It is becoming increasingly evident how insurance technology is becoming the underlying driver of change in the sector. Millennial and Gen Z consumers are no longer content with long wait times to get quotes or renewals, and technologies such as IoT are threatening to minimize returns for P&C insurers. Internally as well, carriers face new challenges with implementing cybersecurity and operational measures that are built for the new hybrid work model that the world is shifting to.
Technology really is the ultimate game-changer for carriers today, and Insurtech companies are bringing innovative solutions to complex problems. But with the myriad of options available, how do insurance carriers identify the most appropriate insurance technology partner to collaborate with? This can boil down to five critical questions that need to be asked before deciding on a tech accelerator.
Question#1 What strategic gap am I looking to fill?
There are a number of insurtech startups with exciting tech features, but not all of them will be relevant to your business. Before embarking on an insurtech partnership, take a step back and think about what the main goal you are trying to achieve through the partnership is. Are you looking at improving your internal efficiency through automation and other tech solutions? Are you trying to make your insurance services more digital-friendly to attract younger customers?
In many cases, you might have more than one goal, but there should always be a primary objective that you can evaluate insurtech offerings against. If you were primarily looking to reduce Average Handling Time, for example, smart automation features such as automated issuance of new policies and agent efficiency tools can reduce manual intervention. This should be your north star metric and should be the ultimate deciding factor when selecting an insurtech company.
Question #2 What is my approved budget for an insurtech partnership?
At the end of the day, everything boils down to the approved budget. You want to find the insurance technology partner that can offer you the best value at a cost that is sustainable for your company.
Apart from the initial payment, however, insurtech companies have different subscription models that you should take into account to arrive at the total cost of ownership. Most insurtech companies work on a DWP-based model where the annual payments are a variable percentage of your total profits as a company. Over time, this can eat up a sizeable chunk of your revenue and might not make financial sense for you. Additionally, partners can charge extra costs for maintenance and customization of their product with your business needs, so these costs need to be stated upfront. If not, an all-too-common phenomenon known as ‘scope creep’ can occur and result in your final costs exceeding the initial budget. This is why at SimpleSolve, we follow a fixed non-DWP-based billing model, in which annual payments are not tied to your business success. Routine maintenance costs are also included within the stated amount so you never have surprise costs that you need to account for.
Question #3 What is the quality of after-sales service?
Insurtech solutions are rarely plug-and-play. Your insurance technology partner needs to work very closely with you and your agents to understand how to best deploy their solutions to meet your objectives. Implementation can take in the best-case scenario up to a year, though often it can go up to 18 months or more. It is critical that you have a dedicated team that is fully committed to ensuring it goes smoothly.
Alongside implementation, providing proper training to your employees on how to use the solutions is essential for maximizing employee adoption rates. Since this is an ongoing process, the quality of service provided by the insurtech partner is just as important as the quality of their products.
As part of your due diligence when comparing insurtech solutions, you should also look at their current portfolio of clientele and the typical timespan of these relationships. SimpleInspire, for instance, is an insurtech solution built by insurance professionals and has over 20 years of excellence in the field of insurance technology. We leverage upon that experience to ensure that our implementation timelines are always less than a year and solutions are uniquely customized to meet your business objectives.
Question #4 How are we measuring returns on investment?
Insurtech solutions require a significant investment so it’s important to define early on how the return on this investment is to be measured. Often it is not as simple as measuring the amount invested against top-line growth, in terms of new business brought in. Insurtech can result in improvements in internal efficiencies, something that can help you keep your agent count low while being able to scale rapidly with increasing demand.
The net dollar savings from managing a lean team can be a strong indicator of the success of the insurtech partnership. The specific KPIs need to be defined based on your primary objectives. The ROI can then be calculated against a wide-ranging set of factors to arrive at a more accurate conclusion.
Question #5 How equipped is the partner to scale up?
Given the intensive evaluation and implementation process, insurance companies cannot afford to switch partners every few years. The insurance technology partner that you choose today, therefore, will most likely be there for the long haul. Because of this, you need to consider how well the partner suits your current requirements and your anticipated future requirements. Do they have the capabilities to scale and offer more advanced solutions when you need them? Determining this fit will help you zero in on the insurtech partner that can bolster your company's growth.
Collaborating with the right tech accelerator can help your company take advantage of disruptive technologies, improve internal efficiency, and ultimately, deliver higher-quality services to your customers. With these five questions, from my own experience, carriers can find the best technological and cultural fit to help reach their objectives.