Ask the 5 Tough Questions of Potential InsurTech Company Partnerships
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.
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Originally published at https://www.simplesolve.com on August 13, 2021.
