How to Work With Insurtechs

The key to success is to remember that an insurer will be co-developing a solution with the startup; transparency is a must.

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Sometimes, it seems as if more insurtechs are getting funded than one can keep track of, and every one of them wants to work with a big insurance carrier to prove out their solution. Carriers are by their nature risk-averse, and these startups are pushing the envelope of what’s possible with new technologies. There are risks associated with working with insurtechs. But insurers that take too conservative an approach to working with insurtechs may miss out on opportunities to gain competitive advantage. 

First, let’s talk about the advantages of working with startups. A well-run startup can use its small size and scrappy culture to a carrier’s advantage, because it enables the carrier to be nimble. Need a change to the solution or identify something that can be improved? The insurtech provides rapid turnaround, giving you the equivalent of a custom-built product.

Over my career, I’ve worked with both startups and carriers, and the most successful relationships are forged when the insurer seeks transparency and is willing to be very hands-on. Communication between product and engineering must be near-constant from beginning to end, and early vetting should make sure that the startup and carrier teams can work together successfully.  

Remember, startups are forging new paths, building new technologies and creating novel use cases. In most cases, they won’t have a polished solution to deploy, unless they’re very mature. They’ll be developing their product or service as you move forward to a pilot. If you’re spending a lot more time with product discovery than you would with an established vendor, that’s a sign that you’re doing it right. Startups need to gain a full understanding of the challenge they’re addressing and what roles will need to be established to tackle it. Once they’ve got that down, the entire team will be able to move forward with technology that quickly delivers the value you’re looking for.

Mistakes to avoid

Startups move fast, and sometimes they move too fast for insurers, which typically work at a more measured pace. This mismatch can cause the relationship to break down. Both sides need to be on the same page with the same expectations about timelines, deliverables and priorities from the very start. 

Don’t send line-of-business managers to work with the insurtech alone. A product person or someone who is technically literate and knowledgeable about the carrier’s technical capabilities needs to work as a liaison. Without a strong technical background, the carrier’s representative may green-light projects that will cause engineering serious headaches later down the road. Technology needs to be at the table from the start.

Startups are ambitious, and it’s not at all uncommon for them to take on more than they can realistically handle. They simply have a different tolerance for risk than a carrier does. To mitigate this misalignment, start small. Identify a project that can be completed and deliver value in a short time. You will limit your risk and be able to test-drive the working relationship to see how well the startup can live up to its promises before you get in too deep.

See also: How Infrastructure Is Reshaping Insurtech

Security and technology evaluation

It’s important to get the relationship off on the right foot, and that starts with evaluation. When you first meet with a young insurtech, ask the following questions:

  • How will we deploy your solution, and how long will it take?: Unless there’s a very good reason for an on-premises deployment, modern software is now deployed as a service. So, if they’re talking about a six-month or longer deployment, that’s not a good sign. 
  • What’s innovative about this?: If you can get a similar solution from an established vendor, there’s no reason to take on the risk of working with a startup. The startup should be able to clearly explain the advantages of their technology compared with what's already commercially available — and those advantages need to be significant. 
  • How easy is it to integrate your solution with other technologies?: Will they build their own application programming interface (API), or are they using APIs that already exist. You need to understand exactly what you may be in for when it comes to connecting their solution with the rest of your stack.  

You’ll also want to conduct a security audit, but don’t be surprised if the startup can’t meet all of your requirements at first. Voice your concerns. Smart startups will address your security concerns quickly. 

Concerning data, limit your risk by only providing the insurtech with the minimum it needs to meet your objectives. Be especially conservative with personally identifiable information. Do they really need full names of customers? Would a first name work? Do they need a full address or just a ZIP code? Don’t provide any more data than is required. 

The importance of transparency

The key to success is to remember that an insurer will be co-developing the solution with the startup, and this relationship only works if there is transparency. Work incrementally with an agile approach, and, once you’re into the main project, have the startup accomplish the hardest technical tasks first.

Insurtechs are a risk, but the potential rewards are great. Build a transparent relationship where each side works as a partner, and together you will build something amazing.


Rick Bushell

Rick Bushell

Rick Bushell has served as CTO of HONK Technologies since 2014 and has overseen the development of HONK’s AI-powered digital roadside assistance and vehicle transport platform.

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