Practical Matters of Insurance Tech Start-up

There are many informative articles that discuss the patterns in the insurance industry for those just starting out to focus on to maximize the opportunities available. However, there are practical matters to be considered relating to operations of a new company.

Meeting with Underwriters

Insurance carriers are no longer looking for new agents to sell their products, especially ones that are not already established. Before you arrange appointments with carriers, consider the following:

• Some carriers are adverse to risk, which makes it ineffective to request an appointment. Seek carriers with a reputation for taking on risks.
• Too much competition from their existing distribution channels could prevent the carrier from working with your venture.
• Which person at the carrier would be the best person to approach because they believe in your mission?

Digitized Customer Acquisition Issues

Providing your products digitally puts you in the spotlight, so even the slightest infraction of law is noticeable. Illegal commissions to real estate agents from placement of homeowners or title insurance can put you out of business quickly, so partnering with Zillow or other online real estate sites is not the most reliable business plan.

People Like People

While the digital age is taking the world by storm, people still like talking to other people. An established agent network can provide more cross-selling of other products than any amount of web apps. Real people can think of follow-up questions that the app cannot. Think it through before deciding to forgo agents completely in lieu of apps.

Adverse Selection

Risky ventures sometimes pay more for insurance than is necessary. This gluts the insurer with more poor risks than is representative of the norm. It also leaves your acquisition strategy open to more instances of fraud related to other carriers.

Sales Ethics

Insurance is beneficial to everyone, but not everyone needs insurance. Fear-mongering will degrade a customer relationship and create long-term damage to your business. It is not appropriate to over-sell for instances when someone can afford to self-insure. Instead, keep to the products they need.

Competitive Barriers

Insurance policies are intangible products consisting of a legal contract and underwriting methodology. This makes them easy for competitors to copy, which happens frequently. To maintain any edge, protecting your products with competitive barriers is an essential part of the business plan.

Regulatory Requirements

Regulation in the industry is not to be ignored. If you do not respect regulators, you and all your companies could be banned from conducting business by a state, province or district. Even experienced companies can be removed from an area for illegal practices. The insurance industry takes regulation seriously.

Outsourcing

The insurance industry is rife with specialty firms who can provide simple lines of insurance so your founders don't have to. Some start-up business models cannot support multiple lines of insurance, so outsourcing for accouting, actuarial analysis, claims, compliance, investment management and regulatory filings is a smart option.

Once you have established a solid business plan and discussed options with underwriters, then you can follow those opportunity patterns mentioned in the multitude of articles throughout the insurance industry.