As the technical co-founder of Buddy, I knew I would be leaning heavily on my background in development and marketing. But, the journey over the last two years has taught me a great deal about starting a business and the ancient world of risk management. Thankfully, I have Jay & Brittany as exceptionally knowledgeable insurance people to help me sort it out.
There are hundreds if not thousands of "things I learned from starting a startup" listicles out there. Seriously, Google it. But there isn’t a ton about InsureTech, so I thought I would put together a quick list to help you understand what you might be getting yourself into if you are trying to disrupt one of the oldest financial instruments in the world.
- Is it InsureTech or InsurTech?
Let’s get this one out of the way quick. There is an odd debate taking place via hashtags online whether or not it should be spelled #InsureTech or #InsurTech. Personally, I like dropping the middle “e”, but based on volume it looks like #InsureTech has won the battle. Now that I’ve gotten that off my chest, here’s some dirt.
- The language is harder to understand than you think.
The Insurance industry has different meanings for words that already exist. For instance, if you have a policy and you want to make a change to it, you don’t change it, you endorse it. When I tell people I set up software to handle endorsements, they think I’m doing something with social influencers, not insurance. And that’s just the tip of the iceberg. Here are a couple of others: Premium - money paid by the customer. This week we sold 50 policies and collected $10,000 in premium. Paper - forms with insurance carrier’s information on them. Buddy’s policies are issued on StarNet Insurance Company paper.
- Red Tape is everywhere
Insurance is a highly regulated industry. How regulated, you ask? Well, you have to have all of the following things done in order to sell a single policy:
- Be a licensed agency in the state you wish to sell in.
- Have an agent licensed in the state you wish to sell in.
- Have a designated licensed producer.
- Have your product approved in the state you wish to sell in.
- Have the rates (prices, see #2) approved in the state you wish to sell in.
- Have someone taking the risk (paying claims). This could be you, but that’s more licensing and capital.
- Have "paper" to write on from a carrier who is approved in the state you wish to sell in.
Each state process is completely different and each type of product (Property & Casualty vs. Accident & Health) has different requirements. And this is just to sell. If you want to create a new product from scratch, as we did at Buddy, there are even more hoops to jump through including an actuarial memorandum (a document that says the math checks out based on the data available).
- There’s no central knowledge repository.
Despite the industry being highly regulated, and having a unique vernacular, there is no single point of truth about insurance. As you wade through the different steps of building your company, this can be frustrating, even with experienced insurance people on your team. Each state has its own department of insurance (DOI) with its own rules for applying for licenses, what can and can’t be in policies, etc. Look for a future post from Buddy on this issue, as we’ve been doing deep documentation on our process to get here, and we think some people might find it handy.
- People don’t like insurance.
Across the board, people don’t like insurance. At best they are ambivalent to it. This apathy towards our industry leads to people to not actually knowing what their insurance covers and what gaps it leaves open. From a survey we did, over 50% of people don’t know what expenses their health insurance covers if they have an accident. Everyone should definitely know what their exposure is wherever risk is involved, no matter how uncomfortable or boring it might be. Here's a short quiz to help find your health insurance gap.
- There is lots of room for innovation in insurance.
Because of several of the above points, there is huge room for innovation and disruption in the insurance industry. You don’t have to create a new product like we did to get started. There are opportunities for better digital customer experiences, on-demand coverage, real-time underwriting taking microseconds, on and on endlessly. If you’re thinking about doing a startup, give insurance a look. It’s a ton of work, but consumers and the industry are ready for something different and there’s room for us all.
Side note: if you’re thinking about doing an InsureTech startup, definitely give the MetLife Digital Accelerator, Powered by Techstars a look. They added real rocket fuel to our team and working with them is still one of the best decisions we’ve made.