Root CEO Alex Timm on Profitable Growth and AI-Powered Insurance

**SPEAKER_1** (0:00)
Let's turn our attention to the insurance industry and AI with Alex Timm, the CEO of Root. Alex, it's so nice to see you again, and congratulations on the quarter. Just remind our viewers first and foremost again, what exactly Root does.

**Alex Timm** (0:14)
Yeah, thank you, and thanks for having me again. Root is a technology company focused in the car insurance space, and so we leverage modern technology, AI algorithms, and modern data sources like connected vehicle data and mobile telematics to more accurately price risk, and that gives consumers a better price and just more power over their financial lives.

**SPEAKER_1** (0:41)
You came off the most profitable quarter in history last time around when we spoke, so a very, very high bar, but you still continue to see some impressive growth here. How exactly are you doing that?

**Alex Timm** (0:54)
I mean, our results have been fantastic. We have generated actually an ROE over 30 percent, which is really almost unheard of in our sector, and so we've had fantastic profitability, and we've continued to grow the business year over year.
For us, it's really based on technology in our products. We are embedding, we're continuing to expand our embedded platform where we sell insurance directly with vehicles and that product has been fantastic for us.
We're meeting consumers in that moment of need instead of having to go and shop for insurance again, which nobody really wants to do whenever they purchase a car. So we've continued to expand. We also just launched New Jersey. We believe we're in about 80% of the population and we believe we should be national pretty soon. So we're targeting national by the end of 2027 and as we continue to invest and continue to just get better and better, we're going to continue to grow. So we're very excited.

**SPEAKER_1** (1:48)
Right, so with New Jersey, that takes you to 37 states, as you mentioned, looking to go national by 2027 I mean, obviously, as you pointed out last time around when we spoke, you are regulated state by state. I mean, is that goal on track? Do you foresee any sort of regulatory snags that you may hit or do you think it should be smooth sailing here?

**Alex Timm** (2:10)
Well, so far, it's been smooth sailing. New Jersey was a huge win for us and so that's a really nice positive step forward. We are, we're regulated at a state level. We can never predict what's going to happen with 100 percent certainty because of that. But we're working closely with all these regulators and we believe that really by the end of 27 there shouldn't be a problem and so we've done very well with that goal.
We're reiterating that by the end of 27, that is our expectation.

**SPEAKER_1** (2:39)
You announced a partnership with an insurance shopping platform. How significant is that? How much do you anticipate that will contribute to revenue overall moving forward?

**Alex Timm** (2:50)
Well, this is super important because insurance shopping is going to fundamentally change. So integrating with platforms is really important. As consumers start to move to ChatGPT and other AI assistance, we expect that consumers are going to continue to use those and actually end up shopping for insurance directly inside of some of these agents and eventually even have their own personal agents that are tailored to what they need specifically for insurance. So the ability to integrate with different insurance platforms and actually recommend the right insurance for every consumer at the best price is super important. So we think that will drive growth for the business. But more importantly, as consumers continue to move, it also puts us in the right spot.

**SPEAKER_1** (3:40)
You've also got your Carvana partnership, you're embedding the insurance within the car sales, which obviously has been going well as well for you. Let's just talk about how your business operates because obviously, you are using a lot of technology to study behavioral trends as to whether people are paying perhaps too much for their insurance. I'm just wondering how you manage cost when you're leveraging AI, but also competing on price with your service.

**Alex Timm** (4:13)
Well, the beautiful thing about insurance, and when you think about the insurance industry, it's effectively a war of algorithms. Everyone's trying to figure out who's going to have the best algorithm to predict, who's going to get into a car accident, who's not, what's good risk, what's not good risk. Then you think about the macro environment with AI right now, and that technology has come along so much. So it's really super powering a lot of the algorithms that we're currently using.