Root CEO Timm: Tech advantage becoming clear with strong results in recent quarters

Root CEO Alex Timm has said the insurtech appreciates the recent recognition it has received for its performance among investors, and argued that the auto specialist’s technology advantage is starting to become more evident as it outperforms the industry.

Timm spoke to The Insurer TV from the InsurTech NY Spring Conference late last month, where he joined a panel of other CEOs including Cowbell’s Jack Kudale and Hippo’s Rick McCathron to discuss the path to profitability among insurtechs.

Root’s stock price has seen a sevenfold increase since mid-February as Root has posted accident year loss ratios for the last three quarters which have broadly outperformed the rest of the industry.

“For us, we don't look at the stock price in times when it's way up, [and] we don't look at it, in times that it’s way down,” Timm said last week.

But the executive was appreciative that his firm is beginning to be recognised for its performance.

“We've consistently delivered now loss ratios, some of the best in the industry, and we're doing that while we are growing,” he said, adding that Root’s management team remains squarely focused on “the fundamentals”

Timm said Root is working to ensure “we're building a great business long-term, and then, eventually, [we] believe that the market will catch up. And I think you saw a little bit of that last quarter,” he commented.

Root’s CEO acknowledged the company had “a hard couple of years” as the industry faced some of the worst inflationary trends ever, and the insurtech moved early to boost its rates.

“Our loss ratios have started to accelerate, in a very meaningful way, [to] really best in class,” Timm commented, adding the insurtech now has its eyes firmly set on growth.

“You've started to see that growth and we were basically near breakeven adjusted Ebitda last quarter,” he added.

“We don't have the best loss ratio, because we're the biggest. We don't have the best loss ratio, because we have the most people. We don't have the best loss ratio, because we have the most money. So, what's left? It's technology,” Timm explained.

“And so, I think now, what we've got, and what the last three quarters and really two years have shown, is that there's just a material advantage to being run on a tech chassis versus an older chassis or an analogue chassis,” Timm said.

He argued that “the only explanation” for Root’s strong improvement in underwriting is its technology.

“We now have proven that we could match price to risk better than almost anybody in the industry. That's what we believe. And that we do that through technology and now you're seeing that in the numbers, and it's really hard to ignore,” the Root CEO explained.

“We’ve become more disciplined, more focused”

Timm described Root’s turnaround as a “painful” process where the insurtech learned a great deal.

“We became more disciplined, more focused, and honestly, we became a permanently better company because of it,” he said.

“And now, on the way up, we want to make sure we don't lose that. And so for us, I look at it, you can make bad decisions on the way down. You can also make bad decisions on the way up,” he continued.

“We don't really let the stock… tell us what we ought to be doing with our company. We think we ought to continue to focus on our products, our customers, our technology, and as we do that, we'll build a really meaningful company,” Timm added.

The Root CEO emphasised that the insurtech is “still in the first chapter” or “the first page” of its trajectory, and while the company is proud of the recognition it is getting, it plans “to continue to stay focused on the long term”.

More competition in personal auto

There has been increased attention on competition beginning to return to the personal auto segment

“That may apply short-term headwinds to growth, and we're okay with that. What we do is, we always look to make sure that we’re hitting our marketing ROI targets on every policy that we acquire,” Timm commented.

The executive said Root will “always be there to opportunistically take advantage of where the market is, at any given point in time”.

Root has been vocal in its ambition to be among the biggest and most profitable auto insurtechs in the US, and according to Timm, being the best in pricing and automation is the way of getting there.

“We believe that our machine learning technology, and our approach to pricing and underwriting, is really differentiated. You can see that in our loss ratios today, and we think we're just getting started,” the Root CEO said.

He also pointed out that as the insurtech gathers more data, including around claims experience, it can retrain its models very quickly and respond with speed to gain a “long-term pricing advantage”.

Watch the full interview with the CEO and co-founder of auto insurtech Root Alex Timm to hear more on:

  • How Root is looking to build differentiated access to customers, including through its deal with Carvana
  • The further opportunities presented by developing embedded insurance partnerships
  • Improving customer experience, including through Root’s mobile app
  • The importance of underwriting and the proper pricing of risk
  • Bifurcated market and flight to quality from investors as industry exits “Great Winter of Insurtech”