Navigating Insurtech Startup Decisions

As a trusted advisor to many InsurTech startup founders, I have been privileged to witness firsthand and help their growth journey from innovation to scaling. Initially, it’s all about innovation, but as startups grow, a tension between innovation and growth emerges. I am often asked if we can have both. Some key challenges include: 1. Maintaining Agility: Early-stage startups are nimble, but as they grow, decision-making processes can slow down. 2. Resource Allocation: Balancing the allocation of resources between innovation and day-to-day operations becomes more complex. 3. Systems and Processes: Scaling requires specialized roles and structured processes, which can limit the initial creativity. 4. Communication: Small teams communicate effortlessly, but expansion requires formal methods to keep everyone aligned especially in today's hybrid or 100% remote workplace 5. Focus: Startups iterate to find product-market fit. Once achieved, the focus shifts to scaling, potentially restricting further innovation. Here are some recommendations for addressing the Innovation/Growth Tradeoff: 1. Anticipate Challenges: Recognize and plan for growth-related challenges. Stay agile and monitor market trends. 2. Foster Communication: Keep innovation a priority with regular updates on market changes and new initiatives. Weekly stand-up meetings can keep teams aligned. 3. Encourage Cross-Functional Teams: Promote collaboration across different departments to foster innovation and maintain a holistic approach to problem-solving. 4. Invest in Talent Development: Continuously up-skill employees to keep pace with industry changes and maintain a culture of innovation. 5. Dedicate Time for Strategy: Ensure strategic thinking isn't overshadowed by operational efficiency. Regularly assess market demands and vulnerabilities to stay ahead. While some loss of innovation is inevitable with growth, it’s not an all-or-nothing situation. By balancing and prioritizing innovation, InsurTech startups can achieve sustainable growth and long-term success, positioning themselves for a successful exit.

My insurtech career began with something simple but powerful: Some text and a "Sign Up" button. Here's how I turned a landing page into an insurance product: 1. Checking Demand This page validated the market for what I wanted to offer. I drove traffic with ads and in-person events. The people who clicked “Sign Up” became leads. Now I needed something to sell. 2. Licenses I applied for a producers license and insurance license, to legally sell insurance. To get licensed as a broker (or producer), I took an online course, passed an exam and got fingerprinted before I could apply. Once I got licensed, getting the business entity license was easy. Just complete forms for name approval and licensing, pay a fee and wait for processing. With both licenses, I could turn leads into deals. 3. Appointments With an agency, I sought carriers that would let me sell their product. How I got my 1st appointments: - Independent agency wholesale networks for new agents - Applied online to sell for insurance companies - Cold emailed other territory managers and insurance companies I got appointments with almost a dozen companies and started quoting leads. Eventually we sold our first policies. This was the best way to learn about our customers. 4. Building the Product With lessons from our insurance agency, I asked: - Who is our ideal customer? What are their problems? - How will we price our insurance and differentiate our product? - Where is our customer? How can we reach them? With those answered, we developed our underwriting rules, forms/contracts and rating model. We then structured partnerships to realize our vision. 5. Partnerships As a bootstrapped startup, we structured ourselves as a Managing General Agent. We needed partnerships to get to market, including: - Fronting carrier for the “paper” or compliance support and regulatory structure - Reinsurer for capital to pay claims - 3rd-party admin to handle claims These partnerships moved us forward. Our legwork before finding these partners was essential for their support. 6. Building the Tech Tech is a key differentiator in our market. The core tech was our policy admin system, along with customer-facing tech for seamless onboarding. We evaluated all options, including building our own. With our policy admin system, we automated everything from issuing policies to managing renewals. Now we had to sell policies. 7. Distribution I've read that every insurance success story is a distribution success story. How do you find customers? We’d sold policies by phone. Now we had to do it without any customer interaction. Some insurance can be sold through independent agents. We went direct. We tried different channels before building an engine with best-in-class acquisition costs. The secret is, there’s no secret. Iterate until you find what works for your product and customers. These steps began my journey to selling millions in insurance.

One insurance gap almost wiped 40% off this insurtech's valuation overnight. Here's how we helped their CFO… The call I got from their CFO was one we get multiple times a year. They now needed deeper expertise. Like many funded startups… They put a basic insurance program in place during their friends & family round. Box ticked. Rolled it through their Series A. Three years later: In the market for a new capital raise. A matured digital I platform serving thousands of customers, and partnerships with several sizeable banks. But their insurance program was still stuck in 2021. Their risk management framework and insurance coverage were speaking different languages. And one insurance savvy investor flagged a gap during due diligence that left a major exposure unchecked. From a 30k view… Here's the insurance framework we helped them design to protect their Series B valuation: 1. Cyber Insurance → ransomware/extortion limits → tech platform interruption calc 2. Technology E&O → software failure coverage → customer data handling errors 3. D&O for Tech Companies → IPO/funding round protection → regulatory tech compliance 4. Coverage Adequacy → tech platform exposure limits → API/integration gap analysis 5. Regulatory Tech Insurance → fintech compliance coverage → digital insurance regs 6. Cost Optimization → insurtech market benchmarking → startup growth scaling costs 7. Data Liability → AI/ML decision coverage → data privacy protection 8. Policy Terms for Tech → API failure exclusions → cloud service interruption 9. Property Insurance → server/hardware protection → remote workforce coverage 10. Risk Management Services → cybersecurity programs → tech incident response 11. Emerging Tech Risks → blockchain exposure → AI liability assessment 12. Coverage Integration → legacy vs digital coverage → partner API protection 13. Claims Process → digital claims handling → real-time reporting systems 14. Policy Documentation → digital certificate system → API-based policy mgmt 15. Market Conditions → insurtech capacity limits → digital insurance trends 16. Regulatory Compliance → fintech licensing reqs → digital compliance reporting 17. Risk Transfer Alternatives → parametric solutions → micro-insurance platforms 18. Coverage Triggers → digital incident definition → automated notice systems 19. Insurance Program Structure → tech platform coverage → startup scaling structure 20. Specialized Tech Needs → open banking exposure → digital payment protection 21-25 Cont in comments… P.S. if you like this post you’ll love our newsletter. Every Friday we flag the top three articles impacting the global insurance markets. It’s for busy executives that want to stay current on the market…