My advice to insurance startups

Any person starting an insurance firm, whether an insurance broker or insurance carrier needs to keep in mind that:

  • No insurance line of business is a commodity.
  • Every insurance line of business is regulated. In the US, insurance firms must comply with each of the regulations in each jurisdiction the insurance firm intends to conduct business.
  • Regulators continually walk a tightrope: they have to balance protecting insurance clients and SIMULTANEOUSLY protect the financial viability of the insurance industry.
  • Part of insurance regulations requires how or where insurers must invest their money.
  • Part of insurance regulations require how much insurers must set aside in reserves for future claims.
  • Insurance has existed in one form or another since pre-biblical times.
  • Insurance is a legal contract with terms, conditions, and restrictions.
  • Insurance is not a game: people’s lives, assets, and / or health are always the reason people purchase insurance.
  • Insurance provides a critically important role in society: mitigating or managing the risks attendant to the potential loss of personal assets (home, automobile, possessions, cash flow), health, or life.
  • Insurance strives to mitigate or manage the risks of loss from personal actions or behaviors.
  • Insurance strives to mitigate or manage the risks attendant to the potential loss of business assets (including intellectual property) and loss from business actions or behaviors.
  • Insurance firms have ALWAYS used technology to operate and / or to get-and-keep customers.
  • No amount of technology, regardless of how hip, cool, or happening the technology is that an insurance firm uses, will ever transform the insurance firm into a technology firm. Why? Because if a firm MUST comply with insurance regulations then it REMAINS an insurance firm. Legal realities take priority over ‘hopes and dreams and desires’ to work for a technology firm.
  • Success depends entirely on understanding and managing the customer / market / competitive dynamics of the insurance lines of business the insurance firm offers or services. This is the point that startup insurance firms either don’t believe or ignore.
  • The insurance industry is not homogenous.
  • The market dynamics (including the dynamics of sales and distribution) and competitive dynamics differ among and between each major insurance line of business.
  • Thinking that success depends on the technology or technologies that the startup insurance firm uses is a wonderful recipe for disastrous financial failure.
  • Incumbent insurers don’t owe startup insurers or their investors anything.
  • Managing insurance as if it is a commodity is another recipe for disastrous financial failure.
  • P&C commercial insurance is a relationship business: the insurance brokers matter. They really, really matter.
  • Personal P&C insurance may be more transactional but at point of loss, personal interaction, or lack thereof, can make or break the client’s desire to keep doing business with an insurance company.
  • The insurance industry is not a charity. Insurers have every right, and, in fact, a fiduciary responsibility to ONLY pay the claims or part(s) of the claims that meet the terms, conditions, and restrictions of the policy.
  • Insurance is not a game. I know that I said this before but it is too damn important not to repeat a second (and third and fourth and …) time.

3 thoughts on “My advice to insurance startups”

  1. An excellent starting list, Barry Rabkin; another top level suggestion would be that engaging in the business of insurance without all the proper licenses will subject you to civil and potentially criminal penalties, including fines and jail time.


  2. Great post Mr. Rabkin! I totally agree (despite being millenial myself 🙂 ).. While technology can be a very useful tool in the hands of insurance companies, it can never replace the business of insurance.
    In fact, I believe that understanding and accepting this reality will enable both – the insurance companies as well as the technology companies – to collaborate much more effectively! Win-Win!


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