Advice and Insights From A Practitioner

Underwriting an InsurTech Venture

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Avoiding the “Definitely Maybe Trap”

Speaking from experience, the worst thing a potential partner (carrier, reinsurer and/or vendor) can do is waste an InsurTech start-up’s time with indecision.  Like most technology start-ups with limited funding, as Benjamin Franklin would say:  “time is money”  which is truly an understatement.  In the InsurTech startup arena I have learned that there are 3 types of a “go/no go” investment decisions that can be made: 1) a “yes” is great; 2) a quick “no”, while disappointing, is fine (we are all grown-ups here), but a 3) “maybe” can be deadly.  Indecision…what I call the “definitely maybe trap”, can be the death knell of an InsurTech start-up, particularly in an industry that is already known for being very deliberate and slow moving. 

To enable more rapid decision making, over the past several years, I have developed a streamlined way, in the form of a checklist, to assist those, from all sides of an InsurTech start-up, to underwrite an InsurTech business venture quickly.

14 Ways to Evaluate and Assess an InsurTech Start-up.

  1. Rationale’, Purpose and Reason for being – what tough problem, challenge, market need and/or customer pain points are they addressing? Is the business plan anchored in reality or is it aspirational? Was there an epiphany moment that occurred that has led to the innovation?
  2. Market Potential and Business Model– is there a large enough potential market? Is the business model geared toward B2B, B2C/DTC or, both? Is it a so-called “value chain play” or “pure play” (with little or no vertical integration) business model? What is the geographic scope of the opportunity?
  3. Financial Potential – within the first 2 to 3 years does the business have the potential to generate a significant amount of top line revenue to get investors, and InsurTech ecosystem partners (reinsurers, insurers, technology enablers, distribution partners, etc.), truly excited enough to support the funding of your business plan:
    • Projected Gross Written Premium of US$10 MM, within 24 to 36 months?
    • Inforce Policies of 20,000 plus, within 24 to 36 months?Premium (TAAP) to Marketing cost (MC) to Premium generated ratio that exceeds 1.40?
    • Is there a clear cost reduction achieved vs. the industry standard?
    • New Target Operating Model – to what extent are you deploying enabling technologies (i.e. AI, cognitive computing, machine learning, chat bots, robotic process automation (“RPA”), block chain, behavioral economic techniques, an accelerated underwriting engine, new predictive data sources, etc.) being utilized to improve targeting, risk selection, reduce the friction/increase the speed in the sales, fulfillment, underwriting and/or claims processes?
    • What is the monthly run rate/burn rate and what is projected in terms of months to break even?
    • How big can the business be in 5, 7 and 10 years?
  4. Excellent Management Team – have they assembled key managers who have a successful track record, especially with similar products and channels, who are all passionate about the mission (and not just about making a quick buck). Are the founders inventors or entrepreneurs with start-up experience? My personal preference is to work with those individuals who have truly developed the intellectual property at the core of the value proposition. Is the team promoting a culture of curiosity to create the next new product, capability or service or so-called “option value”, a second level of capabilities that can be configured into new concepts – a virtuous cycle to sustain growth? What about outsourcing critical functions like recruiting, staffing, regulatory, legal and compliance? There are a few resources available for start-ups including Gust Launch  and Google for Start-ups.
  5. Strong Value Proposition (and Competitive Analysis) – is there a strong and clear value proposition that ranks high with respect to the 4 essential elements of a forceful value Proposition, according to MECLABS: appeal, exclusivity, clarity and credibility? Does it provide a superior, “sticky” customer experience throughout the entire product life cycle? Also, according to MECLABS, a value proposition is the answer to the question: “If I am your ideal customer, why should I buy from you, rather than your competitor?” Does the value proposition create an unfair advantage and multiple barriers-to-entry? Why and how will they win over competitors? What specifically in terms of points of differentiation makes their value proposition that much more superior than competitors?
  6. Open platform – is the platform open enough (via APIs) to enable to company to participate in a larger value rich and data rich ecosystem?  Has there been an independent review of the IT platform, documentation of code, developmental roadmap, QC processes and information security review that demonstrates a best practices approach has been taken throughout all software development and hosting efforts thus far, and into the future?  Is there a disaster recovery plan that has been documented and tested?
  7. Intellectual Property – do they have proprietary technology, a software application and/or business method(s), patent(s), trade secret(s), feature set(s), etc. that cannot be easily replicated (for a few years and millions of investment in time and materials)? How flexible and user friendly is the user interface (whether it is a supplier or ultimate customer UI)?
  8. Commercialization – is there a clear roadmap for commercialization coupled with a realistic “go-to-market” strategy to bring a product to market backed by a stable operational capability (aka target operating model) and future commercial development roadmap? Is this a minimum viable product (“MVP”) or is it ready for a full scale commercial rollout, complete with a strong feature set?
  9. Proof of Concept/Use Cases – ideally, the product and/or service has demonstrated via a live pilot, demonstrator, prototype(s) and/or trial that it does indeed fulfill the intended need(s), and is now ready and well-positioned to scale.
  10. Scalability – is there a Strategic Marketing Plan backed by sufficient budget that supports the scaling of the business that shows sustainable, positive cash flows and realistic growth projections?
  11. Alignment of stakeholders and the investors– is there complete alignment amongst all stakeholders? Are the investors well versed in insurance and actively engaged (aka “smart money” partners) or just passive capital contributors?  What is their appetite to participate in future funding rounds and capacity for introductions to possible ecosystem partners/clients or additional investors?
  12. Risks and Mitigants – have all threats and risks (including execution risks) and Mitigants been identified and addressed via a SWOT analysis? Who are the ecosystem participants and possible co-dependencies? What are the contingency plans that are in place to support changes in the strategic direction of the company if things do not go as planned?
  13. Pivotability – are there course correction alternatives that have been considered as part of the business plan?
  14. Exit Strategy – what companies would view this business as an attractive target for acquisition? Why would they find your firm attractive and is there a time horizon set for exit (3 years, 5 years, etc.)?

While not exhaustive, this checklist has served me and some of my colleagues well as a great track to run on.

Are there any additional items to add to my list?  Your feedback and comments would be greatly appreciated.

Bill Tyson, The Savvy Strategist, has been active in the InsurTech arena for over 18 years. He is the CEO and founder of Strategic Marketing Plus, LLC, an InsurTech and marketing advisory practice and author of the “InsurTech Marketer’s Manifesto”.  He also serves as EVP, Global Strategy and Chief Business Development Officer of autonomousID, an Internet of Things (IoT) startup based in Ottawa, Canada.  He is also an active participant in a firm called Insurance Innovation Partners Group, LLC working on a few additional life, accident and health insurance M&A deals with fellow seasoned insurance/InsurTech executives intent on transforming the insurance industry. 

Contact Bill at:


CB Insights recently conducted a post-mortem of more than 100 failed startups to try to figure out what went wrong. 

The top reason they failed — “No market need,” cited by 42%.

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Categorised in: Accountability, Association Group Insurance, Bain RAPID Model, Balanced Scorecard Approach, Best Practices, Bill Tyson Consulting, Bill Tyson's Blog Strategy-In-Action, Business Model, Business model innovation, Change, Change leadership, Customer Engagement, Customer Value Proposition, Differentiation, Digital Insurance, Execution, Innovations, Insurance, Insurance consulting, Insurance distribution, InsureTech, InsurTech, Lead Generation, Marketing, multichannel marketing, organizational change, RAPID Decision Making, RAPID Decisions, Risk Management, Social Media, Strategic Plan, Strategy, SWOT Analysis, Trends, Value Chain, Value Networks, Value proposition

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