Creating financial services products that are built to last: an interview with Kylie Gauthier
Over the past few years, several new financial services providers (like Jetty!) have entered the multifamily real estate market. We see this as a sign of innovation in the space, and we’re excited to continue adding new products as we grow.
But as we evaluate products currently on the market, there are differences in pricing across the board. That’s especially true of security deposit alternatives.
This can be confusing for both properties and their residents. So to clear up some of that confusion, we sat down with Jetty’s Lead Actuary, Kylie Gauthier, for a quick Q&A.
Q: In general, how does Jetty determine policy prices?
A: First and foremost, the price that we charge for each product has to cover the cost of the losses that we expect we’ll have to pay out. For Jetty Deposit, the cost of these losses depends on the default rates we experience. Thanks to the length of time we’ve been in the market, we have a good understanding of these default rates and how much we will pay in claims as a result. We also have to consider the additional features we’ve built into our products that differentiate us from our competitors, and the additional costs these features require.
Beyond covering our claims related costs, the prices we charge must also cover expense costs associated with offering an Insurance product.. These include everything from the costs of running a claim department, to acquisition expenses, to taxes and fees that we pay to remain compliant.
Q: Why are there differences in pricing between providers?
A: Everyone in this space has their own way of evaluating risk. On the most basic level, products are priced based on how much risk the provider takes on in selling them, and how they differentiate that risk between applicants.
At Jetty, we have identified significant differences in the risk levels of applicants. That’s why the differences in our prices for our lowest and highest-risk applicants is greater than some of our competitors.
Another priority for us is offering admitted products. This offers extra protection to our partners, but it also requires that we contribute to state guaranty funds that offer that protection.
We also build certain provisions into our products that others in this space don’t that increase the amount of risk we take on. For example, we believe it’s important to guarantee our partner properties that we won’t cancel coverage if a renter stops paying their premiums.
Finally, it’s worth noting that our policies don’t have exclusions for things like pandemics. A few years ago, this may not have seemed like a huge differentiator for most properties. But as we’ve seen over the past year, it’s essential that our model can weather major events—and that those events won’t wreck our business.
Q: What is the intention behind this kind of pricing? Will it change down the road?
A: Our product is designed to offer our partner properties the coverage they need, at a price that’s attractive to their residents. At the same time, our prices need to be adequate to cover the costs of providing this coverage, which is a key component to our relationship with our reinsurer.
Ultimately, maintaining healthy partnerships is critical to the stability of our business. Our pricing is designed to help us do just that. And as we build each of our products, we think about pricing for the long-term. We create models that are built to last—so that down the road, we won’t have to raise them to meet our expenses or the expectations of our partners.
As a result, we’ll never have to change our prices on a dime. We see this as an essential part of maintaining the trust we’ve built with our partners and policyholders alike, and a necessity for our long-term success.