[chrisplotz]

Thanks for your question, it's an important one, and deserves more than a handwave answer. When we started Goodcover, our goal was to make it so we were not in conflict with our Members - and the core of this is a cooperative model.

The original business model we were looking for is known as a "Reciprocal Exchange" (RE) - a type of co-op or mutual (like you mention) where the members own the claims capital, but the business is managed by a company called an "Attorney in Fact", which is usually a for profit (Farmers is an example). That would be us - we’d make money providing an amazing service to as many people as possible.

Unfortunately, we found out from the CA regulators very early on that starting a Reciprocal Exchange today was basically a non-starter. The capital requirements I mention in "Quirk 2" mean we can't just raise money from somewhere and kick-start the RE. We would need to get future-subscribers to put up the cash, and the amount we were talking there was just not possible. Farmers started in 1928 with a loan for their backend capital, something that is illegal today. So we were stuck - how do we start a new co-op insurer given this requirement?

The above story is the process of us figuring that out. Goodcover is an MGA that manages insurance on behalf of its Members, like an Attorney in Fact does for an RE. However since we can't have an actual RE until we have sufficient number of Members, we rent the capital backstop from conventional carriers. They pay us a fee and return the "underwriting profit" to us (that part is even more complicated and can talk later if you want), which we then return to Members, like Farmers should, but doesn’t anymore.

So, long answer - but yes, we are a for profit company. We operate the insurance like a cooperative, but like many other coops we do that for a for-profit fee. But, given the regulatory environment today we don't really look like your 1920s co-op!

[funwhilelost]

Thanks for sharing this extra detail. Your industry is obviously much trickier to navigate than the service industry our worker co-op is in.

Do your members get any voting rights or other feedback mechanisms?

[chrisplotz]

No problem, it's important I think. It is a heavily regulated industry so we always have to be mindful of what is legal, what is going to get regulatory approval, and what we actually want that will serve Members the best.

On voting rights - we haven't worked out how to legally do so, but we're experimenting with ideas over how to give the community more control. Would love to brainstorm ideas! Feel free to reach out, chris @ goodcover com

[carterehsmith]

>> we don't really look like your 1920s co-op!

Thats is not good marketing -- do you want customers to believe that you are the only innovation that happened in the field of _insurance_ (worth what, many trillions of dollars a year? ) in 100 years?

That sounds like a scam. You may want to change the pitch, just my 5c.

[chrisplotz]

Thanks for the feedback, that's not my intention. We're definitely not claiming we're the only innovation in 100 years.

However the environment those companies started in is gone. Insurers went in and out of business all the time in the 1920s and 30s, it's the survivors who are left (I think it really is amazing how many of the top insurers started in the 20s and 30s!). It's good there's more regulation and safety for insureds.

It does mean though we have to work in the current framework to get things done - the companies of the 1920s can't be started the same way in the 2020s.