"The insurance companies are panicking.They need us."

Udi Ziv  credit: Eyal Izhar
Udi Ziv credit: Eyal Izhar

Udi Ziv talks about his teens at Beverly Hills High, his bond with Shai Agassi, and how he turned insurtech company Earnix into a unicorn.

Forty years ago, at the age of 14, Udi Ziv from Haifa found himself in the world-famous Beverly Hills High School - the one that would, years later, serve as the inspiration for the television series "Beverly Hills 90210". "All the students there were as rich as Croesus, with parents in the film and other industries, just like the kids who appeared in the series," recalled Ziv, 54, CEO of insurance technology start-up Earnix. "They had amazing villas and private planes, and I was a pauper from 'The Workers' City,' living in a small apartment, 60 square meters for five people, that my parents rented." >p>Ziv's father had been hired for a job at the Israel Consulate in Los Angeles, and the family emigrated to the US. Because his parents wanted him to receive a high-quality education, they decided to live in Beverly Hills. All they could afford in that neighborhood was a tiny apartment, which didn't make it easy for the young Ziv. In retrospect, he actually views it as a formative experience. "I saw huge success and asked, 'Why not me?' It was a challenge. I suddenly had to become part of something up till then had been remote from me. That's something that definitely builds ambition in you."

In the end, the move was a success: "The first year was hard and I learned English from television," he recalls. "But then, people at school accepted me, and I had two wonderful years. Luckily, there were many Jewish students there, and Israelis were considered heroes - in those days, the early 1980s - an attitude inspired by the Entebbe operation."

At that time, Ziv also discovered computers. "At Beverly Hills High School I learned to program on PDP-11 computers [a mini-computer common before the PC era - O.D.]. This was when computers weren't yet commonplace in Israel. The school even hired me as an information systems programmer. One program I wrote calculated the weighted average of all students and we'd joke that, for a small fee, I could make sure my classmates would get outstanding grades. It's pretty amazing that they gave a student, and a foreigner at that, access to the school's most sensitive information."

He returned to Israel at the age of 17 with high school behind him, having skipped a grade, and unsurprisingly entered the Academic Reserves [the IDF draft deferment program allowing outstanding students to attend university prior to military service] in computer engineering at Technion - Israel Institute of Technology. On the second day, as he was standing in the hallway, something else happened that significantly affected his future, when the young Ziv met the even younger Shai Agassi. "He was 15 and I was 17, which is why we connected. We always laugh that even the other reservists viewed us as kids. I'd bought an Apple II computer in the US in 1983, and Shai had that computer too, and we spent a lot of time together."

Their bond did not end there; after graduating and serving in Unit 8200, Ziv joined Agassi and his father Reuven in 1991 to establish QuickSoft Development, (later Top Tier Software), which developed internal e-business portals. "These were the days before venture capital funds in Israel. Like in the movies, we slept in sleeping bags in Reuven's basement and ate pizza. On business trips, we were two in a hotel room, because there was simply no money. There was something romantic about it; it was living on the edge. There was almost no opportunity to do anything large-scale in Israel, build a billion-dollar Israeli company like you can now. Back then, there was Nice Systems, Comverse and Amdocs. These days, five big companies are born a week."

Top Tier was acquired in 2001 by SAP of Germany for $400 million in cash, in what was then considered a major deal. Following the acquisition, Ziv served as CEO of SAP Israel Laboratories and as Global Director of the Small Business Solutions Unit. Shai Agassi was appointed to the company's most senior technology position, President of the Products and Technology Division, and served as a board member until he resigned in 2007. A Wall Street Journal report claimed Agassi had left because of friction with SAP's executive board, and after not being promoted to CEO. Ziv left SAP shortly after Agassi.

"Journalists love headlines like that," laughs Ziv, who has avoided media interviews for many years. "In practice, for most of the time, we had a great marriage with SAP and played a very central role at the company. Towards the end, there were power struggles, but in any case, Shai had already decided to go his own way."

Although their professional paths parted after they left SAP, Ziv describes his relationship with Agassi to this day as "friendship, heart and soul." "The most important lesson I learned from Shai is to dare and do impossible things, and I'm very proud of that," he says. "If you look at his time at SAP, Shai changed the world. He brought me - and them - to do things that seemed impossible. This was a stodgy German engineering company - we transformed it into an American and global company."

As for Agassi's failure with electric car company Better Place, Ziv believes it was just a matter of timing. "We all know what happened with Better Place but look at what's going on in the world today. The electric vehicle revolution is happening big time. Shai was a little ahead of his time and didn't get a chance; in the end, Better Place's failure was about business, but the product and the vision of battery replacement stations worked perfectly."

Do you have any takeaways from his failure with Better Place?

"Mostly, you learn that failure is very painful."

Know the customer intimately

Today, Ziv is CEO of Earnix, although he is not the founder. The company was originally founded in 2001 by entrepreneur Yoni Cheifetz, then-Direct Insurance CEO Shai Fogel, and Sammy Krikler. Cheifetz ended his involvement in 2008 and is currently a partner at US-based Lightspeed Venture Partners. Fogel resigned his commitment to Earnix after moving to the US in the mid-2000s to run insurance company Guard Group. Krikler today serves as Chief Insurance Officer at Earnix, or as Ziv terms it, "the brains of the product."

However, the latest success can certainly be attributed to Ziv: a $75 million funding round that has turned Earnix - after two decades of operations - into a unicorn valued at over $1 billion. The round was led by US-based Insight Partners, with the participation of existing investors headed by Erel Margalit's JVP, the largest shareholder. During his tenure as CEO, Ziv has expanded the company's product portfolio and increased its workforce from under 100 four years ago to 250 today (with the intention of reaching 350 by the end of the year).

But the recent success of 20-year-old Earnix cannot be explained solely on the basis of Ziv's management skills. This success is also to do with the major changes in the sector in which Earnix operates. Simply put, Earnix's technology helps insurance companies and banks to customize policies and loans, price products, and contact customers on the basis of their profiles.

"Initially, our focus was on helping companies identify the right price, the price that would be profitable while still affordable," Ziv explains. "We then went on to identify the right product for the customer and the proper timing for offering it. Today, we not only provide analytical insights - which is what Israeli companies did in the past - but also management of all the data and the process up to the proposal via the agent or the digital channel. We also take care of regulatory issues because the CEO of a bank or insurance company thinks about profits, he's scared of going to jail."

Earnix's customers insurance and banking giants that manage billions of dollars and have been around for decades. Take, for example, US-based Liberty Mutual, established in 1912, with revenue of just under $44 billion last year, or 53 year-old British banking group NatWest with £10.8 billion revenue in 2020. These giants continue to rake in huge profits but suddenly, after many years of market domination, there's a tangible threat on the horizon.

"To my delight, the insurance and banking industry is one of the only traditional industries that hasn't undergone a revolution. I say 'to my delight' because Earnix makes its living from this reality. Today, banks and insurance companies have websites and apps, but nothing has really changed in the last 20-30 years," says Ziv.

"Today's customers have stopped accepting this and don't want to go on working like this. They're not willing to deal with companies that don't relate to them in a personalized way. Given this situation, wonderful young insurance companies have sprung up in recent years. Suddenly, veteran insurance companies are panicking about this change, and about the fact that new companies are proving things can be done differently."

Some of those young insurance companies proving it's possible to do things differently are Israeli, or at least have Israeli founders: Hippo, Lemonade, and Next Insurance. Recently, these companies have gained astronomically in value, from private investors or the stock market, usually well in excess of their actual revenue and profits.

While others may raise an eyebrow, Ziv actually understands these valuations. "The market realizes there will be a revolution in the insurance sector and is betting on who will come out the winner when the revolution is over, and will become a giant company," Ziv explains. "If the market didn't believe that there will be a revolution, then it wouldn't be interested in tiny businesses making $150 million annually in a market with giants making $30-40 billion. Of course, some of these new companies will succeed and others won't, so it's a gamble."

Insurance company fears

In order not to be left behind, veteran insurance companies are seeking out solutions like the ones offered by Earnix. "We're handing them the keys to the 21st century and beyond, meaning they can compete against Lemonade, Hippo and Next, as well as against giants like Amazon that are entering insurance and finance," explains Ziv.

In Ziv's opinion, the key to the 21st century and to the survival of the older insurance companies is not service quality, speedy claims clearance, or commission rates, but personalization. "When I'm in the US and want to buy something, I go straight to Amazon without even checking other options," Ziv explains. "The reason customers like me love Amazon so much is because they know, using data analysis, what products to offer me and when. They save me time and effort, because every time I need something it just shows up for me. That is the true vision of personalization. "

To explain the need for Earnix's personalization offering, Ziv gives a very recent coronavirus-related example. "During the pandemic, customers in US whose cars were parked at home and weren't being driven, approached insurers and demanded that they should stop billing them. This trend will only increase; studies in the US show that in two to three years, 70% of insurance policies will be based on usage patterns instead of a uniform fixed price for everyone.

"Of course, to calculate insurance based on usage and behavior, you have to know the customer intimately, beyond their age and whether or not they've had accidents to date, which is what insurance companies know today. You have to know how much they drive a month, whether they drive on safe or dangerous roads and, of course, keep tabs to see if they've changed workplaces, for example, from nearby to far away. That way, you can charge them less so they don't go elsewhere. That's one product we offer. "

With all due respect, can't the multibillion dollar giants do this themselves?

"It's very complicated to do it in-house. These companies specialize in insurance, not technology. This technology takes many person-hours with a big investment in intelligence and creativity. To do this, a company would need to replace core systems, which is their biggest fear. These systems have been operating for 30 years and no one really knows how they work. So, they look for someone else to do this - and that's us."

These are large, bureaucratic companies. Don't you find they're resistant to change?

"These industries are complacent, and up until a year or two ago, they didn't have to change because all was good and profitable. Today, our customers are eager to change. They've realized there's no choice because otherwise they'll become irrelevant. The demand for behavior-based insurance won't disappear after Covid-19, and there's no going back from the personalization revolution."

"A company suited to an IPO"

To date, Earnix has raised about $100 million and enlisted other investors, including Moshe Lichtman and Haim Shani's Israel Growth Partners (IGP), and Vintage Investment Partners. In its early stages, the company was also invested in by Direct Insurance and Formula Ventures. Ziv belives, however, that the veteran insurance companies' urgent need for change will soon lead to Wall Street. "Right now, we can raise as much money as we want on the private market, but Earnix is essentially a company that's suited to an IPO. The question when we'll go public is still open."

For Ziv, an IPO would be another personal achievement in the range of positions he has held in high-tech at both large organizations and small start-ups. After leaving SAP, he was recruited by then Nice Systems CEO Haim Shani to serve as president of the Enterprise Group. Four years later, he returned to the world of start-ups, first at Pontis, which was sold to Amdocs in 2016 for $100 million, and then Earnix, most recently serving as non-founder CEO.

"The thought of setting up my own start-up has crossed my mind, but I feel that my skillset is much more suited to a company that already has a product, sales and a customer, that already has something to work with," Ziv explains. "When I thought about what my passion was, I realized it was to cultivate something and make it grow, so I consciously decided to go for companies that are not 'in diapers.'"

Still, being a founder is an ego boost.

"No. Can I tell you what makes me do this? To change the world - which is something else I learned from my friend Shai. Whether you're a founder or not, what matters is making a difference in the world."

Udi Ziv (54)

  • Personal: Married + 3
  • Residence: Ra'anana
  • Education: B.A. Computer Engineering, Technion - Israel Institute of Technology
  • Previous positions:
  • Top Tier Founder with Shai and Reuven Agassi
  • Director of SAP Laboratories in Israel
  • President of the Enterprise Group at Nice Systems,
  • CEO of startup Pontis

Published by Globes, Israel business news - en.globes.co.il - on May 18, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Udi Ziv  credit: Eyal Izhar
Udi Ziv credit: Eyal Izhar
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