Insurtech, a blend of innovative technologies that’s disrupting traditional insurance processes, is reshaping the insurance industry. The digitization of insurance services is now termed – insurtech. Businesses can benefit from offering personalised policies, streamlining claims processes, and ultimately reducing costs.
A study by Mckinsey shows that 63% of insurtech companies have a collaborative approach and focus on helping traditional insurers transition towards a more digital future, improved efficiencies and better customer experiences. Customers will also gain access to faster, tailored and affordable services – having more control over the selection process.
Driven by the rising demand for digital insurance solutions, there has been a steady rise in the number of insurtech startups in South Africa, but what does it take for these businesses to be successful?
Charlotte Koep, COO of Root, says the insurtech platform’s leadership team learnt seven hard lessons in the process of launching the company and insurance products developed on it. This may help you on your journey in make the tech transition.
Sales Can Be Difficult
Recognise that insurtech sales can be challenging. Merely having a product doesn’t guarantee success. Koep advises that defining the right product starts with choosing the right problem to solve – one that is worth paying money for, and that is wide enough to enable you to build a successful tech company.
Planning your marketing is as vital as developing your product. Don’t simply focus on building your product; invest significant effort into strategizing promotion and marketing. As a start-up, your brand is fresh, but unfamiliar and not yet trusted.
One effective strategy is to collaborate with bigger, established brands to increase visibility and borrow credibility. Brand value plays a significant role in sales. An established brand can make sales and partnerships easier.
Adaptability is Key
Flexibility in business models can lead to surprising successes. This is especially true if the initial approach is proving difficult to convey to potential customers. For instance, Root changed course from a direct-to-consumer (D2C) approach with its original open banking solution to working solely with large enterprises that have existing consumer relationships.
These days, Root offers an insurtech platform following a purely business-to-business (B2B) strategy, which has proven beneficial – and easier to export to other geographies, like the UK.
Root helps insurers develop products, which are white-labelled by retailers, telcos and financial institutions. This model is proving very useful for insurers across the world, allowing us to expand beyond our initial success in South Africa and Mauritius.
Collaborate, Don’t Compete
Instead of viewing big insurance companies as competitors, see them as potential collaborators. Not only is a collaboration the most favourable option, but it is also the most productive. Up to 40% of short-term and life insurers’ expenses are spent on core processes and can be significantly reduced by digitisation. It makes much more sense for a startup to target this opportunity at existing insurers than to compete outright with companies that have much bigger war chests and marketing budgets.
Niche vs Broad
In smaller markets like South Africa, having a broad, end-to-end approach is necessary because a niche might be more limiting than it would be in a larger market. As a result, South African insurtechs have the advantage of being able to address the full value chain in insurance, something that isn’t a reality in larger markets such as the UK and USA.
Koep says that insurtechs in larger markets tend to be very niche in their approach. Root’s experience in building a platform across the value chain has been part of what made it possible for the company to expand into other geographies.
Customer Experience Rules
Understand that in today’s age, integrating tech-forward solutions and prioritising the customer journey is crucial. So few do it well. Focusing efforts on integrating the customer experience throughout, and helping incumbents do the same, because true customer-centricity is the biggest gap in the market.
Be About More Than Just Tech
Technology alone doesn’t cut it. Human experts not only see that the technology is implemented correctly but also guide organizations through the change, ensuring that employees understand, accept, and are trained to make the most of the new system. Be prepared to offer that combined value and be a change agent.
The technical deficit in insurance is enormous. Koep says that she finds that her ability to help clients implement and run a platform has been critical to their success and that insurance is too complicated an industry to think that merely selling licences will lead to success in software and product development.
Disrupting the industry doesn’t mean disrupting incumbents. Collaboration with traditional insurance companies enables insurtech businesses to grow and helps established players improve their offerings, all to the benefit of the end-consumer who for too long has had to put up with solutions that are well below par.