One of the “unintended consequences” of the most recent underwriting cycle and sequence of natural disasters in Australia, against a backdrop of reductions in corporate insurance roles, has been the rise of the number of new start-ups, particularly Underwriting Agencies. People have been leaving their comfort zones in the warm, shiny, “safe” environment of large organisations and moving into small, nimble start ups where they need to be equipped to get their first customer and then be able to manage a small business, which, hopefully will grow into a bigger one.
Over the past few years, we have seen new start-ups that are successful, and some which aren’t so successful. We would like to share what we see are five fundamentals that you need to get right in establishing a new insurance related start up, if you want to be successful in the long run.
1. Understand your Value Proposition
You need to know what will push customers your way. What unique service or aspect of insurance are you providing to your customers – and their clients in the case of underwriting agencies? What is your service promise or guarantee? People will most always be prepared to pay slightly more to get better quality or certain delivery of your brand promise. This value proposition in most cases will be the foundation of the culture of your organisation.
2. Establish Financial Control
Insurance is a unique product that will always involve payment and management of other people’s money. Trust is at the centre of all insurance related transactions, so its important that on day one of your new business, you have a framework of financial control in your business that allows you to trace and monitor the flow of money from the Customer all the way to the Insurer. Trust accounting can sometimes appear simple. Its not and every cent needs to be properly accounted for. For hundreds of years, the integrity of accounting means the debits must always equal the credits. Put in place process and platforms that make this easy to manage.
3. Acquisition of the Right Business Software Platform
Quite often installing the correct insurance software platform for your business can be a decision left to the last moment. Given the inherent complexity of general insurance (there is a lot of data required in order to be able to price risk). The sooner you determine what insurance software platform you are going to use, then the sooner your security provider, your customers and your staff will be able to all be on the same page. We have seen new underwriting agencies start out using spreadsheets as their main source of truth. These can come quickly unstuck and are often an impediment to growth. Having your platform tuned to price risk, do policy admin, claims and reporting will save a lot of grief in the long run.
4. Get the Right People to Help You
We all know how difficult it is to simply recruit people these days. Its even harder to recruit the right ones! You need people you can trust and who are on the same wavelength. Selecting the right business partner is probably THE single most important decision. If you are in start-up mode, it will be all hands on deck, you will have many ups and downs. If you get it right, there will be smooth sailing further down the track.
5. Newtons Laws of Motion
Sir Isaac Newtown, during a time of pandemic, went home to the family farm for three years (sound familiar??). He invented Calculus (shows how bored he was) and a few laws of physics. His Second Law of Motion is all about force being applied to a mass to get it to move. This translates into the old-fashioned maxim that to get something to work, or to move in the business world, takes a lot of motivation and energy. In a start-up, it will take a lot of energy, things won’t always go well, and often it takes trial and error…. All requiring a lot of energy and enthusiasm.
There are many facets to establishing a successful start-up and if you manage the five above, you’ll be well on the road to reaping the benefits in the future.