The past few weeks have involved some difficult conversations for Walid and Karim Dib, the brothers who co-founded InsurTech start-up Addenda.
The pair have spent the past two years building the business, which uses blockchain technology to speed up the process of reconciling motor insurance claims. They have also spent a lot of time and effort convincing insurers in the UAE, Bahrain and Kuwait to use the technology.
However, a decision to rapidly alter its business model, or to ‘pivot’ in the language of its venture capital backers, meant they had to cancel the hard-won contracts as they look to compete with their customers instead.
"People thought I'm insane, there were rumours we'd sold it, but no. It was very tough for us to make this decision, but it was something we needed to do," Walid Dib tells The National at Hub71, the WeWork-run accelerator at Abu Dhabi Global Market Square.
Walid, 29, and Karim, 28, were born in Austria to a Jordanian father and a Palestinian mother. The pair moved around a lot when they were younger, as their father, a civil engineer, took on jobs in different countries.
They also both became engineers, but Walid, who specialised in water and environmental engineering, didn't enjoy it.
"I was designing sewage pipelines for, like, a year and-a-half. I don’t know if that was a good opener in any conversation and it didn’t appeal to me, to be honest."
By chance, he transitioned into loss adjusting which, combined with a long-held interest in blockchain technology due to some early cryptocurrency investments, led to the pair setting up Addenda. Their venture was part of the second intake of companies into DIFC's Fintech Hive accelerator in September 2018.
Last year, they relocated to Abu Dhabi's Hub71, motivated by an incentive package that included a rent free office space as well as residential units for employees, and are now launching hala – a digital-only insurance company offering rewards for safe drivers.
“We want to become The Entertainer of insurance. Every day you are accident-free, we want to give you points you can spend on pizzas, hotel stays, gym membership, jewellery, spas, salons – all of that stuff,” he says.
“The intention here is that if the average policy value is between Dh750-Dh2,000, in a month or so you can redeem back the value.”
Addenda had eight major insurers using its blockchain in the UAE and a pilot in place involving five insurers in Bahrain. It also signed up six insurance companies in Kuwait. On top of that, the company had raised $1.2 million (Dh4.4m) from a group of investors including Oman Technology Fund, 500 Startups and AB Accelerator – the FinTech-focused venture capital arm of Arab Bank.
Convincing these backers of its change in strategy was not something Walid was looking forward to.
“I expected it to be hell. I was nervous,” he says.
But after explaining their shift, with financial projections, the investors could see his logic fairly quickly.
“People assume that the investors invested in [the] blockchain tech. They invested in the founders,” he says.
Addenda digitised the claims process for insurers and serves as a transparency layer so that each insurer involved in a claim can see how it is progressing – if a garage is approved for repairs, if repairs have been made and if claims have been settled.
Traditionally, settling claims can take a long time – anything from three months to three years.
“We tried dropping that number down to nine days with our insurers – at peak that was our best performance, but then Covid changed things,” Walid says.
Not only did it mean there were fewer claims to settle, it also highlighted the fact that some insurers were not keen on settling claims quickly.
“What I do is I’m a transparency layer. I show the market how much you owe them,” he says.
If, for example, a motor insurer owes its competitors Dh80m in outstanding claims, the incentive for some of them to hold on to that cash is greater than the benefits of reducing their operating costs by digitising the claims handling process.
“With Covid hitting, the priority to reconcile motor insurance accidents became one of the least priorities for insurance companies because they want to keep the money as long as possible,” Walid explains. “Their priority now is selling new policies.”
Hala pivoted to build a digital layer allowing insurers to do this by incentivising safer drivers with discounts. It is not offering insurance policies itself, as it is not regulated, but is instead teaming up with one of Addenda’s former clients to launch its service. A deal has already been signed and will be announced in the coming weeks.
“I only have one insurance underwriter, we’re not a price comparison site,” he says.
The aim is to digitise more of the insurance process, from buying policies to handling claims. The price comparison aggregators have done a very good job at digitising policy buying he says, but "the aggregators aren't always your friend".
"Convincing you to buy the cheapest policy is not the best thing for you," he says, arguing the standard of cover or the quality of the repairs carried out following an accident, or the customer service level in handling claims, may not be good enough.
"A lot of people don’t think about insurance in the sense of ‘what if I have a car accident?’. We need to flip the narrative," he says. "That is the purpose of your insurance. It’s not a tax to pay to drive."
The main advantage of hala (which translates into "welcome" in Gulf Arabic dialect) over the Addenda blockchain business is the much greater scope for growth. It wants to be able to offer home insurance and, if regulation allows, to potentially bundle offers. It also wants to use telematics once regulations allow – current pay-per-drive offers are merely based on a car's odometer, he says, whereas real telematics will provide more detailed data on how a person drives, rather than just measuring the distance, allowing for a better assessment of risk.
His one regret about changing course is the cancellation of contracts with former clients, many of whom took some convincing to use blockchain but subsequently saw the benefits.
"Some people might think ... 'You were doing a transparency layer with us?’. But at the end of the day, I have a fiduciary duty to my investors, to my team ... and to my vision. I quit my job to do something big, not to stay as a small part of an ecosystem in the last mile of the claims process."
Q&A With Walid Dib, co-founder of hala Insurance
How have you found setting up a business with your brother?
Mental health for founders ... it’s not talked about at all. Founders always want to seem strong, but there’s never a discussion about how difficult and lonely it is.
I’m glad that my co-founder is my brother. The level of competitiveness between us and the sibling rivalry is insane in every part of our lives – even work. But having him has been phenomenal because he’s my rock. And he is fantastic at what he does. He now knows way more about insurance than I do.
What new skills have you learned since starting the business?
Public speaking. I was so bad at it. Coincidentally, I was taking improv classes at the Courtyard Theatre in Dubai.
I also learned empathy. It's so important that my staff have comfort and trust in me. That I train and empower them. Because I didn't come into this for the money. I earn less than half of what I was earning before.
Which other start-up do you wish you’d founded?
There’s a start-up founded by a few Arabs in the US called Tribal Credit. It issues credit cards for start-ups. It’s an incredibly swift experience. Here, I have all of my capital raised in the bank, the bank knows I have this money [but] I’m having a tough time getting a Dh10,000 credit card? Come on! With these guys, it took two days.
Where do you see yourself in five years?
To become the default brand that you think of when you want convenience for insurance. And not just from a price perspective but actually getting your money’s worth. I want to change education about insurance and I want people to consider home insurance down the line, or any other type of insurance that you may not think you need until that day comes.
If you could do it all differently, what would you change?
I think I would have pivoted earlier.