Insuranceciooutlook

A 10 Step Guide to Starting a Digital Insurer in 18 Months

By Andrew Shaw, Founder & CEO, Coya

Andrew Shaw, Founder & CEO, Coya

There’s no secret recipe to build an insurance carrier, as most of the challenge will be very specific to you model and certainly go far beyond 10 points. Having been lucky enough to build up a digital insurance carrier with my team over the last few years though, I’m pretty certain you will need to consider the challenges below and milestones along the way.

Step 1: Find a big problem in the industry you will focus on

Are you passionate about solving the problem? You’ve got to be prepared for the long haul, so make sure the business approach you are choosing excites you. You'll need passion to push you through when times are tough and the finish line seems far away. Is the timing right for your solution? You have to pull a lot of resources together to get your career off the ground. Do customers really want it? Research, research, but not too much or else you won’t get started.

Step 2: Find your founding team

Nothing great is achieved alone, you’re going to need a driven team of co-founders, carrier, and business partners. It’s the team, not the idea, that will carry your business over the finish line—and it’s a long race. So firstly, make sure you are going to enjoy those long nights of work together and pick each other up when you need it. Skills and responsibility split are certainly important, but even more important is the attitude. Every team will have its own culture; I personally attempt to bring in people who are both humble, which helps the team learn and collaborate better, and hiring those who go the extra mile and deliver the unexpected. If a task is assigned and delivered, that’s good, but it will never be great unless it either exceeds expectations or delivers something outside of the task list through employee initiative. The culture of your founding team will trickle through the organization, so find role models.

Step 3: Get funding

After the round is before the round we say, so the principles for your co-founding team above apply equally to your investors. To tackle the digital insurance model, you have two general directions: strategic or venture capital. You should ask yourself how independent you need to be. Given Coya is a full-stack approach, this was a key consideration, namely investors’ independence, as we wanted to ensure the most disruptive growth decisions in the long run with like-minded backers. The challenge with this route is finding the perfect fit investors. The perfect fit will have a long term investment thesis and ideally, some experience investing in successful fintechs. And finally, remember that you choose people to work with, don’t be fooled by considering the deep pockets only. Will your backers bring further great funds into the business—the domino effect— and will they have the stamina to back your vision until it’s realized?

Step 4: Decide on the build of buy technology

If your vision is to be a technology company with an insurance license, this is going to be a difficult choice, as the ever so important time to market will need to be compromised to follow a true tech-first approach of building your own infrastructure, the long haul future-ready bet. There is no right or wrong choice, however, in our case, we saw a proprietary tech stack as critical to building out our vision. As a digital insurer, you will consider aspects such as cloud hosting, REST API connectivity, continuous deployment to ensure you are able to achieve both speed and control while updating your code to fit your customer’s needs.

Step 5: Finalize your business model plan

Unlike the typical startup that’s live in a month figuring things out on the fly, as a licensed carrier, one does some heavy lifting upfront, planning endless processes, policies, and risk management frameworks, many months before go-live. Not to worry though, as what may seem like a lot of unnatural documentation upfront in the startup process ends up being an asset when you finally get live and need to rather concentrate on adapting to customer needs than drafting the documents. You will have a strong governance framework from day one.

"Whether in insurance or other industries, if you really want to be successful, everything you develop needs to add value to your customers"

Step 6: Pre-align your business concept with the regulator

Transparency is the key to trust, with your customers, and very importantly, your financial supervisor. In our case, we were talking to the financial supervisor in Germany—BaFin—many months before we applied for our P&C license. We went so far as to not announce big investments into our company in the press until we had spoken to the supervisor. Your financial supervisor will want to have a solid understanding of the viability of the business, the people and partners involved, and the capital behind the business.

Step 7: Submit your application

Your application will include well over 1,000 pages of documentation including risk management policies, SCR calculations, outsourcing policies, key functions staffing, reinsurance partners, and a whole lot more. Take a deep breath, you made it this far! However, the journey is only beginning.

Step 8: Build out your team

The challenges of building up a team of experts from insurance and technology worlds are not insignificant. But a diverse team of experts from both worlds is needed, as the trick is to translate the knowledge of the insurance domain that is not changing with the potential of agile working methods and technologies, which tend to go hand in hand. The most talented developers will not want to work in waterfall methods with technology that is outdated.

The culture challenge is real. The typical process involves forming, storming, norming, and performing. Therefore, it’s critical you only hire people who are humble enough to learn, truly enjoy each other’s company, and believe in the vision. This will allow teams from different backgrounds to stick together despite the challenges in communication between the insurance and technology world you will face. You will need to work hard on creating cross-functional squads that solve specific problems together, rather than passing work back and forth between functional departments.

Step 9: Constantly iterate on your tech culture and need for speed

I personally think of a tech culture as one that increases control via technology, and thereby reduces fear within the company to experiment, increases the feedback loops for learning, and empowers developers and employees to do what they love most. The technology talent expects cutting-edge technology to increase both the speed of development and control over the release process and bug detection. Continuous deployment frameworks are critical in accelerating the realization of purpose, the learning curve of the engineer, and the independence to work without fear of breaking a monolith architecture whose code is not even documented.

The rituals across the company need to be in sync with this culture to achieve your digital mission. This encompasses retrospective rituals in various formats, from quarterly OKRs to your sprint planning. Again, the idea is to reduce fear and increase learning via open collaboration rather than top-down planning to allow all to participate in the creative process and feel their purpose within the mission of your company

Step 10: Launch your business

You’ve built it, now measure and learn... Well done! Now you’re only getting started though as the real feedback from your customers starts coming in. It’s one thing preparing the business, but now the hard work starts. The fun part too though, as receiving customer feedback is an amazing experience and as a digital carrier, you can expect far faster feedback, which your team can celebrate and focus on. Customer feedback now drives continuous improvement in your product: Build. Measure. Learn. Repeat. Whether in insurance or other industries, if you really want to be successful, everything you develop needs to add value to your customers. At Coya, we believe that systematically collecting and incorporating feedback into the next version of the product is the single most important thing we can do to ensure customer-centric products. We’ve thus designed the entire architecture with this in mind to accelerate the process. It’s a revolution for us, but a continued evolution is required to stay relevant for your customers.

Read Also

The Insurance Industry must open Mind to the Energy From Insurtech

The Insurance Industry must open Mind to the Energy From Insurtech

Clive O'Connell, Partner- Head of Insurance and Reinsurance, McCarthy Denning

Weekly Brief

Top 10 Insurtech Startups Companies in Europe - 2019
Top 10 Insurtech Startups in UK - 2019

Startups Europe Special