The excitement of a startup company is in its experimentation. The procedures have not been set in stone, there aren’t multiple departments who have to approve experiments, technical challenges of executing new ideas on a small scale may be onerous. In a startup, though, experimentation is all there is. Everyone’s coming in with an open mind, no biases and assumptions to overcome, and data is the only thing that drives decisions and results. You fail often, and small, and quickly learn from these failures.
While startups are in an exciting place when it comes to daily experiments in all possible areas, Insurtech startups are quite possibly where there’s the most room for innovation. In an industry that has traditionally been dominated by behemoths, there’s the weight of a conservative culture and tomes of processes which tend to stifle experiments before they can even be birthed. For startups, there is room to manoeuvre in three broad categories – the product, distribution channels and processes.
In the case of products – insurance has traditionally been sold as one big package. You are either “insured” or not. By breaking up the insurance pieces into smaller products, we can let people choose affordable policies that just cover things that feel relevant. Smaller products can also be changed and redone to reflect the needs of the customer with a tight cycle of innovation and sale to see what works. Micro-insurance, where you cover yourself for a specific disease only or you buy a cover for specific purchases, can serve to protect you in a personalised way and also be a great gateway to realise the potential of bigger risk mitigation in your financial security.
Distribution channels is possibly the biggest new thing in what startups in Insurtech can do. By taking the point of sale from a website or a planner and placing it in a dealership where you make a purchase that you can directly insure, you are literally placing your product in your customers hand. A customer that may not even have known that they needed insurance. Again, considerable experimentation can show what works – in our case we found that a person visiting a local pharmacy may not be interested in buying a small dengue policy, but a person buying eyeglasses or a cycle would be very interested in covering their expensive purchase against theft or damage.
Processes are harder to experiment with as a start-up because you may not have the numbers to give you a statistically valid result. Still, in the Insurtech space, there is a great deal of innovation that needs to be done to make the customer experience smooth from purchase to claims. For example, can we play with ways to give out claims to customers without making them go through hoops to prove that the claim isn’t fraudulent? Companies are looking at simple things like asking customers to make a video of themselves describing an incident, which can be analysed later with sophisticated software to spot patterns or trends.
The challenge for startups is thus not the experiments itself – that's very much part of company culture as they grow – the challenge is to be able to preserve this playfulness, this openness to experiment as the company grows and becomes more solidified with a need for structure and processes. Keep the eye on the data, keep testing and growing to turn that data into action, and separate the noise from the valid causation points that allow for a continuous growth in profitability.
The author is the CEO of Toffee Insurance