Kinsale Capital Wins By Spending Less Per Policy
Hello Business Enthusiasts,
Welcome back to Business Knowledge, where every week we look at one public company that sells something forgettable and earns serious money from it. We tell the story, then dissect the habit worth stealing for your own business.
- Company in focus today: Kinsale Capital Group, Richmond, Virginia (NYSE: KNSL)
- What they sell: insurance for small businesses that regular insurers turn away, like axe-throwing bars and cannabis shops
- Read this twice if: You work in a market full of odd one-off jobs, and you keep winning the ones you didn't want
In today's issue, we look at the cost figure that makes analysts recheck their spreadsheets and the Richmond insurer built in 2009 to produce it. You'll learn how to lower your cost of saying yes so you can afford to say no, all in about four minutes.
A cost line that looks like a typo
In 2025, Kinsale spent 20.8 cents of every premium dollar running its business. Plenty of its rivals spend 35 cents or more doing the same job.
Insurers call that first number the expense ratio. It covers underwriters, systems, offices and broker commissions, divided by the premiums earned, and Kinsale's came in at 20.8% for the year. On the February earnings call, management said many competitors run in the mid-30s or higher, and some go above 40%.
Add claims to costs and you get the combined ratio, the single number insurers live by. Anything under 100% means the policies made money before a cent of investment income. Kinsale's 2025 figure was 75.9%, leaving about 24 cents of underwriting profit on every premium dollar.
Built in Richmond to be cheap on purpose
Michael Kehoe founded Kinsale in 2009. Before that he spent years at James River, another specialty insurer, where, according to the Moats & Margins newsletter, he saw up close where the old carriers wasted money.
He picked one corner of the market and never left it. Kinsale writes only excess and surplus lines, the insurance for risks standard carriers refuse, and it is the only public company whose entire business is that niche. That market grew from about $42 billion in premiums in 2016 to about $130 billion in 2024, by Moats & Margins' count.
The customers are small and strange. Kinsale has covered axe-throwing venues and marijuana dispensaries, and its average premium runs around $15,000, a size most large carriers find too small to bother with.
Small policies only pay if handling them is cheap. So Kehoe built one in-house system that runs everything from the first submission to the final claim. Moats & Margins reports that about a fifth of staff work on that software, and that brokers often get a quote back within 24 hours, whereas older carriers take days.
Low cost buys the right to say no
Here's the idea behind all of it: in a market full of odd risks, the lowest-cost underwriter gets to choose.
A high-cost insurer has to keep writing policies to cover its overhead, even when prices drop below what the risk deserves. Kinsale can walk away and still earn a profit on what it keeps. Back in 2020 it received 461,000 new business submissions, more than enough to pick from.
Kehoe says it plainly on earnings calls: "as the low-cost provider in our space, we have a durable competitive advantage."
What choosing looked like in 2025
New money poured into property insurance over the past two years, and prices fell. Kinsale's answer was to let its property book shrink. Moats & Margins puts the commercial property drop at nearly 18% for the year, and gross written premium grew just 1.8% in the fourth quarter.
Profit went the other way. The fourth-quarter combined ratio was 71.7%, and operating return on equity for the year came in at 26.4%.
That held up even with the Palisades Fire in Los Angeles, which added 1.9 points of catastrophe losses to the year. Meanwhile, the premiums it did collect kept earning, with net investment income up 24.9% to $52.3 million in the quarter.
The bill for saying no
Discipline has a price, and shareholders paid it. Moats & Margins tracks the stock from about $547 at its 2024 peak to roughly $300 by mid-2026, as investors marked down an insurer whose growth had slowed to a crawl.
Two threats are worth watching. Rivals with deep pockets are happy to write property cover at thin margins for now, and better AI tools could help them price odd risks almost as well as Kinsale's system does. If both happen together, the 20-cent cost line becomes the last advantage standing.
Grab a napkin
Let's run Kinsale's math on a business you can picture. Say you're a freelance designer, and a logo enquiry lands in your inbox.
You spend an hour on a discovery call, two hours on a proposal, and another half hour answering follow-up emails. Call it three and a half hours. If your time is worth $50 an hour, every quote costs you $175 before you've designed a thing.
Now the painful part.
If you win three jobs out of every ten quotes, each yes is really carrying the cost of the seven no's. That's $1,750 of quoting time spread across three jobs, or about $580 per win. On a $1,500 logo, more than a third of the fee went on getting the job.
That's your expense ratio, and it explains a lot. A designer spending $580 to win each job can't afford to turn work down, so they take the cheap, messy projects too. Kinsale is spending 20.8 cents per dollar, so it gets to choose.
Cutting that number usually comes down to two fixes.
A proposal template for your most common job can turn two hours into twenty minutes. A short intake form, sent before any call, filters out the enquiries that were never going to buy.
Do both, and the same designer might spend $200 per win. At that price, saying no to a bad client stops feeling scary.
Try the numbers on your own business tonight. Plenty of owners are surprised by what comes out.
First pick when the market turns
Soft markets end the way they always have, with heavy losses for whoever priced too thin. When this one turns, the insurer still running at 20 cents per dollar gets first pick of everything the others drop.
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