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You Want Us To Do WHAT For Free?

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


One of the things we recognized very early in this game was that insurance companies hate risk.  Insurtechs are risky. Therefore, insurance companies hate insurtechs. 

The logical proof holds. They’ll say that they don’t, but it’s in their DNA. This basic premise causes some very irrational buying behavior.

Somewhere along the line, insurance companies figured out that they could get prospective vendors – which is basically what insurtechs are -- to do stuff for free. Big stuff. Costly stuff. Just for the pleasure of potentially doing business with them.

As an example, we recently had a prospect come to us to run a VERY large quantity of records -- over 3 million of them. Then they told us that they expected the data for free and they would let us know whether or not they “found any value in the data” and would potentially pay us if they needed the data.

Unfortunately, experiences like this have taught us one thing: a prospect who demands that you do your work and/or POC for free is a dead end. But rather than tell them this, we decided to have a little fun with them. We asked, “How about you give us home and auto insurance – for free – for the length of this test? We’ll let you know if we see any value in it and will pay you if it turns out we need it.”

Their response? “Well, competitor XYZ is doing it for free.”

Our response: “Companies that don’t believe in the value of their work do that. If you’re not willing to give us YOUR product for free, how can you expect us to do that for you?”

The silence was deafening. We never did the project.

The funny thing is, we used to do this sized test for free (OK – I liked doing them more than John, my co-founder). After giving away a LOT of records, we stopped (OK – John MADE me stop.)

We stopped for what we think are four good reasons. We hope you find them useful – (note – your mileage may differ.)

  1. People who ask for free tests usually don’t actually want to make things happen. We’ve learned this the hard way. People who ask for free tests seem to be (a) trying to build a case to show value for money that’s not a planned spend (aka, “I’ve opened the fridge door but don’t know what I want”), or (b) trying to protect the status quo by saying things like, “Yeah, we tested them. They’re not as good as what we’re currently doing (even if you are WAY better.") Both cases have a common thread: these are not people who can move things into execution. They say they can, but we simply haven’t seen it.
  2. People pay attention to money that’s spent WAY more than free stuff. Paying for a test – even a small payment – not only tells you that this group can “get things done.” It also tells you that they are serious about evaluating what you have. It’s not a guarantee of success if your POC works, but it’s a lot bigger sign than the “free sniffers” who can’t really get anything done.
  3. If you can’t get insight from a sample, you’re probably not a good examiner of data. At HazardHub, we always encourage people to start with really small samples – as few as 10 records. If you can’t see something in a very small sample of records that you know well, multiplying that number by a million won’t make much of a difference.
  4. If you don’t value your product, how can you expect anyone else to? This is the hardest point for most Insurtechs to swallow, as too many people are desperate to get to the POC. Frankly, POCs look nice to your VCs, and lovely to AM Best, but they don’t matter if you can’t convert them to a paying customer. That conversion takes time and effort that you should be paid for. 

We still do free tests; they’re just a whole lot smaller. Now, we provide up to 1,000 records for free, which is usually enough to let you know whether you want to engage further. After that, it’s 10 cents per record to test – which is still a SCREAMING deal.

Free isn’t bad – just make sure you’re properly valuing yourself. Good luck out there!




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