I often meet start-up founders determined to improve insurance distribution and customer experience, with most of the solutions targeting millennials. They are often millennials themselves, or at least emphasise with the needs and wants of this segment. These brave souls don’t often expect what cruel faith has in store for them – the inflexible “suits” in traditionalist insurance companies who want little to do with start-ups and product innovation.
The single biggest obstacle faced by pretty much all those entrepreneurs is the lack of control over their product. Since they are limited to selling the products offered by insurers, they can quite ironically innovate everything else except the very core – the product itself.
A start-up aspiring to come to market with a telematics-enabled usage-based motor insurance app can expect to discover that insurers “don’t’ have appetite for that type of risk” and would much rather work withold-school motor cover that requires your hairdresser’s age for calculating the premium, besides 200 other variables.
As the product sits in the centre of customer experience, there’s only so much that these start-ups can do – more often that not, they are limited to wrapping these old, often cumbersome products in a nice user interface.
Considering the poor customer experience level that online insurance customers have traditionally been facing, a posh design with a clever quote form logic can maybe win a few hearts – but unfortunately it falls short of a serious sustainable competitive advantage.
Moreover, the entire start-up management methodology is built around experimenting with every aspect of the organisation and its operations, with product characteristics being obviously amongst the most prominent variables. If the product is “locked in”, it’s like boxing with your better arm tied behind your back.
Amazon would not be Amazon without controlling the whole customer experience from sales to delivery (and everything between), Uber would not be Uber if its product would be limited to an app for ordering regular taxies. Tesla couldn’t have built the best electric car by just putting an electric motor under a Volkswagen’s bonnet. To redesign the value proposition, you need to control the entire value chain, and in insurance it includes the product, support, process, pricing, claims and payment collection.
The main reason behind that problem is the inherent risk averse nature of the insurance industry. Insurers want to underwrite portfolios with historical profitability data, which certainly makes sense; however, one can’t experiment with new business models and underwriting concepts without being capable for a small leap of faith. The leap of faith of putting the customer journey first, and the leap of faith of trusting the new underwriting ideas created by new technology and customers’ digital footprint.
Vikings decided to sail to England and beyond without knowing if any land exists there, and in order for insurance industry to find new territories they too need to unlock the courage of sailing to uncharted waters. Of course, it can be wise to send ahead a scouting ship before committing your whole fleet to the unknown
This is probably why US based start-up Lemonade became an insurer instead of an intermediary although it required a substantially larger investment. Bad news is that most start-ups fail to raise $12 million to capitalize an insurance company without demonstrating any real traction – but there can’t be traction without a product. Catch 22.
Thanks to considerable entry barriers, including regulatory ones, insurers have felt relatively safe against disruptive innovation from newcomers. The immune-system-weakening effects of this “quarantine” have become glaringly observable by now, with insurance lagging behind in efficiency and customer experience. There’s no Uber for insurance – yet customers are getting used to the experience level enabled by new technology in other industries.
It’s about time insurers stop merely paying lip service to innovation, and start going with the flow of experiments proposed by dozens of start-ups, desperate to find underwriters for their novel product ideas. Of course, not all these ideas end up being great. Of course, not all these ideas end up being great. But such is the nature of experimenting.
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Market Minds has recorded a very fun and captivating podcast with Insly’s CEO and founder Risto Rossar and project manager Mart Parve, introducing Insly as a cloud based CRM and policy administration business for insurance industry.
Conversation is centered how to bring innovation to insurance industry. How right now the industry wastes energy and which steps needs to be taken to change this. Discussion about the current state of London’s insurance market and if and how it needs to be renewed.
Listen to the interview and find out how Insly is digitalising insurance intermediation business by helping all insurance brokers and MGA’s to become 100% digital, leading them to achieve bigger sales and lower costs.
Find out what are the key components for „winning the game“.
Also, some entertaining stories about the speed of operating of Estonian insurance companies and checking business which still excists in some countries.
During my time in London I have met hundreds of insurance brokers, investors and innovators in FinTech, and the surrounding, wider insurance industry. The question that I have been obliged to answer most is:
The domination of direct online sales and aggregators in UK retail insurance market, as well as the near disappearance of insurance brokerage industry in Scandinavian countries, suggest the clear validity of this question. As I’ve built my business around developing software for insurance intermediaries, it is essential for me to have this question answered – so that’s why this blog post was written.
First, let’s get on the same page with the definition of a broker. I’m afraid that the ones casting death sentence to insurance brokers picture the broker as a 68-year-old person running a small office with 4 employees and 3 computers on the corner of Baker Street, and this indeed represents one certain type of broker businesses. Insurance broker is an intermediary that represents customers in the insurance distribution process. It doesn’t say anything about how the transactions are handled, over which channels the products are distributed nor how technologically advanced it is.
So, asking if insurance brokers will be replaced by technology equals to a question if transportation industry will be replaced by autonomous cars. Until human teleportation is invented, we still need the car that transports us, we’re just talking about removing the human operator from the driver’s seat at this point. Similarly, the nature of insurance broker business will change considerably over the course of next years to come, just as it is the case across many other industries, with just some of the trends listed below:
And guess what does the industry need for all of that to happen? It needs technology, a lot of it, and this is exactly what we’re doing at Insly: empowering insurance industry with technology to embrace the innovation in that sector. Many of the current trends concern the distribution aspect of insurance business, with the main emphasis being the move to online sales and servicing, be it over the web or mobile. Will customers start to buy more “direct” (from insurer, without intermediary)? I don’t know but it sure seems the genie is out of the bottle.
The brokers are already losing battles in some countries, for instance in UK where consumer insurance has largely moved online to bypass brokers. On the other hand, the immensely successful online aggregators can also be considered a new type of brokerage on some level (new Insurance Distribution Directive has already categorized them as intermediaries), since they too compare prices to assist consumers in their choices, and act as intermediaries. So the ones losing seem to be only those not embracing technological change and having been slow to start selling online.
In Scandinavia, customer loyalty is generally high in financial services, and people are used to buying insurance from the same company that their grandparents preferred. When you also consider the extensive lobby insurers have made against brokers, including a legal ban on insurers to pay commission to brokers, it’s not surprising there’s not much brokering business to speak of. But UK and Scandinavia are not the representation of the world. For example, the number of people employed in insurance intermediary sector has been increasing in US, and direct business is yet to have any serious effect on brokers. The story is similar in Estonia where brokers started to sell online even earlier than insurance companies – already in 2001. Nearly all brokers are using the Insly software, and as a result, brokers haven’t lost any market share at all.
The fact that insurance brokers have lost some battles in some countries doesn’t mean that insurance intermediation industry as a whole is dying. Insurance intermediary sector has shown immense capability to innovate, with most insurtech innovators (think of Friendsurance, BoughtbyMany, HeyGuevara, Moneysupermarket, WorryandPiece, Simplybusiness, Knip, FinanceFox etc) starting up precisely as intermediaries, as in principle, you can do everything that insurance company does by being an intermediary, without the burden of actually being one.
In fact, I’m having a hard time remembering any great, major innovation stories starting from the insurance companies (except DirectLine, and that was 30 years ago). This pain of stagnation is indeed also felt by the insurance behemoths themselves as nearly all of them are doubling down on innovation programs. Can these initiatives have the effect that is expected? Are they quick enough?
The war for customers is always won by companies that understand customer needs and make them happy. We are seeing many new services where insurance companies are bypassed altogether, with online channel operators (essentially agents or brokers) making direct deals with reinsurers – for instance the recently started cooperation between Trov and Munich Re.
The industry structure is shifting but as of now, it’s not at all decided which participants – insurers, brokers, agents or reinsurers – stand to gain and which ones end up losing. Some things are certain though. Only the digital will survive. And in the new world, it’s not about big eating the small anymore, it’s the fast eating the slow.
Photo credit: Shutterstock
For more than 15 years, Insly team has been a main contributor to innovation in the insurance industry. We were the first ones to launch Internet sales, along with price comparison in 2001, and we changed the way insurance is sold in several sales channels (banks, leasing companies, car dealers, gas stations, etc.). We introduced the concept of wholesale brokerage to Estonia (hardly a new concept in London) and we are currently building the first global Cloud-based software for insurance agents and brokers.
These changes to our approach have significantly improved our efficiency, but it is quite clear that the insurance industry (brokers, agents, and insurers) has not progressed at the same pace. The question is – Why not?
Insurers may have a lot of money to invest, but they lack both the flexibility and the motivation to change their ways of doing things. They are also struggling to factor in legacy systems and a number of other considerations. The best that they can do is slightly modernize their client fronting solutions, but a massive overhaul to how insurers operate is simply unrealistic.
Brokers and agents, on the other hand, are often small companies that lack the resources to invest on a serious scale, which means that the payoff is small. Many seem to be somewhat old-fashioned and unable to drastically change their established practices. Perhaps the most obvious evidence of this came from our small market survey in London, which revealed that only 2 out of 10 insurance broker CEOs have LinkedIn accounts.
Besides the individual actors’ unwillingness to adapt and modernize the industry, the regulations for compliance also pose a significant obstacle to reform and innovation. Anything that has the smallest chance of being non-compliant is quickly rejected, as the industry has continued to accumulate regulations and confusing “legalese” that makes it intimidating to think too far outside the box. When large sums of money are in play, those companies are obviously at the biggest risk, and they actually employ people on their payroll to caution them against risky maneuvers. The compliance officers on the payroll of large companies are also tasked with preventing risks and signing off on any new ideas before they are enacted.
Change comes slowly in certain industries, specifically when a new idea is viewed as being disruptive. Major changes usually result in shifts to power dynamics, so to protect those vested interests, lobby groups and the framework implicit in the business model make it very difficult for these new ideas to come into play without being tied up in legal battles over compliance. Entrepreneurs struggle to break into this industry for precisely that reason; we have seen it happen with each and every one of our innovative ideas – without exception.
Unfortunately, with all of those long-standing obstacles to innovation and evolution within the insurance industry, few creative and forward-thinking young people choose to enter this field. The fact is, most people that we meet are only here to make money, not to achieve their specific vision of changing the world for the better. The industry seems designed to hamper innovation and remain stagnant in its profitmaking rut, but there are still some who work to advance the plot. At Insly team, we are proud to be a part of that latter group.
While the founder of Lloyd’s might be amazed by how far Lloyd’s of London has come in a little over 300 years, the insurance market is no longer the pioneer of the industry that it once was. It is now lagging behind in this age of constant insurance technology innovation.
In the 1600s, Edward Lloyd made sure that his coffee house (coffee houses served as business centres throughout London at that time) had the best and most information to offer. Today, the reality is that the London insurance market is operating with a surprisingly low amount of information. Big Data holds the power to dramatically improve the market, and the market knows this. In a 2014 global survey by The Economist of insurance executives, 86% of respondents said they are currently or will soon make more use of their data. These are positive signs of change, but many risks are still insured based on gut feelings and very basic tariffication, and it is not rare when an insurance policy is renewed and all the data is rekeyed into the system. Some brokers simply keep all their data in folders on their computer hard drives. This outdated mode of operating cannot sustain Lloyd’s prominent position, as the study released by London Market Group and The Boston Consulting Group last year made very clear. So why is it like this? There is no excuse for the insurance market’s refusal to innovate, but there are a couple of reasons to explain the lack of insurance technology innovation so far:
1. The market is heavily regulated
The insurance market – and especially the London insurance market – is quite heavily regulated. I am quite certain that the average insurance broker or MGA pays more money to compliance consultants than they are spending on software. Difficult regulation creates several problems:
The paradox of regulation is that it is supposed to protect clients, but extensive regulation actually deprives clients of good service. In PwC’s 18th Annual Global CEO Survey, over-regulation is cited as the main threat to growth.
2. Lack of innovative minds
The challenge is also to find innovative young talent for the insurance broker industry, which is currently dominated by very experienced (but complacent) insurance professionals. The problems mentioned above combined with the unsexiness of the insurance industry and a completely boring work environment (compared to what many startups and coworking spaces in London are offering) just does not attract innovative minds. (It is no coincidence that Insly and the new insurance startup Worry+Peace are located in the Rainmaking Loft, which is still close to the insurance centre but full of inspiring young startups.)
In light of these hindrances, is there any hope for Lloyd’s to change? I have to respond with an enthusiastic YES. Lloyd’s is in the perfect position for technology innovation because the London market has several elements that the traditional insurance market does not possess:
Hundreds of small brokers and agents (MGAs) are logically much more likely and able to innovate than very big insurers. The London market is well known for innovative underwriting practices — here you can place risks and create products that are not accepted by traditional insurers. The groundwork for technology innovation is already in place. Now the sector needs to take that same approach with IT. Big traditional insurers have huge IT budgets which are mostly spent on upgrading old IT systems. MGAs can change the way insurance is distributed without the need for huge budgets.
Most London brokers are working without IT systems, or they are working with IT systems that are rather easy to replace. That is exactly why the banking system in Estonia is much more technologically advanced than the banking system in London. Estonian banks have been able to create completely new, flexible IT systems instead of replacing or updating old ones. The London insurance market can do the same.
Everything the insurance market needs to innovate is available right here. They just need to take themselves out of the comfort zone of Lime Street pubs and instead visit some FinTech events. That is how they can tap into the technology, skills and innovative spirit of London’s FinTech revolution and create change in their own industry.
With the help of a good technology partner, an MGA operating on the Lloyd’s of London market can become an innovative digital insurer in a matter of minutes. According to a report from Morgan Stanley and the Boston Consulting Group, such an insurer is able to reduce the combined ratio by as much as 21%. But beyond the many benefits of technology innovation is the serious fact that London’s position as the insurance centre is threatened. A look back through Lloyd’s history shows us that the insurance market has been in this position many times before, and each time innovation has provided the way forward.
In our next post, we’re planning to reveal our hard-learned lessons for introducing as well as switching to new insurance software and for reducing the pain of the transition. Subscribe below to get the insider view of the industry.
Insly, global SaaS solution for insurance brokers and agents, raised a seed round of €1M.
A software company established one and a half years ago through spin-off from an Estonian broker company, raised a seed round of 950 000 EUR with numerous angel investors from UK, USA, Estonia, Switzerland and Germany participating in that round.
Insly is the only global SaaS solution for insurance brokers and agents. Customizable cloud-based solution helps to manage clients, policies, objects and payments and offers an easy sales workflow for both the client as well as for the salesperson.
Recent investment will mostly be used for strengthening the company’s development team and for mapping out new potential markets for growth.
“The most important achievement of us is the breakthrough to London insurance market. Our sales team has managed to sell cloud based software to most conservative customers – London insurance brokers. They walk around Lloyd’s of London with slipcase full of papers and do business mostly based on trust. And now many of them have decided to move all of their core business to cloud and this is really proven to be a right decision for them. This is huge achievement for our sales team and, of course, an important recognition for our product developers,” commented Mr Risto Rossar, CEO and founder of Insly.
Insly employs 30 people in offices in London, Tallinn, Minsk, Warsaw and Vilnius. Company’s revenue in 2015 was 870 000 EUR and it’s growing rapidly reaching at least 1.6 million in 2016.
12 of November was the grand finale of our Insly Startupbootcamp programme – the Demo Day. Usually one would expect the classical setup of a large stage where companies can present their ideas one after another. The approach taken by us was slightly different. The Startupbootcamp Demo Day was held in very crowded environment – big hall where 10 companies were pitching at the same time. Much like today’s business world choices had to be made both by the participants (which teams to view?) and by the companies presenting (who to best share your message with the audience?). Due to the conditions just explained then no filming of the different pitches took place. As a result we are not able to share the demo day pitch video but rather we can share with you the video of the pitch that we recorded one day before the Demo Day. It is quite identical to our Demo Day pitch but just without an applause and Q&A session. Have a look and let us know what you think.
Picture of real Demo Day environment:
And Insly team on stage
According to dozens of insurance brokers and agents that we interviewed, renewal management is one of the most essential responsibilities of insurance brokers, yet many of the employees of insurance brokers and agents forget to complete this critical task.
The problem is that in this complex industry, employees are not backed up with safeguards or checklists; sometimes, the only way to ensure that all of the necessary activities are being performed is by implementing defined processes that are fully supported with innovative software solutions.
In order to implement any new process or evolve your business procedures, you must store all of the data regarding ending policies and the necessary actions to renew those policies so that they can easily be accessed and appropriate actions taken. This is a simple, but crucial step towards business success. You can manage this data in a variety of places, including a network drive Excel file, public folders, Google spreadsheets, or Microsoft access, among numerous others. As soon as your company expands beyond a single person, this sort of open-access system must be in place.Streaming and download Froning: The Fittest Man In History (2015)
Once you have established a central database for all of your policies where you can track and organise every policy based on its ending state, then you simply need to assign someone to track those critical actions. Each ending policy should have a set status, without exception, and those statuses should be the same for all policies. The below are suggestions of these:
Proposal Presented: signifies that you have sent the renewal insurance proposal to the respective client
Answer Yes: signifies that the client has received and accepted the insurance proposal, and has chosen the insurer, insurance coverage, and payment plan
Policy Issued: signifies that the policy has been issued or the insurer has been asked to issue it. This has been entered into your policy accounting system and was subsequently delivered to the client
Answer No: signifies that the client rejected your insurance proposal. In this situation, the reason for the rejection should also be noted – “object sold” or “client received a superior proposal from another insurance provider”
Efficiency is a key aspect of every business; there is no reason why insurance policy renewal management should be any different.
With insurance agents and brokers being client-focused, tasks such as filling out forms are not always high on the priorities list so what is the answer?
Basically, there is no better time than right now to start. Use any of the abovementioned options, and ensure you’re using technology that has the functionality to perform at its best.
Risto Rossar, veteran of two insurance start-ups, explains how to get a successful business of the ground.
Thinking of breaking out and starting on your own? The ‘start-up’ route is popular in the tech sector and increasingly being used in the insurance market.
But what are the key things you need to know if you’re considering going down the start-up route?
Risto Rossar of Insly, a cloud-based insurance management software, has the lowdown.
One way to develop the insurance industry is to provide unique, valuable services to established insurance companies or intermediaries, but as a startup it can be very difficult to get your proverbial “foot in the door”.
Plus, real implementation of your product is not directly in your control. Insly has taken this road by offering insurance management software to help insurance brokers, agents, and MGAs become more efficient.
Insurance is a very habit-driven industry, and changing it is challenging.
I admire what is being done by Guevara, BoughtByMany, Friendsurance, Worry+Peace, etc.
Some of them are making a bigger revolution, while some are making incremental improvements. Consider new ways to work with insurers, brokers and MGAs to see what you can do to shake-up the market in your own way.
Consider finding funding from organisations that are not related to insurance.
These founders offer a fresh perspective and innovative thinking that is sometimes lacking in the insurance industry
Although you are surrounded by compliance stories and risk managers, do not be afraid to implement Lean Startup (a way to shorten product development cycles) principles: build, measure, and learn.
The traditional business principle – “Build it and they will come” – just does not work here.
Whenever you start cooperation with insurance companies, do not believe them when they tell you it has to be complicated.
My experience with Insly and my previous startup IIZI is that when you’re determined to simplify insurance, it is possible.
I hope these tips help you on your way to launching a successful insurance startup, or give you confidence that you’re already on the right path.
And I especially hope to see more and more innovators enter and change this unsexy industry.
Risto Rossar is the CEO and Co-Founder of Insly. He has been at the helm of two insurance startups, one in London and one in Tallinn.
The blog post was initially posted on InsuranceAge.
Notes from a Startup in the London Insurance Market
Being a startup in the insurance business often feels like being a first-time footballer in the Champions League.
The insurance industry, by its very nature, is extremely conservative and competitive, which is why a company must be very careful before adopting the title of “startup”. However, there are a number of positive attributes to being a startup in this industry. It gives an immediate impression of innovation, conveying the message that you intend to be disruptive and that you plan to grow rapidly. So when Insly talks to talented professionals, investors, and the FinTech community, we often choose to call ourselves a startup.
In my position, I frequently talk with clients and partners, whether they are insurance brokers and agents from London or around the globe. However, to retain their respect and confidence, I need to use more than the fact that Insly has established itself in the industry, with more than 70 brokers using our services for a number of years. Granted, Insly has over 25 employees and has already made an agreement with the experienced team at ABC Insurance Brokers, but that isn’t enough. You need to demonstrate results and ambition.
One of our fundamental goals when we started Insly was to grow quickly, so we chose to apply to a startup accelerator in order to boost our business. Obviously, choosing the best accelerator was a crucial decision, so we applied to Startupbootcamp FinTech, knowing that insurance was an essential part of FinTech in London. I have personally worked in the insurance industry for the past 15 years, in which time I realised that in London, insurance is nearly as important as red telephone boxes and the Queen. My extensive experience has also led me to believe that insurance is directly involved in London’s Fintech scene.
However, when I arrived in London, I found that the reality of the situation was quite different. When you walk around the City of London, you still meet a great number of insurance professionals (wearing their obligatory suits and ties), but in London’s FinTech community you rarely find any insurance professionals.
Let’s be honest – insurance is not a particularly sexy or interesting business. Generally, neither is banking, but there are some elements of banking (for example personal finance, remittances and cryptocurrencies) that are a bit more attractive to creative minds. The startup sector has identified certain areas where disruption is possible and has begun entering those narrow niches to challenge the established order of the banking industry.
However, the only way to cause a disruption in the insurance industry is to provide unique, valuable services to established insurance companies, but as a startup, it can be very difficult to get your proverbial “foot in the door”. It will likely take you two months just to secure an initial meeting with a major insurance company, and you probably won’t even meet with the right person. Furthermore, they probably won’t understand what you’re offering and will hold back on trusting you.
That being said, there are exceptions to this case. Insly is not the only insurance startup in London, although many of the others have not yet been launched, and many of the founders of these companies do not even have experience in the insurance sector. Inevitably, they are also considerably younger than the insurance market average. These are the components that make for disruptive, agile, and profitable startups.
In my opinion, the London insurance market is in a prime position to change the established insurance industry and begin a disruption that could quickly be exported to the rest of the globe. I will go into more detail about how this process could (and likely will) happen in my upcoming blog posts.