It is no surprise that, in an industry struck by inefficiency & archaic processes, being overly optimistic when deciding on a solution is the status-quo.
Willis Re & CB insights reported that of the $724 million of insurtech funding in Q1 2018, only one transaction was delivered by an incumbent. The VC-dominant investment landscape is telling of the fight for incumbents to understand the ROI & value of insurtech adoption.
The insurtech collective too often overstate their abilities, claiming to impact the entire insurance value chain, ambitiously taking on the problems facing the underwriter to the consumer. In applying themselves to this broad spectrum they fail to realise the different requirements and drivers of business. Believing you can impact each one in the same way and dominate is futile.
You cannot be all things to all people
There are some exceptions to this; those who focus entirely on the process for one journey i.e. an end-to-end claims platform. Or the rise of Insurance-as-a-service, with firms like KASKO disrupting the entire insurance value chain through working with individual insurers on particular projects. However, those attempting to deliver value across the entire landscape fall into the trap of being mediocre for everyone.
However, many insurtechs, such as those with data-analytics as a mandate, have been keen to disrupt the entire insurance model in order to capture the entire market.
The belief that you can drive valuable insight at every stage is dangerous. Underwriters need to mitigate risk: the insights & capabilities they need from your technology must feed this sole purpose. This driver shifts throughout the value chain. The claims manager needs to detect fraud, the insurer needs to prove ROI to their corporate clients, & at the point where customer engagement is vital, the UX needs to be unparalleled.
As an Insurtech you cannot adopt the once size fits all rule – attempting to impact the whole insurance value-chain without a clear product-market-fit is ambitious and misguided.
A number of insurtechs have distinct product market fit & focus & have been able to overcome this:
“InsurTechs are no different to any other startup. They should have a larger vision, but initially you must be super focused on a particular niche in the value chain. A startup must genuinely solve a specific problem really well, differentiating themselves to customers; whether B2C, or B2B. Once they start to see traction in their solution, the startup can then expand their focus either horizontally across the value chain or vertically into new areas.”
(James @ Insurtech Gateway.)
As such, Preadicat, specialising in emerging risk for the underwriter, have identified a market gap and directed their laser focus to this customer base. Their immense growth & backing from Swiss Re’s Jacques Dubois is testament to the benefits and opportunities realised from specialisation. Attempting to cater to the entire spectrum of insurance will lead to a waste of money, mediocrity in your deliverable, and a misuse of resources.
However, some firms have managed to prove their value across the entire value-chain with acute focus, vision, and appreciation for the distinct differences across the landscape. Concirrus, a marine analytic solution provider, derive insights across the entire chain:
“What Concirrus has done well is they have created a product that is valuable to multiple stakeholders across the marine insurance value chain (distribution, underwriting, risk management and claims), that can be leveraged by (re)insurers, brokers and & clubs”
(James Tootell – Eos Venture Partners.)
Demonstrating that servicing the entire insurance value chain isn’t a mythical reality, however, it continues to be an elusive strategy which requires a concrete USP and in-depth understanding of the landscape something most firms cannot achieve in their early stages of growth.
Product market fit does not mean boxing yourself in
On the other hand there are firms so bespoke and narrowly focused that their offerings are relevant to next to no one.
“For an insurer to partner with an InsurTech start-up there needs to be a clear value proposition, with the solution solving a significant pain point. Many companies I see are creating solutions for problems that don’t exist or are not material to an insurer”
(James Tootell – Eos Venture Partners.)
You must refrain from being forced into a feature-box which delivers little to the business model of insurance.
Many find themselves stuck beneath the umbrella of bigger issues & platforms. Going in with an incremental solution creates a barrier to adoption: insurance firms with convoluted legacy systems want to see the ROI, implementing 20 to 30 different insurtech solutions at different stages of the value chain is understandably not as attractive as an end-to-end solution.
How to walk the line between mediocrity & irrelevance
Failing to understand your defining ambition and purpose means you run the risk of spreading yourself too thin and ultimately lack clear focus. This basic philosophy is critical for insurtech start-ups to understand who you are, where you play in the market and what your ultimate value is.
These are the questions you should be asking yourself. Considering a problem-first approach and a holistic analysis of your business model will ensure you focus, execute & embed yourself to become the insurance industry’s number one priority.