Matthew Grant is the Co-Founder and CEO of InsTech, which identifies and promotes the use of the best technology, data and analytics within insurance and risk-management around the world. Matthew is the host of the InsTech podcast speaking weekly to guests around the world. Matthew was interviewed by Andrew Daniels, Founder and Managing Director at InsurTech Ohio.
Matthew, let's dive into the world of carrier and startup partnerships. What has your research shown about this topic?
“There's a wide variety in intent and how successful carriers are. The landscape is changing over time but most of the reasons why early-stage companies have been successful or failed when working with established carriers remain true. We're seeing a differentiation between the carriers that are both committed and successful, and those that have realized that it's just not the right thing for them. So, we're in an innovation adoption curve. We’re in a place where the early majority are now engaged, some are doing well, and others are still waiting to see which of the recent start-ups and scale-ups survive.
Additionally, for companies that have emerged in the last ten years, the distinction between the insurtech MGAs versus technology providers is important to understand. The operational fundamentals are similar, but the offerings are different. An insurtech MGA is looking to a carrier to provide capacity, a technology company is looking to sell its product. One thing they have in common is that they should always have someone in the core business who will be their champion.
There has to be an alignment between what the insurtech MGA wants and the goals of the carrier that is providing the capacity. An MGA needs to be careful about having all their capacity provided by one organization. Carriers that work well with early-stage companies see the insurtech MGA as a strategic opportunity to move into a new, specialized area.”
What do good carrier strategic partnership teams do that others don't?
“One strategy is to have a strategic and C-level supporter in the organization, but that in itself is not enough – even in companies where the CEO wants innovation and to support startup companies. Successful partnerships also need somebody on the ground who's close to the business, who wants to make it happen, and who is tasked to make it happen.
Another thing they tend to do is have a personality within that team at the carrier that is able to sell new concepts internally. An innovation team has to be able to get alignment around its colleagues and form a ‘coalition of the willing’. Find the business people that have a challenge and convince them to spend some of their time with a new organization. There is great advice that comes from Parul Kaul-Green, Chief Digital Officer for Liberty Specialty Markets at Liberty Mutual from our interview with her for the InsTech podcast She emphasizes that innovation teams and business users in carriers should focus on finding the problems in the business and focusing on outputs, not outcomes. Look for the problems within your business, find the people who have those problems in the business (because they will be your allies) then look for solutions. Hiring for a skill, but not knowing what the solution is for the business rarely proves successful. Avoid the solution looking for a problem. That's often the problem when an internal business initiative fails.”
How do carriers ensure that they're seen as these serious strategic startup partners?
“Look out for what I call ‘the killers’. One of them is procurement. Procurement kills innovation. There are a couple of parts to that. The first is speed. People trying to support carriers get caught up in a lengthy procurement process that throttles their income in addition to procurement trying to squeeze the cost out. A second ‘killer’ is the partner asking numerous questions about IT security, which can become a massive cost and distraction.
Another problem is with carriers that feel they shouldn't have to pay for a PoC (Proof of Concept). Instead, they want their partners to prove themselves to the carrier at no cost. But the reality is, early-stage companies rely on their client’s ability and willingness to pay for an engagement to justify that the business idea is valid. And of course, the income helps fund the company too. So, I would encourage any carrier that's working with a company and doing a Proof of Concept to pay some money because that helps that organization validate your commitment.
My advice is: don't be a bully. Don't be greedy. A good carrier will have criteria and qualify which companies they're likely to work with early. They should be able to discover quickly if there's a fit for them in the organization. Once they engage, the carrier should be honest about whether they want to work with their new technology vendor or not, without dragging out the process.
Sometimes carriers will be competitive and sometimes they’re happy to collaborate. Lloyd's in London is a good example of collaboration. Many of the insurers operating out of Lloyds are owned by US carriers, Japanese carriers, etc. and they're writing business in the US. They’re very good at bringing together the heads of innovation in these different insurers and looking for opportunities to support them. Lloyds itself is structured so it can invest and underwrite for non-traditional lines of business. They've allowed for innovation with initiatives such as the Lloyd’s Lab and being flexible on how carriers allocate capital to new insurance product lines. One of the things that carriers can do is collaborate with, or be part of a group that's working on a PoC, particularly where these are in non-strategic areas such as agreeing on data standards.
How have you seen carriers determine which stage of startup they're comfortable engaging with?
“If you go back seven or eight years to when the term insurtech was coined and everyone was very enthusiastic about what was out there, you saw a lot of carriers participating in different ways such as accelerators and incubators. Over the years many of them realized that they were just not geared up to be starting with very early-stage companies. It's a bit like if you're a teacher. Are you a kindergarten teacher? Are you middle school? Are you high school? If you're a high school teacher, you probably don't want to be looking after kindergarten and that's fine. You just have to know your strengths. Most insurance companies are not geared up to work with very early-stage startups and know that they require a lot of work. Conversely, some organizations love these early-stage companies. They want to be on the bleeding edge. They want to be there first with types of insurance that nobody else has figured out how to do.
As a tech company looking for a partner, do your due diligence. Ask the questions, and look at who else the carrier you are approaching has worked with. What level of ‘teacher’ are they? And what ‘school’ are you in? If you can match those up, you can have a happy relationship.
Secondly, it's important to understand the roles and personalities of the people you are talking to. Senior-level employees are going to be mostly interested in initiatives that can scale rapidly the person who is talking about innovation in the company is at a very senior level, they're probably going to be more comfortable working with more-established and proven companies because they're the ones that are going to make a difference. Often if you are a hungry, earlier-stage startup and want to get in there, you’re probably better off finding somebody lower in the organization who will be your ally and can give you some airtime and some budget. Conversely, if you're a mature startup and you've got proven product market fit and revenue, then by all means, go for those bigger companies or more senior people.”
What is one thing a carrier can do right now to better position themselves for more effective startup partnerships?
“Listen and learn. And as a carrier, look and see what other people are celebrating on both sides. Who has successfully scaled up? Who's successfully navigated that tricky first 10 years of being a startup and who's been looking after them? Then actually go and talk to them about why they were successful. To the extent that you can learn from your peers in the market, look out there at who's backing at series B and series C. I would recommend doing your research.
The second thing someone in a carrier can look for is a pair of internal sponsors. Look for a C-level or near C-level person who has some budget and influence, plus a business user who needs a solution or is looking for an opportunity. For example, AEGIS built an active shooter product working with Dallas Police Department to look at shootings and they built a parametric product that pays out after a shooting incident or similar type of incident. It was an underwriter there who saw it as an opportunity to grow the business, bring in some parametric tools and analytics and went and did it. They found a person earlier in their career who was enthusiastic. That person got buy-in internally and they released the product. The more connected innovation is to the strategy or the business, the better. And in terms of success, you need a CEO's strategic-level buy-in.
Another consideration is if the innovation team is respected internally. You want an innovation team that people in the organization respect and value. As a carrier, you don't want the bad reputation of somebody who kicks the tires. There was a period when some innovation teams measure success by the number of start-ups they brought in to talk about innovation, but they never really were committed to using them. That’s an undesirable reputation.
Lastly, celebrate your wins. Oftentimes, large corporations have legal departments that won’t let the new technology partners disclose who they are working with. It’s a mystery to me how a carrier can claim to support innovation but then refuses to celebrate its own partners. Early-stage companies rely heavily on their reputation of working with carriers in order to expand their business. Ultimately everyone wins