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World’s Worst County/Western Insurtech Song

Eye of the Storm: Natural disasters, the insurtech market, and other musings from Bob Frady, CEO of HazardHub


“I Hate My Current Vendor, but I Can’t Work with You Because You’re Not My Current Vendor.”

It’s the title of The World’s Worst Country/Western Insurance Song. 

Repeat that title a thousand times and you’ll begin to understand what insurtechs are up against. It’s the No. 1 reason why insurtech companies die. A new company may offer outstanding tools, but the proof and approval processes on the buyer’s side are so long that many insurtechs simply won’t survive the delay.

The process involves three main steps. Your goal as an insurtech is to cut through those steps as quickly as possible.

The First Step: “Who Are You People?”

One of the hardest things to do as an insurtech is to let people know who you are and to get them to understand that you’re a real company. Accelerators can be helpful -- places like Plug and Play have their role. But many times the innovation people who visit these accelerators are just as frustrated by overly complex internal processes. Social media can be helpful. But it's a long and slow process; it can take a year just to get a carrier to recognize who you are.

The Second Step: The Proof Point

After getting past the “who are you” stage, insurtechs often send a sample of data so they can “prove” their value. Some people call this a “proof of concept.” One of the big issues with a proof point is that carriers usually don’t tell you what they’re trying to accomplish; they hide their true intentions because they believe that you’re lucky they’re even talking to you. For example, carriers rarely tell an insurtech what will actually move a company into production. Many times, the proof point becomes just an intellectual exercise. Getting through the proof point process can take another year. So now you’re two years in and your “burn rate” may begin to singe your toes.

The Third Step: The Negotiation

If you survive the first two steps, at some point you will try to move from planning and testing into production. Getting a contract through an insurance buying process is time consuming. Many times, the contract requirements are tuned to very large companies. If you're an insurtech, you don't have a lot of the protections that large companies do -- you shouldn't, you're small. The procurement group can slow down the whole process because they’re not really concerned about the business need – they’re concerned about their own process and checking the “right” boxes. This process can take 6 to 12 months by itself to work through.

Carriers work with companies they hate because they've set their own artificial walls to discourage their employees from using new vendors. Plus, these old vendors will decrease service levels and increase costs because they know how hard this process is for a new company to get through -- which just makes the whole thing worse.

We’re not afraid of this process. We know it exists and we work our way through it. But for many insurtechs, it's the single biggest surprise they run into: the sad ballad of The World’s Worst Country/Western Insurtech Song.

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