and their needs.”
Lots of people thought that we were stark-raving bonkers when we started
Steven Mendel, Bought By Many
Going against what the industry traditionally did and does is precisely what first spurred Mendel on to found the business. For a long time he had been frustrated with what he saw as the financial services corporates – banks, insurance companies and so on – taking advantage of people in a way that they didn’t with larger organisations.
“The way in which you interact with them as a corporate is fundamentally better, stronger and more equal than if you’re an individual,” says Mendel, who once left a corporate healthcare scheme and tried to secure the same deal on his own. “It was the same insurer, family and product, but it was four times more expensive to buy it on my own than as part of my employment.
“While there is an extra admin cost involved in dealing with an individual, it’s mostly about the balance of power.”
So in 2012, Bought by Many was born. Mendel’s mission was to level the playing field, rounding up groups of individuals to give them insurance-buying power on a corporate-like level.
Mendel brought to the table more than 20 years of industry experience, having held senior positions at Barclays Wealth and Close Brothers, among others. He launched the business with Guy Farley and
Sam Gilbert, who brought the technical knowledge and marketing nous.
The first year was especially difficult for the trio, due to the fact that their offering was so new and different. “There were a lot of issues around the regulators, banks, legal firms and accountants not knowing how to deal with us or where to place us,” says Mendel. “Lots of people thought that we were stark-raving bonkers when we started.”
Changing the way that insurance is done is really hard… there’s a long way to go from having an interesting business idea to actually making proper revenue and serving real customers
Steven Mendel, Bought By Many
Doors only started to open when the Financial Conduct Authority launched its Innovation Hub, established in October 2014 to support innovative financial product and service businesses. “My advice to start-ups in this space is to use it,” he adds. “It’s a great tool and the people who work there are excellent. It’s a huge step forward in this area”
Mendel’s other key tip for start-ups in any space is to really take the time to get on top of the company’s legal issues and obligations. “We spent more time and money putting together the legal basis of this business than most people thought was sensible,” he explains. “But it was definitely the right decision, because it stood the test of time.
“We’ve stuck with the same legal basis for nearly four years, whereas I hear from lots of other entrepreneurs that every couple of years, or more often, they have to rewrite their shareholder agreements or corporate governance structures.”
He urges start-up owners to stick with a legal expert whom they can trust, rather than a firm that comes with a great reputation. “We’ve stuck with the same chap who did our paperwork five years ago.
He’s changed firms three times, but he’s the same person with the same team. It’s about the people.”
The company, which has 50 employees, is in a strong position, thinks Mendel. “Our financial year runs from April to March and last year’s sales [gross premiums written] were £9.7m, up 104pc versus the previous year."
But success for the business doesn’t mean that the industry is softening up; making it in the insurance space is still no easy task, he adds: “Changing the way that insurance is done is really hard – and there’s a long way to go from having an interesting business idea to actually making proper revenue and serving real customers.
“My words of caution – this isn’t anything like as easy as people think it is.”
