Why partnering with an insurer can be a frustrating experience for a start up
“The battle between every startup and incumbent comes down to whether the startup gets distribution before the incumbent gets innovation” (source unknown).
The above quote neatly encapsulates one of the major challenges for start ups looking to disrupt the incumbent insurers. If they have a fundamental belief that current insurers can be disrupted with more customer centric propositions, then how do they go about accessing customers in a sector (notably on the Life & Pensions side) that predominantly relies on intermediary distribution, is aided by having a trusted brand and history of operation, and requires an ability to meet various regulatory and capital obligations.
As many have found it is not that easy and so a potentially better route to scaling a start up is to look to partner with those you are trying to disrupt, namely the existing scale insurers.
Partnering might be done for a variety of reasons for a start up, to source insurance capacity and operational expertise, to work with the incumbent on improving elements of their value chain, or partnering to access the insurers existing distribution with new propositions or services.
With a strong desire to embrace innovation to improve their businesses (or even sometimes just as PR to the market/ or the Board) the majority of existing insurers have welcomed the opportunity to partner / invest in a variety of start ups.
However they often then fail to consider how exactly they should work together or how they can implement the start ups proposition / tech into their own systems.
This can then result in the coming together of “move at speed” start ups and typically slower moving (often for good reason) established insurers providing a lot of frustration for the start up. These frustrations can be driven by:
Regulatory and compliance requirements. There is a significant overhead for operating as an insurer in meeting various regulatory and compliance requirements, the vast majority of which are for very good reason. This can make it difficult, particularly in a more conservative organization with significant levels of internal compliance sign off, to take an innovation to customers quickly to “experiment” and learn in developing new propositions.
Internal reporting. It is often surprising to a start up just the amount of overhead that is generated by a large insurer for internal sign offs, progress reporting and approval processes. For example, various departments requiring monthly progress updates on the same topic but taking slighting different angles (CIO / compliance / proposition), as well as Board reports, committee reports, working groups etc.
Onboarding processes. Working with new partners will typically require completing an insurers procurement process involving a lengthy form and questions with no or limited applicability to a start up (e.g set out your last 3 years profitability).
IT systems. Any requirement to integrate with an insurers legacy systems will typically cause challenges from a technical perspective, as well as specialist resource availability to make it happen (where in the change portfolio prioritisation will you be placed).
Internal politics can be difficult. A classic example. There might be a new function set up to lead on establishing and managing partnering with start ups, this team then wants to bring the innovation into the actual business and finds resistance from the P&L owner who may not have been consulted on the partnership in the first place or may have a number of other priorities to deliver first.
How then might a start up deal with some of these challenges? A few ideas below:
The most obvious one is to spend some time to understand the challenges and obligations an insurer has, what does it actually take in practice to launch a new proposition to market for example. You’ll need the insurer as much (if not more) than they need you, so appreciate the realities of operating in the insurance market and the regulatory/compliance obligations that this brings.
Understand the market you are looking to launch in. Who are the competitors, what are the existing products, how are products distributed, what the pricing / commission models etc. It sounds obvious, but there are a surprising number of start ups who may have tech knowledge but don’t really understand the market they are looking to enter.
Dedicate someone in your start up to dealing with the corporate oversight and relationship. Find someone who has the patience, attention to detail and understanding to be able to turn around the various requests an insurer will have, from reporting to form filling.
Effective networking in the insurer with appropriate people. Work out who in the business will be critical for you going live and scaling your product / innovation and try to engage those people early. Understand what they are trying to achieve with their business, what their priorities are and how you can help them could be critical.
Select your insurance partner carefully. While often there may not be the luxury of choice, some initial partner due diligence could pay dividends later on. What examples are there of that insurer successfully partnering with other start ups, what do those start ups say of the relationship, how are partnerships structured and what resource dedication is there, how much of an impact will your product/innovation have on the partner etc.
Be clear on how you will execute on delivery of your product / innovation. A set of slides and a prototype without a clear idea of how to get something live is often not enough. Insurers generally aren’t short of good ideas, but it is the time, resources and practicalities that limit their ability to implement those ideas. Being strong on execution will make a huge difference.
Don’t overpromise. Over pitching your innovation / product and the ability to get it live (without an appreciation of the challenges of the environment in which you will get it live) will lead to frustration on the insurer side and potentially undermine your credibility. Have a clear and realistic plan, don’t over commit to other partners and ensure you have good execution capability to support an effective delivery.
Partnering with an established insurer can provide the opportunity for a start up to scale quickly or indeed be the only route for growth at all. However, it is important that a start up enters these partnerships realizing the new requirements they may have to deal with and being prepared for these. In doing so they will be in much better shape to support an ongoing successful relationship.