The InsureTech Geek Podcast powered by JBKnowledge is all about the technology that is transforming and disrupting the insurance world. We will be interviewing guests and doing deep dives into specific technologies we see changing the industry. We are taking you on a journey through insurance tech. So, enjoy the ride and geek out!
JAMES: All right, all right, all right. Another week of insurance tech discussions. Always good to see and hear from my good friend. Rob Galbraith, Rob, how is it going buddy?
ROB: It is going, man. Actually, tomorrow is going to be my 46th birthday.
JAMES: Oh, happy birthday!
ROB: Thank you!
JAMES: Another summer guy. So, I was 7/7, you are 8/8.
ROB: I ’m 8/8 and this is probably TMI for this podcast, but I am divorced and remarried. I have a son from my previous marriage, and I have been with my current wife for over 10 years. And, for whatever reason, my ex-wife likes to schedule haircuts for our son. She has a relative that does them on my birthday, and so, she did it again this year. And I did do a mini-rant and I was like, look, I know we got divorced 2005, it has been a while, and I was like but, why cannot your mom remember my birthday? It is not that hard. It is like an 8/8. It is not that hard – it is not that hard!
JAMES: Every year! 8/8 – it is like, got to do it!
ROB: And It was funny, so I texted her cause she said, hey, I am going to pick up Andrew for a haircut on Saturday at 3:00 PM, and I was like, yeah okay, we kind of has plans, I was like, can you reschedule that? And she goes, well, I do not know. It is tough getting a haircut these days!
JAMES: Geez! I do my own. So, I bought a razor and every other Saturday I just go in the shower and I start at the 11 to 13 guard and zip, zip, zip, and I go down the sides to the 8 to 10. Then I go down from 5 to 7. And I end up with the three on the back and, I have even worked out how to do my own fades and everything. So, I seriously, I have never cut my hair in my whole life. And this whole thing. I was like, I hate long hair. I hate long hair. And so, on myself I mean. I do not care what other people do with their heads, but on my own, I cannot stand it. And so, yeah, I just cut my own hair. So, you should just grab a razor and just say, hey, I will take care of it, honey. I got it. I got it. Zip, zip, zip, zip. Just do a daddy cut, man. So, it is your birthday gift to him on your birthday!
ROB: That is true. Yeah, he is looking a bit shaggy, school is around the corner, but I like it. I will just text her the photo.
JAMES: That is what I am saying! Hey, problem solved! Just cut his hair for him. And, with us from Boston, Boston! It is where it is hard to park the car in the yard. Dan Sterling. Dan, how are you doing today?
DAN: I am doing great. I am doing great. What a beautiful way to end a busy week here, geeking out with you guys.
DAN: I do not think we could have choreographed it better.
JAMES: Yeah, that is good. Yeah. It has been a busy week. People have kind of adjusted over the last few months to working from home and getting things done and keeping regular hours and, I do not know about you guys, I have had a pretty full meeting schedule and getting work done. It is weird today was a strange one. Because I started getting cancellations for conferences that are next year today. And I had a call with a client who hosts a regular, very large conference every year in March. And today they decided to cancel 2021 in March. And I was like, wow! Thankfully, I am not in the conference business. We build software and we have our own products and services and stuff so, but someone is going to have to just buck up and start holding an event at some point to get people off-center. Cause these poor hotels are going to go bankrupt.
ROB: Oh yeah. No, you are right, James. So, it is funny. I actually got invited from InsureTech Insights to speak at their big event. They are based out in London, but they have a big event in the US in New York, and it is by invite only. They said invite like 800 to 1000 at the top. People, in fact, they will start promoting this in June of 2021. And so, I was telling my wife and my family, it feels weird to commit to doing a conference in person in New York. I said it is right after school gets out. I was like, we can all go as a family and I was like, I just feel weird talking about it. I said I do not want to jinx it by talking about how…
JAMES: Yeah, right? You have no idea if they are even going to hold events in 2021. Do you know what I mean? Who knows that they are even going to have them?
DAN: Hey, have you guys done any online conferences?
JAMES: Tons. I ’ve done tons.
DAN: Yeah. And some of the platforms are looking pretty good I have to say. They have the exhibit hall; they have different sessions. It is not the same experience, but I have to give them credit. I mean, someone is trying at least to come up with a better platform vs being doomed.
ROB: The one weird thing, Dan, and you are right. I have been to some of these and they seem to get fancier and fancier platforms and I have been in lots of virtual green rooms. And then they got to bring me on, and the weird part is the networking. Some people have tried to have these networking apps or whatever, and I think I have already outed myself as this turning you know, now getting on to the late forties. I have never done the online dating thing. I think that was kind of after my time or whatever, but I think it is just weird to kind of drop in and try to set up one on one. And I am good with Brella. I can use the text to do a face to face at a conference. But I do not know, and most of the attendees have said that is the same thing. So that is really the part kind of that informal networking that is obviously the main reason you go to the conference in the first place.
DAN: Well, where the beers are after hours, is where the deals get done.
ROB: Yeah, exactly. That is the part, that is the hardest to replicate on a virtual…
JAMES: Yeah. Exactly. So, unfortunately, the reality is most of the value of conferences comes outside the official sessions. At least for me. And I have done, I have spoken at over 400 conferences I have attended. I have been a keynote speaker since 2005 and I have done 30 plus a year for 15 years, I have done over 450 events or something. And tons of the value happens outside of the official sessions. And it is just hard to replicate that virtually. I mean, I have been to progressively better and better and better virtual events and they still do not hold the same energy or value, as being face to face. So, they are going to have to figure it out eventually. C’est la vie for now! For now, we have an oven. But hey, we do have baseball. My Cubbies are back to playing!
DAN: Your Cubbies?
JAMES: Exactly. Go Cubs go! My Cubbies are back to playing. They have cardboard fans in the seats. In Austin Texas, they have actual live fans in the seats in Round Rock, the Round Rock Express. There is a minor league team, there is a triple-A team there in Round Rock North of Austin. They have fans in seats. They just spaced them way out, but it was pretty cool. You have to have masks on to get to your seat, take them off when you are at your seat, skip every row, and have 10 feet between people. It works. It actually works. It is so it is kind of neat. Let us talk about insurance. Although events are certainly something that we want to talk about. Remember out there, if you want to subscribe to this podcast, you can text a GeekOut to 66866. So, you just never miss an episode. We are doing it every week and you can get on our email list and get our show notes. And we do a transcription of the whole episode. It is pretty cool. So, check that out. And you also go to InsureTechGeek.Com Back to our interview. Dan Sterling, Water Hero, Boston, Massachusetts, but he is a Cubs fan cause he is from Chicago. We love talking about insurance. We love talking about tech. But first, we are going to start talking about you. You are a serial entrepreneur and you have done some cool things in your life. And I want to talk about those. You got a BA in Economics from Carleton College. You got an MBA from Harvard, Harvard, Harvard yard!
DAN: Park the car. Park the car.
JAMES B: Park the car in Harvard yard! You got an MBA from Harvard; you are still in Boston. And, from 1980 until now, you have really spanned the gamut of different things from bread, to ketchup, to TV, to pipe, I mean really it is not pipe, it is actually firewalls. SecurePipe. But I mean you really spanned the gamut. So just talk to me about, tell me about your childhood. When you were a kid growing up, what did you dream of doing? And then, what is this crazy road that led you to this point in time?
DAN: Yeah you know it is funny. So as a classic kid growing up in Chicago, three paper routes, so I am like, Rob. Rob, I am inverted. I am next August 17th, I will be 64.
ROB: So, you are turning 46.
DAN: I will be 64. So, I grew up in Chicago and I had to throw out at the end because I made my first 1,000 with my three paper routes. I was in Chicago Tribune, Chicago Daily News… Remember where there used to be two newspapers in town?
JAMES: Yeah, right.
DAN: And then, I grew up in Oak Park, Illinois. So, I delivered the Oak Leaves as well, but doing my three newspapers and in high school, I said, I told my parents, I want to be pre-med. I want to go to med school. I was really interested in science and math. And I have been a geek since before it was even fashionable. It is cool now, but in 1968, it wasn’t cool to be a geek, but anyways, I’ve wanted to be pre-med, but I had this vision cause my brother had broken and his leg and we went to a surgeon called Boone Brackett was the orthopedic surgeon. I thought it was so cool. Cause this guy had 10 locations and I am thinking, that is what I want to do. I want to become an orthopedic surgeon of all of these locations. And my parents said, no. You are going into business. You do not go into medicine because of that, you go into business. So, they corrected the course, so I decided to forget med school. Plan B was, I would get an MBA. And I pretty much held true to that. So, I went through with that, but still took a math’s and science course. I am still a health nut too. I do love health and nutrition and that is another hobby, but I think the general theme. I have got entrepreneurial EdD. A real bad case of that. So, I will typically do something for about five years, go real deep on it, and then want to learn something new.
So that has been pretty much my track record, how I have gone from, I started in consumer-packaged goods out of business school. So, I was with the food division of HJ Heinz. So, they were selling a billion pounds of Crinkle Cuts and Tater Tots. So, cut my teeth in that arena, and then got the idea for my own business. So, I was -self-employed from 1983 on, I have been doing to my own business and so I lasted three years in corporate America with HJ Heinz and Boise Cascade Corporation. And then I have been doing a variety of entrepreneurial things, but same thing with bread. I just fell in love with bread. I like the Italian bread we grew up with in Chicago and I could not find it anywhere. So, I was actually in between businesses as they say, and getting bored and I helped this guy for free, that was a French-trained baker and I helped him with his books, I computerized this operation and he has taught me to bake. And I decided I wanted to do world-class European bread. So, we actually won a medal at the National Restaurant Show, we were written up in Bon Appetit as one of the top 10 bread stores in the country. So, I took that interest in fermentation then joined a winemaking club. So that is the real fun – fermentation, but yeah.
Along the way, I had developed a real interest in technology, like during the dot.com eras. It is hard not to. Just turn around and you know, Cisco is going to the moon. Companies were just… valuations were just going crazy. So, bread is about as old economy as can be. So, I retread myself in the technology and a friend of mine from business school said hey, there I have this interesting company in Madison, Wisconsin called SecurePipe, but they needed adult supervision. And so, at that time, I was probably closer to your age Rob. Decided to give it a shot. And I went pretty deep on it. I actually got my CISSP degree, which is a Certified Information System Security Professional. And I remember all the techies because I was a business guy. And it is all these, you know average age was 26, super-smart young guys, I was in my 40’s, and they are like, holy crap! Dan got his CISSP. So, they all had to run out and get their CISSP ‘s but it helped me. I could go out on sales calls. I could architect a security solution for a financial institution. You know firewalls, DMZs, virtual private networks, secure email, and all that. But what is interesting is that that company was called SecurePipe. We merged with Trustwave out of Chicago and we ended up selling for close to a billion dollars to The National Telco of Singapore.
But the interest is that CISSP, I am now applying to water damage risk mitigation because we used to have to work with these banks to develop network security risk mitigation programs, cause they were examined by the FGIC and the Department of Treasury, depending on the bank, charter, and registration. So, we had a whole elaborate framework we had to develop. And I realized now that those security principles are the exact same, whether you are talking water damage for a commercial building, networks security for a financial institution internet, that it is all about layers of security and just making judgments. I mean, I used to tell customers at SecurePipe, if you want a 100% security, I have got it. Here are some scissors. Cut that connection with the internet. Cause there is no 100% security.
That is the same thing in water damage too. You need commercial insurance. There is always going to be a vulnerability, so I think the framework that I am working on is to apply that same cost-benefit analysis. Look at the data. Where are the greatest risks in a commercial building and what is the appropriate spend to mitigate that risk? And so, we are getting a lot of interest from insurance companies. I mean, honestly, a lot of tech has not been employed in this area and so we are passionate about us changing that cause there is a lot of cool tech and it keeps getting better and better. So hopefully that gives you a good segue James into how I ended up coming from SecurePipe and now I am with Water Hero.
JAMES: Exactly. It is still pipes, just digital versus physical. I mean look, water damage is like the top issue in buildings. And certainly, there is a lot of dollars in claims that go to pay for water damages and insurance companies are very interested in preventing water damage with simple solutions. Because it is a pretty big source of their compliance with either losses or gains that they have on their insurance operations. So, just tell me, tell me how it works. How does this actually work?
DAN: Yeah, basically think of it as a security system for your water. So, we have different types of units, but, for example, we have one condo project. They had so many problems with water damage, the insurance company was not going to renew them. They got 170 units, so they ended up putting a Water Hero, our residential size, we have a ¾” and a 1” size that is typical residential units in every single condo unit, in a 170-unit condo complex, and they are right next to a major university. And they have a lot of problems. Students were there, professors were there. They would be gone weeks at a time, and when a pipe breaks in that situation, you do not damage one unit. You damage the fourth floor and everything underneath it. So, that is one very extreme application is to take every single office or room that has a cold-water feed and secure that.
And what we do, it is really pretty, pretty simple. It is we take a utility grade water meter. So, the same water meter the city of San Antonio would use. These are built to American Water Works Association specs, and accuracy for billing. They are robust, brass, they weigh about 10 pounds. You cannot drop these on your foot. And we put that right in line with the motorized ball bells shut off, and then those are connected within about 6’, we have the main controller box and that has a very powerful local microprocessor made by Texas Instruments. So, we use a TI microprocessor, that is local. And then there is a Wi-Fi chip so that the unit can connect to the building’s Wi-Fi or in this case, the 170 units we connected to the individual condo owners units, that then gets up to the cloud and then you can control your water from anywhere in the world. So, I could do a webinar with you and allow you guys to shut my water off here in Boston, from anywhere you have kind of activity really. So, we do two things. We just protect you from burst pipe damage. And we also, provide Realtime water usage information, which about 60% of our customers end up saving money on their water bill. And a lot of times a real common culprit is eroded toilet flappers.
DAN: Yeah. We have had several golf courses buying Water Hero’s for their clubhouses because they have these huge water bills. They have shower facilities; they have public bathrooms. How many times have you walked through a public shower facility and people just leave the shower’s running? No one cares. Cause they are not paying the water bill and in some areas, that can add up. We had one huge condo complex. They had an underground leak that was feeding their pool house. And you only get your water bill every quarter in that area. That is in Princeton, New Jersey. They went through 600,000 gallons of water, cause it was all underground and it was not bubbling up. And so, they had a surprise 60,000 extra on their water bill.
JAMES: Oh my gosh.
DAN: And we would have picked that up right off the bat. It went on for three months until they got their water bill. And they were like, what is going on?
JAMES: So how does this, how does it detect? Does it look for abnormal flow through the pipe rather than putting sensors around to see if it is leaking?
DAN: Ours is called a whole building leak protection. So, what we are doing basically is we have two types of triggers. And think of it as an occupied mode in away mode. And so, the first type triggers just continuous flow, so, in my house, for example, I will use that. I have got it. So, if water runs for more than 10 minutes continuously, when we are in home mode, I get a text alert. If it runs for 20 minutes, I get a text alert and there’s automatic shutoff. So, it is great because now the kids know they cannot take 45 minutes showers and I am saving money on water.
JAMES: I like a good long shower though, man.
DAN: Well, if you want, in a matter of seconds, you can go to our mywaterhero.net and you can change those settings. If someone needs an hour of shower, you can adjust that to 61 minutes, but then it is shutting it off. Whatever you want. But then in away mode, I have it set at one minute for a warning, and one minute for shut off. Now, sometimes people have an ice cube maker, so they will set it up for two minutes, but it puts the user in control. So that is one type of trigger. Time-based. And the other one that is really popular in a big building is just flowing over time. So, we can say if more than X gallons runs over Y amount of time, give me a heads up. Text alert.
DAN: If more than Z flows over W, send me a text but also shut it off. And those variables, you can go from 1 gallon to 10,000 gallons, and 1 minute to 60 hours. So, it is a matter of studying the data. So, you could be in a 60-story building and say, it is very rare that we ever use more than 500 gallons in 20 minutes. And so, it is funny how this ties back to my internet security days. We were doing anomaly detection on networks; we are doing anomaly detection on the water!
JAMES: I was going to say you are still doing anomaly detection because you are writing a software program that becomes really good at analyzing flow patterns. Now, we have had some other people on this show who are in a similar business, and they have trained their little, of course, everybody says AI, okay, they are using a little machine learning algorithm that is improving as they compile their model, that is looking at flow pattern analysis. And it is saying, hey, you have a toilet leak on floor three. You have a sink leak on floor four because of the way that pattern looks like, you can tell what kind of a leak it is. Can you do that with this?
DAN: Right now, we are not using AI customer-facing. We are using it in the back end, but we just do not think it is ready for prime time right now. Actually, our CTO teaches artificial intelligence and machine learning part-time at Boston University. So, he is chopper to the best to do it, but he thinks right now it is probably only about 67% accurate. And it is funny. We are working with another company in Cambridge, they do data desegregation for electric mains. And they have 10 data science scientists from MIT. I mean, they are going at this pretty hardcore, but they still do not have a 100% accuracy. They can tell you; we think that is your TV, that is your refrigerator, but we just do not think it is ready for prime time yet. So, we put our users in control, which is nice because we do give false positives. Cause to me, false positives are the kiss of death from an insurance standpoint.
DAN: It is like the smoke detector that chirps. How many of you guys had pulled the battery out of the smoke detector?
JAMES: All right.
DAN: Yeah. It is the same thing on the water. There are some other good companies out there, but too many falls. Some people are three strikes. That is the third false alarm and they just disarm it. So, there is no mitigation at all for the insurance company. So, it is not a perfect world. If someone tells you they have a 100% security, run! Run really fast! It is not out there, but can you mitigate 90 some percent of the risk? Yeah, we sure can!
JAMES: Yeah. That makes sense. Rob?
ROB: Great conversation. I just want to pick up on a couple of points that you both made. So, James just bought on, in terms of water, water, water. When I was working in an underwriting space, at a very large personal lines carrier, I have been on those claims right along. I have seen water damage. In fact, I have personally had a water loss at my previous home. We had just moved in and in a month, we had a situation where the water just completely flooded the first floor basically, while we were sleeping. And so, woke up in the morning and came out and there was a little, little pond there. And so, yeah, obviously had to rip up the entire flooring, had to have ServPro come in, bring out the big fans and all that. So, had we gotten some type of alert notice, etcetera easily could have mitigated that damage. So, definitely feels a compelling product.
And yet I will tell you, Dan, that this has been a space that has been explored from insurance companies for at least five years, if not longer. And there is definitely a devil in the details I would say. Some of them have been simply alerting, where it just has an audible noise or something, but it does not actually actively shut off the water. Others have evolved, have gotten to a point where it can look at the color of your water signature. So, we can tell there is lots of water activity in the morning. And then we can tell the kids go to school and mom and dad are going to work. Cause there is not much going on during the day. And then we see you come home and whatnot. And they have been trained to like, hey, shut the water off anytime you see any abnormal water usage. And then it turns Jr. was sick that day and was taking a shower at 10 in the morning and it shut the water off on him, and things like that.
So, yeah, just kind of curious, you can talk about both the personal line side, and then I know you moved into the commercial line side, where again, I think there is even more opportunity here. What are some of those obstacles you have encountered as you’ve kind of developed over the years at Water Hero and, what remains unsolved, or what are some of the ones that you are kind of currently grappling with?
DAN: I think part of it is just a natural conservatism of insurance companies. That has been the number one obstacle. I have been talking to insurance companies since 2014. So, when we first came out, and this is more from the residential side, but we were under NDA with basically all the top 10 residential insurance companies. A couple of them took us under our arm. We were in some invite-only InsureTech programs out in Silicon Valley back in 2015. We have been in test homes of insurance companies, but the bottom line is they move really slow, but I am starting to see a tipping point. This is more on the residential side. We have one insurance company that we have a really close relationship with now. But they insure a lot of high-end homes and their average water damage claim is $100,000 on a home. Their average.
DAN: And so, I did the math in the back of the envelope and you can figure out, basically I figured out, every time they write a policy, they need to escrow $2,600 a year forever for water damage. Bottom line, they should be giving devices away.
DAN: But it is still, they are very actuarial driven. They are very conservative. And I do not think the industry’s moved that quick. Now what I am seeing, which is interesting though, is so a lot of companies have started offering premium discounts and I think this will carry over to commercial too. And it is starting to. But that really does not move the needle that much. What I see one major company doing now is, they looked at their data really carefully and they said our worst nightmare is vacation homes. And so, they are saying any vacation home we write over $500,000 coverage, they are doing this, they are testing this in New York state, but it is a national company, they are just mandating it. So, they are just saying we will not underwrite you. We do not care if we lose your business. Go somewhere else. So, I think what my crystal ball showing me is I think in the next three to five years, we are going to see more on the residential side. And I think those will carry over to commercial though, more companies saying, alright this is our approach and water damage. Cause it is about 30% of claims. It is typically, it is their number one controllable cost.
I think they are just going to say, we tried premium discounts, the uptake honestly is miserable. It is not very impressive. They are just going to start mandating, I think. Because I am seeing this from one of the biggest companies in the country and I think, I have actually sold technology in those insurance companies before. I was selling social media services as a part-time gig for a while, and they are very slow to do anything until one big player jumps in. And then everyone else, but no wants to be the first company to take the risk to say I am putting my career on the line and we are going all-in on leak detection. So, I think eventually some companies, some major companies are going to do that. And they are going to say, you know just like they were so cautious about social media. And finally, one of the big banks went in and then everyone followed after him the same thing in insurance. So, that is my prediction guys. Let us check back three to five years, but I think you are going to see it moving from we will offer you a 5 to 10% premium discount to it is just mandated.
ROB: It is funny you mentioned that Dan, I completely agree with you about the, nobody wants to be the first mover and, if somebody wanted to throw a few million dollars at me, I would start my own carrier. Or if I ever were in charge, which will never happen, be a top CEO, I think I would just be the first to everything. Because that company does not exist. And I would adopt every single thing. And again, kind of like from a venture capital standpoint, I do not need them all to pan out. I will only need one or two to pan out to find the winner, so why do we not have this insurance carrier that is the first to everything. I do not understand why that does not exist.
DAN: Especially as a serial entrepreneur. It does bother my mind because if nothing else, and some of these companies are paying out $2 billion every year. Over the next 10 years; they will pay $20 billion. Why do not we roll some dice with 50 million?
JAMES: Yeah, it is wild. I mean because you are in organizations that pride themselves on risk. You are you literally are selling risk. You are saying I will buy your risk. And yet they are extremely risk-averse when it comes to, and it is wild because the, certainly the VC model is not predicated on everybody hitting out of the park. In fact, the VC model is predicated on about 2 out of every 10, having wild success, 3 out of every 10, completely failing and the middle, the other 5, just returning capital and in other words just kind of being a wash. That is generally the 2-5-3 VC model that does not always work out, like when there is a really a bad time like that all gets blown up and then VCs go out of business. But it is really fascinating. That is usually the model, and more often than not, it works out fine.
And in my own business, Rob, it took me seven product failures until I had a successful one. And the successful one was so successful that it wildly overshadowed the seven failures I had to shut down, and I have got three products I am running right now, and I am still swinging. I am looking at, maybe you should do a fourth you know, like why not? If you lose a little bit of money. Does not really matter if it returns capital, you are okay. Some of these will be turning capital. Some will be a wild success, very few will be a wild success. And the rest, you know we all have a couple of failures, but it is interesting Rob because I think in insurance companies, that is not how they think at all. A 30% failure rate is you are going to lose your job. I think honestly, you and I both know a lot of insurance executives. If you told them that they would have a 30% failure rate on initiatives they tried, they would be like, I’m going to lose my job if I get a 30% failure rate.
DAN: Right. Right. The other interesting thing, I did this looking at it from a CFO standpoint. And again, some of these biggest companies spent $2 billion every year. And I looked at it, especially for the public companies. I said, look, if you can take $10 million of that risk off the table, that’s money you are saving every year. If you are a public trading company at 22 times multiple, you are going to put $220 million in your market cap. If you can take $10 million of that risk off the table, so again, there are huge towers to be reaped here. And it is not in one area. So, I would be prioritize saying, we have got to spend money, this our number one controllable claim. Let us solve this.
ROB: Yeah. The other interesting thing, Dan, and I have had a lot of conversations with friends in this space over the years. And James, we have had one of those on Pankaj Parashar from Purple Ant, a few episodes ago. And so, he is a bit in this space now. He does not sell the hardware. He is kind of hardware-agnostic and kind of on the software, but we have talked about water claims with him and one of the things that I think we have continually puzzled over is that, in the past, if I am an actuary writer, if I am underwriter and I am trying to assess the risk, I do not know about the quality of your plumbing in your building. I cannot really assess that. It is behind the walls and all that. So, I am going to use proxies for that.
I am going to look at the age of the home. I am going to look at the type of construction. I may ask you, have you read on the plumbing, things like that. I may look at prior losses, things like that, but those are all essentially a proxy for what the risk of a water leak is. With your hardware, all your devices, all these IoT sensors like, you know! I can tell you exactly what is happening. I see the flows and you also catch those near misses. That leak that maybe somebody did catch in time and they mopped up with a bunch of towels. And they never did report it to the insurance carrier. But as a carrier, you would want to know about that. That is that canary in the coal mine, that kind of false alarm that may alert you to, hey, a big claim is going to occur if this continues. So yeah, it is kind of fascinating.
I do feel it is, over time in having these conversations, it is just a total mind shift. It is a paradigm shift. You cannot do business the old way. You kind of have to make the leap. And when, and how that happens, I think is fascinating and kind of up to debate. But I think it is really kind of on this part that, or we are talking about. I am interested Dan, is kind of a follow-up. You mentioned personal, being ahead of commercial. I don’t disagree with you there at all, but I have always thought that part of the problem is each individual homeowner unless you’ve gone through that pain of a water claim or whatnot, you may not see that the value proposition as strongly, but if you’re a condo owner if you’re running commercial properties because you can get it at scale, you mentioned a 170 unit property and things that. Just kind of curious, is that the way of your future? Do you think commercials have to get ahead of personal lines in this space or building owners? What has been, why the slow adoption on the commercial side?
DAN: Yeah, I am not exactly sure why that is, to be totally honest with you, Rob, but I think it is starting to change. But I think a lot of is probably not a really great familiarity with all the different technologies out there and how to really deploy them. But like I said, I think this is, I see we are at a tipping point in the next three to five years, where it is going to change. The products between residential and commercial, it is the exact same concept. And that they are the same type of product. So, I think they will you will cross those borders between the two. But, yeah, I do not know why commercials’s been a little bit less receptive to it for some reason, but on the residential side, I really see it changing with some CEOs just pounding the table now. You can look at the annual reports and they are just saying our number one claim is water damage. We got to do something about it.
DAN: We do a lot of work up in Canada too. And in Canada, it is 45% of claims water damage.
JAMES: Snow and ice, man. Water penetration is a big deal. Well, let us talk about, I want to get in the guts of how this works.
JAMES: Okay, you go on WaterHeroInc.com, you spend $699, you get a ¾ meter and valve, located indoors. So, I am going to do an indoor location, let us say I am going to do an indoor location. Indoor location, ¾” meter and valve. You can add it to your cart. Check out. It is $699 plus shipping plus and tax.
JAMES: It shows up at my house. Am I going to be able to do this? Or am I going to bring a plumber in to do this?
DAN: No, we recommend you bring a plumber in.
JAMES: And so, I call the plumber. How long has the plumber gone to spend putting this on?
DAN: Takes a plumber about an hour and 20 minutes. So, what we do is we send it to the homeowner first and we actually have a label right on the top of it saying, before the plumber gets there, we want you to pair it to your home network. So, the homeowner needs to do that because there is no sense paying the plumber to do that for you. A lot of times people do not even know what their SSID is, they do not know what the password is. The password is case sensitive. So, we tell them, go ahead, and set the unit up on your network and then bring it down to where you want it to be installed eventually, too, just to make sure you have the proper Wi-Fi signal. And then once they do that, then we say go ahead and schedule the plumber. But, for the plumbers, it is a pretty straightforward install because we are using components they like.
Our initial design was this real sexy looking one-piece design. And the plumbers hated it. And they had a lot of good points. They were plasticky, a lot of devices weigh 1.9 pounds and they are plastic. And the plumbers are like, I am not putting that in my customer’s house. So, they want the brass water meters that they see every day, they are used to working with them. Those things are tanks. Those things are really reliable. And so, they want something solid, robust, they are comfortable with. But it takes them about an hour and 20 minutes.
JAMES: Where is it going to go in? Is it going to go in near my head-end where the water’s coming into the house or where does it go?
DAN: Yeah, the basic concept is you want to install it as close to water entering the house as possible because everything from our device downstream is protected. So, in my house, for example, my water comes in below the frost line into a basement. So, it is about a 1’ ½ ” off my basement. I had my city meter, so I have got a city water meter, and then it makes a 90 up to my first floor. So, my Water Hero is installed in the vertical orientation right in my basement. So, everything from that point on is protected with these different time limits as well as the flow over time. And so, the closer you get to where water first enters the house, the more protection you get.
JAMES: But you got to have power, right?
DAN: Yes. Yes. It plugs in the wall power, so it is the same type of adapter that would run your smartphone. So, it outputs 5 volts. We also do have a backup rechargeable lithium polymer battery inside our unit, so that can run and protect your house for up to four days of power’s out.
DAN: So, then it reverts to an old school device. You just will not get a text alert cause we do not have that connection to the internet, but it will still, that TBI microprocessor will still act on the triggers and automatically shut the water off. And that is, I want to stress this, the insurance companies, they really want the mitigation. They do not want just an alarm. They want to know if something is abnormal, shut the water off. That they are very, very adamant about that.
JAMES: Okay. Awesome. Well, Rob, any closing questions, or comments?
ROB: Yeah Dan, I am just curious. If we can share a little bit about, new construction. I know, James, I do not know if you have ever lived in a house in Texas that had this, my previous home, they put the water heater, we had two of them, a water heater for upstairs water heater for downstairs. They were both in the attic. And so, typically they are in the garage, so if it leaks in the garage, and usually there is a drain or something and that’s a big deal.
JAMES: Not College Station. Most houses are in the attic here. It is weird.
ROB: It is insane. And so, yeah, if one of those things burst, then they tend to reliably burst every 10 years and sooner here in Texas because our water so darn hard, so it could blow it 7 years, even though it is supposed to be good for 10. Now you have a huge mess on your hands. Cause it is gone through the ceiling and getting into the drywall and all that. So just curious, have you made any progress with builders? Either again on the residential side or the commercial side to try to get these in it at new construction, rather than to kind of retrofit existing home or building stock?
DAN: We are making more progress with high-end builders on the residential side, for example. And the lower end of the market, they are concerned about every penny. So as much as it makes sense, they just do not want to spend the extra money to install smart technology. Whereas on a high-end home, I think they view it as an amenity, and they know that that buyer is going to demand a smartphone.
JAMES: You know the reality, Dan? At entry-level and lower-end price points, customers will not pay more money for it. And they know it. I mean, I know a boatload of home builders and their buyers, it is amazing how little they give about their house. It is appalling how much they do not care about the ongoing maintenance and operations and usability and maintenance of their house. They do not, they fully intend on deferring all maintenance. I fully intend… Like it is the same people that just do not factor in that like you should have your HVAC serviced twice a year. Every home needs to be serviced twice a year. Once in the spring, once in the fall, before, before summer, before winter, it would be service. It is a machine that runs all the time. And your total cost of ownership of HVAC will be lower if you put that money in servicing the equipment. It will actually, your equipment will last longer and your total cost of ownership will be lower. They do not care. It is. It is amazing, the deferred maintenance mentality.
I had a whole home water shut off at my last house. I am looking at actually getting your unit into my house in Texas because it would be devastating to have a water issue. It would be absolutely devastating. I had a whole home shut off in the previous house, so I could go in and just inside the house I could, before I went on vacation, I could just walk and shut it off. So, I would not have a water issue. And it is just amazing to me how many people just do not care. But the insurance companies are the ones who are underwriting. And part of this is because the insurance companies will pay for it. And so, that is why they should care, and they do care, and we are excited to see them, getting on board with us. So, look, where can people get more information on your website. That is a WaterHeroInc.com
DAN: Perfect. Thank you.
JAMES: Yeah. And what is your closing message for the insurance companies out there?
DAN: Yeah, I think guys try some small experiments. Take some chances. This is your number one controllable claim. That there is a lot of money on the table, a huge amount of money. And the technology is there. It gets better and better too every year. I mean right now we have got the whole house, our next generation, the cool thing about these connections products, they keep getting better and better. It is almost Tesla where you are not buying a car, but it is a computer on wheels. And the same thing for us. We are constantly improving the product. We can improve the firmware. We are looking at moisture sensors, integration down the road, where we will actually have a whole family of sensors. You could have additional temperature, humidity, sensors. So, you might want to heavy up somewhere where the moisture sensor or putting your sump pump area. Cause it may not be plumbing, but it could be groundwater coming up. So, the technology is just going to get better and better and better, but someone is got to just step up to the plate and show some leadership really.
JAMES: Yeah, I agree. Awesome. Rob, closing comments?
ROB: Oh, Dan it was just great to have you on. I am curious about the price point. You talked about the technology getting better and I thought that was great, and Tesla’s a great example of that and new generations. So, we mentioned the $699. Do you expect that price point will come down over time because that will definitely drive adoption as well, I would imagine?
DAN: Yeah, absolutely. I mean, over time, and it is all about volume. So, if we can ramp up and get greater volume, we will get a better price from TI. We will get better prices on printed circuit boards, electronics. So, yeah, absolutely. I think over time, those prices should definitely drive downward, and we are seeing good adoption around the country. Texas is actually probably our third-biggest market.
JAMES: Hmm. Awesome.
DAN: So, it pretty much goes by population. People have those hot water heaters down there in the attics, and it scares the crab out of you!
JAMES: Tanked, not tankless! Tanked hot water heaters. I have tankless. I am a tankless guy, right? I mean, and mine is on the outer wall by the water main. So, there is the water main and then there is tankless since they face out flood, if they flood, if they rust out, it just dumps water outside. It is not that big of a deal. I remember my first house had tanked hot water in the attic. This was 2004 and I lost my mind. I was, why on earth would you suspend 40 gallons above my head? That makes no sense. Anyway, onward, and upward. Thank you so much for joining on today. And we appreciate you being here, Dan, and best wishes with the business.
DAN: My pleasure. No, same to you. Just say safe down there and really enjoyed being on your show. Thanks, guys!
The InsureTech Geek Podcast, podcast powered by JBKnowledge, that is JBKnowledge.com, is all about technology that is transforming and disrupting the insurance world. I have been your host, James Benham. That is JamesBenham.com. New website by the way! With cohost Rob Galbraith, endofinsurance.com. Go read his book! It is good. Thanks to Jim Greenly, our podcast producer, Kara Dalton-Arro, our creative producer. And thank you for joining us today. We are taking you on a journey through insurance tech so enjoy the ride and geek out.
See you next time!