Healthcare & Insurance – A connected toothbrush in an insurance business
Alex Frommeyer, Co-founder & CEO of Beam Dental
Interview by David Veredas (Professor of Financial Markets and Insurance, Vlerick Business School)
100 million Americans do not have dental insurance, and they brush their teeth on average once per day and only for one minute. Alex Frommeyer connected these dots and co-founded Beam Dental in Columbus (Ohio, US). Beam is a dental benefits company that offers dental insurance and uses innovative technology to encourage Americans to have dental coverage, and brush their teeth more often and better.
David Veredas, Professor of Financial Markets and Insurance at Vlerick Business School inquires Alex on his company, and his views on the future of insurtech.
Can you please explain to our readers the business model of Beam? Why is Beam different to other dental insurers?
Beam is a dental benefits company that primarily focuses on selling group dental insurance. We know that today’s dental insurers don’t truly understand the risk profile of their members or prospective customers, leading to artificially high prices to ensure profitability. Our big leap forward though is our beam brush, a sonic powered, connected toothbrush that is given to every member. Not only do we offer ‘good brusher’ discounts based on the data we get back, but we have found that just putting the brush in people’s hand makes them engage more actively in preventive health…namely, brushing their teeth more often!
You are an entrepreneur with an engineering background. Why and how did you become interested in dental insurance?
I know it makes no sense from the outside, but it’s actually quite a natural fit. My sister was in dental school and one of our other cofounders’ mom is a dental hygienist. So, the dental industry is near our families. But, what really tipped it over for us is a contract we worked on for a dental manufacturing company in our first start-up. We realized that there are over 100 million people that don’t have dental insurance and thought that was an incredibly interesting problem to solve.
Some institutions, like the World Economic Forum, think that among all the financial services the largest impact of technological disruption is going to be felt in the insurance sector. This is because traditionally the insurance sector has not been as innovative as, say, banking or asset management. Do you agree that health insurance is quickly re-inventing due to the disruption of insurtech?
Absolutely. Insurance does $1 Trillion USD a year in premiums worldwide. It’s an insanely large industry, and also one that is inherently data driven, so it’s a great fit for topics emerging in technology like quantum computing, machine learning, AI, etc. But, design, UX, mobile, IoT, and a host of other topics are happening everywhere already, but insurance has been slow to adopt. The floodgates are open now though I think, and so we will continue to see a surge of start-ups, funding, and great products built in insurance. However, only a few start-ups, including Beam in dental and Oscar in major medical, have ventured into becoming a risk-bearing insurance company. We will need more than that, or the large incumbents will just make some technology acquisitions and that’s it.
Many technological innovations in insurance promote risk reduction with changes of risk behaviour. The black boxes in the cars and your toothbrush are examples. By reducing the risk, the policyholder obtains a reduction in the premium. Economically this is justified, as the policyholder also reduces the claims (healthier dental habits imply less – costly – visits to the dentist). On one hand this is profitable, but on the other hand a reduction of the premiums and the claims implies smaller insurers, as both assets (premiums) and liabilities (claims) decrease. Do you think that the insurance industry will shrink due to insurtech?
That’s actually a really interesting point, and honestly I have no idea. First, we try to serve the customer the best product possible, so I guess if that means less premium, than so be it. However, I ultimately think the result of this era of insurance innovation will be more customers. In our industry, there are 100 million Americans (40% of the country) without dental insurance. That’s huge. The number one reason why is cost. So, I think we will open up a new group of people to being able to cost effectively visit the dentist.
One of the main pain-points of traditional insurance is the lack of regular contact between the insurer and the client. Innovation in insurance technology opens the door to new experiences for the policyholder. In a way, the disruption of insurtech can be as powerful as the disruption of Uber in the taxi industry. Uber offers more than a cheap ride. It offers a whole new experience to the customer. Do you agree that the insurance industry is converging towards Uber-like experiences for the policyholder? Would you say that this is the case of Beam?
Totally agree in every way. The user experience will evolve rapidly. Mobile first, better interfaces, customer service. All that. Here is a specific one at Beam: Insurance is classically an invisible product. Since we give toothbrushes, floss and toothpaste to all of our members as a subscription, we are building our brand every single day placing it on your sink right in front of your face. It’s a huge new opportunity to ‘own’ physical space in a member’s house without running commercials on every football game just so people remember you. Advertising of insurance could change a bunch as well.
In many respects insurance is a luxury good only affordable in wealthy countries. Indeed, insurance penetration is quite correlated with the GDP per capita of the country. There is a big and untapped market for insurance business in developing countries. Do you think insurtech can accelerate the insurance penetration in developing countries?
Massive, massive, massive opportunity. I spend a lot of time thinking about dental services in developing countries. 80% of the world’s population has never been to the dentist in their life. More generally, insurtech opens up access points that didn’t exist before. In developing countries, the first computer in a home is likely a smartphone, so mobile first insurance companies have a big opportunity here.
To conclude, how do you envision Beam in the future? Will Beam expand internationally? If so, how important you think that different health systems, regulations, and speed of adaptation of technology across countries affect the expansion of innovative companies like Beam?
We would absolutely love to go international. Without question there are some large hurdles though, most notably regulatory environments and just how different health and dental markets are in different countries. Distribution is different everywhere too. In some places, we need more dentists to justify an insurance product to cover them! Like many software based systems though, all you can do is slow them down. It will definitely be a much different industry in 10 years than what we see today.
Alex, many thanks for your time and for sharing your insights with our readers.