Nick Pester is this months guest InsurTech blogger. He’s a partner at Capital Law and works with a number of InsurTechs inside and outside of the Gateway portfolio.
At the start, play smart. It’s never easy being a startup, regardless of the sector, but the insurance market poses its own particular challenges.
Over the last 18 months, Capital Law has worked with numerous InsurTech startups, not just in terms of legal support but also – more importantly – helping them to forge commercial relationships, whether within the traditional insurance space or the corporate finance market.
We’ve seen a few fall at the first hurdle, and others take giant strides forward – in the time that some take to choose a logo. So, what is the key to success within the InsurTech startup space?
Well, if I had the irrefutable answer to that question, I’d be lawyering mainly in Micronesia. But, even so, there are undoubtedly common themes running through the veins of success. Below, I’ve jotted down a few pointers which I’ve picked up along the way.
A clear strategy
Some InsurTech startups are convinced that they never want to play in insurance beyond a SaaS solution. Others resolve to be a fully-fledged intermediary from the outset. Sometimes, a commitment to a particular path is made too early, or without the requisite foresight, and time and costs are wasted.
Of course, it’s not always clear at the beginning. But do spend your time on strategy and research before you jump into things. It’s far better to get the right offering out three months late, than to rush out a deficient product ‘on time’. The insurance market is slow to forget mistakes.
One option may be to bring on true insurance expertise from the outset.
Respect your elders
Sure, the traditional insurance market can be stuffy. And it’s the old guard thinking that you’re looking to change. But don’t underestimate the importance of ‘getting’ insurance, and understanding how the traditional model works. After all, how can you improve something if you don’t truly appreciate its functionality and worth?
It’s no coincidence that some of the more successful InsurTech businesses have plucked an NED or Chairman out of the traditional market, to guide and inform their strategy. Often, these individuals are happy to take on such a role for sweat equity.
They can also help you to plot the plan of least resistance.
Figuring out the decision makers
Ask an InsurTech startup what their main challenges have been, and finding the right contact(s) within a traditional insurer will be at or near the top of their list, every time. The behemoths, in particular, will have multiple divisions involved in ‘innovation’ in a broad sense, from underwriting, to operations, to innovation.
You can often waste considerable time pursuing a particular line of enquiry, which, ultimately, will never result in a sale. NEDs or Chair roles with insurance experience can often help you choose the right door.
Avoid the tunnel vision
You have to work hard to make a startup successful. But, don’t keep your head down so much that you miss the opportunities around you. We’ve had as much success in encouraging startups to come together as pairing InsurTechs with the traditional market.
Not only does collaboration offer you an opportunity to test out the product with like-minded individuals, it also provides the potential to create a stronger, more valuable market offering.
When you’re trying to catch someone’s eye, it’s sometimes better to have company. Or, to look outside of the box entirely…
Rising interest in capital markets
Not gaining the interest or traction you were hoping for from the traditional market? Or you’d like to take greater control of the design, build, and distribution of your product? The good news is that it’s not just insurers who might be able to provide the capital you need.
As the insurance market struggles, external capital providers are growing more interested in the opportunities this creates. There are multiple platforms in production, focusing on the transfer of reinsurance and ILS risks to the wider financial markets. In time, it’s inevitable that those protagonists will take a more direct route, partnering with new, innovative offerings to challenge the status quo.
Why not be first in line?
The InsurTech Gateway is the first authorised InsurTech incubator. They have the expertise to help early stage startups shape a clear strategy. The connections that open doors to key decision makers in the industry. The passion to support out of the box ideas. And the capital to back this all up!
So if you are working to launch a new InsurTech business, check out what the Gateway has to offer!