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.