The Future of Insurance Podcast – David McFarland

Co-Founder & CEO, Coterie Insurance

Season 2, Episode 10, January 4, 2022

Guest Bio

David McFarland is the co-founder and CEO of Coterie Insurance. a US- based insurance entity focused on making risk transfer efficient for the small commercial P&C insurance space. Coterie uses industry-leading tech, deep insurance expertise, and product innovation to embed insurance into their partners’ existing products and workflows, leveraging data from multiple sources to turn small commercial accounts from an unprofitable obligation to a profitable opportunity. Immediately prior to founding Coterie Insurance, David was Chief Actuary and Head of Insurance Product & Pricing at Clearcover; a personal auto insurtech in Chicago.

Highlights from the Show

  • David started his career as an actuary in the Workers Compensation space in the early 2010s, and was trying to find ways to pull key data in without having to ask for it, or have long periods of time without updates to data
  • He found a lot of resistance in the industry because it was perceived as being disintermediating, while David thought it could actually empower intermediaries, which was part of the idea for Coterie
  • He then went to Jeweler’s Mutual, and learned about embedding insurance to really optimize conversion and drive much better service experiences
  • These two ideas together were really speaking to what David wanted to build, but he didn’t know how to start an insurer
  • At that time, he met Kyle Nakatsuji, and ended up joining as one of the first hires of Clearcover when they were starting up, which helped round out David’s education on the pieces of the puzzle he needed to start Coterie
  • Coterie focuses on bringing speed, simplicity and service to the commercial segment by creating an insurance manufacturer and services that can hook into distribution no matter where it is
  • Coterie sees their distribution strategy as one of partnership (not D2C), regardless of what that kind of partner might be
  • As commercial insureds get larger and more mature, David recommends that they should go to an agent or broker because their needs are getting more complex and guidance becomes much more important
  • Coterie focuses on getting the data and ensuring its accurate so agents can focus the time they can put on an account into the relationship and giving advice rather than chasing down data
  • Why is Small Commercial the battleground?
    • Massive TAM – 32 million small businesses
    • Open Space – it’s largely untapped by new solutions
    • Expenses – the E/R is too high in the space while the L/R is extremely attractive, so solutions that can address the costs can win
  • The space hasn’t innovated because the C/R has been fine (low-90s), so there wasn’t enough of a burning platform to innovate or get more efficient, but if you can, you can really stand out
  • Small Commercial has also been hard to carve out and solve because the policies aren’t big enough to justify its own tech stack or set of processes, so it’s lived on more cumbersome tech built for more complex business
  • Today, Coterie is an MGA that built its own products and filed in the states they’re in, and they own their own tech stack to ensure they have the richness and flexibility needed for what they’re trying to achieve
  • They’re in 48 states, but not NY or MA due to approval timelines, with BOP, E&O and GL in several classes of business covering 70-80% of business out there
  • Trying to move the insurance industry forward can be hard as not everyone is ready to adopt it
    • David talked about Selfish Disruption vs. Selfless Disruption – bringing about innovative ideas to help existing constituents do business better rather than just doing something new or unique for the sake of newness
    • You have these relics of how business is done that may not be ideal, but the players in the market want to use them, so you can’t just move past them, but rather find ways to improve what people still want to use
    • Coterie sees this as being humble and open to what other people think or want rather than what you want
  • When you have ideas of where things can go but also need to support old ways of working that some people still want to use, you can struggle to make priority calls or find resources to make both paths work, especially for a startup. This was a very real thing Coterie has had to contend with, but it’s been important.
  • The big question for existing systems and system vendors is how they’re going to be able to accommodate the huge amount of new data sources and the frequent changes to them – this is something that will be hard for carriers who don’t own their stack to deal with, and the big vendors today don’t support this yet, so a big change will be needed
  • Coterie has four core values – Integrity, Intelligence, Passion and Humility – and describe themselves as smart, energetic people who do the right thing and don’t brag about it
  • That all means not making it about me, but rather about someone else – the customer, your team members, etc – so you can view things from the perspective of what’s healthy to the long term of the industry

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Special thanks to VPay (, part of Optum Financial, for sponsoring this episode.

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