Zack Stiefler and Tom Austin will receive their MBAs from
Wharton this month, and their prospects just got a lot sweeter thanks to a $30,000 Perlman Grand Prize award in the
2015 Wharton Business Plan Competition.
Stiefler, who was born in Philadelphia but grew up in San Diego, and Austin, a Maine native, began working on their company,
Bungalow Insurance, about a year ago.
The 28-year-olds both studied economics at Duke University as undergrads (Stiefler graduated in '09; Austin in '08), but didn’t connect personally until the summer of 2013, when they met in California, and later played together on Wharton’s hockey team.
The inspiration for their new online insurance-buying platform hit when they moved to Philly for school, and had to grapple with buying renters insurance for the first time.
"We really decided to start Bungalow because as consumers, we were frustrated with the experience of buying insurance," recalls Stiefler.
The two already have a lot to say about the insurance industry. First off, most insurance companies are much older -- some have been around for a century or more -- than major companies in other sectors. It’s a tough arena for entrepreneurs to break into. Plus, there's the feeling and experience, both for consumers and venture capitalists, that insurance is a complex, unglamorous field.
"Consumers have grown used to the fact that insurance is a complicated thing, and the industry has really benefited in a large way from that perception," says Austin. "Insurance doesn’t have to be as complicated as it seems right now. The products are actually relatively straightforward."
Factor in many insurance companies' reluctance to join the online marketplace in a user-friendly way and you have the perfect opportunity for a new business niche. They note that when it comes to customer satisfaction with online service, only cable companies rank below insurance companies.
Bungalow is launching with a focus on renters insurance rather than a more conventional product such as homeowners or car insurance partly because of their own experience with the needs of renters. Stiefler points to a major demographic shift: People under 35 are twice as likely to rent versus own their homes, and 55 percent of them don’t own cars.
"There are 30 million millennials out there who don’t need auto, they don’t need homeowners, they just need renters [insurance]," he explains.
The industry has failed to effectively grasp this need or create the kind of online shopping experience this generation prefers.
"We thought not only could we build a great experience, we could also really deliver a product that people aren’t selling right now that customers really need," adds Stiefler.
The Bungalow platform (which will be headquartered in Philly but also operate in New York) and its industry partners will aim to simplify things both for buyers and providers, and the Wharton prize will help boost the company's growth.
Writer: Alaina Mabaso
Sources: Zack Stiefler and Tom Austin, Bungalow Insurance