P&C insurance startups require a solid foundation before launch.
After raising capital and gaining regulatory approval, it’s time for startups to make informed decisions about operations and technology. In light of insurtech innovations and evolving customer expectations, it’s essential to carefully evaluate various technology solutions that can streamline operations and enhance user experience.
In this series, we outline each step of the process behind launching a P&C insurance startup:
- Capital Raise and Financial Management
- Regulatory Approval Process
- Operational Preparedness and Technology Choices
- Business Model, Plan and Product Model
- Competitive Environment
1. Your Policy Administration System
One of the first major operational decisions for a P&C insurance startup is selecting the right Policy Administration Platform. This platform serves as the backbone of your insurance business, handling policy issuance, underwriting, billing, and claims management.
Startups typically have four options for acquiring a policy administration platform. Each option has its pros and cons, and the right choice depends on your business model, budget, and long-term goals.
- Buying a Solution: Purchasing a policy administration platform can provide stability and control, but it often comes with a high upfront cost and requires ongoing maintenance.
- Leasing a Solution: Leasing allows startups to spread costs over time but may offer limited customization options.
- Subscribing to a Cloud-Based Solution: Subscription-based models offer flexibility and scalability, with many insurtech companies providing cutting-edge cloud-based systems that can grow with your business, such as WaterStreet Company’s Platform. These platforms are generally easier to integrate with third-party solutions and come with built-in updates, but you may face long-term dependency on the vendor.
- Building a Custom Solution: For startups with specific needs or a unique business model, building a custom platform may be the best choice. However, this option demands significant capital and a dedicated team of developers. It also comes with a longer development timeline.
When making this decision, it’s important to consider whether your company has any specific “greenfield” requirements. When building your startup business from scratch, you are more likely to lean on existing technology solutions. If you plan to integrate third-party technology solutions for policy underwriting, policy selection, or claims decision-making, a flexible and integrative platform is essential.
Customers: Interactions & User Interface
It’s time to decide how your customers will interact with your platform.
- Will you work directly with insureds or through independent agents?
- When startups focus on a direct-to-consumer model, user interface (UI) and user experience (UX) design are critical.
- When startups use independent agents, they need to consider how to best support agents in quoting, binding, and servicing policies through the platform.
A seamless, intuitive interface can significantly enhance customer and agent satisfaction to reduce friction in the buying process.
2. Claims Infrastructure and Protocols
Claims management is a cornerstone of any insurance operation, and your startup will need to decide on the right claims infrastructure, processes, and protocols to provide policyholders with a smooth and efficient experience. This decision will influence how you select third-party partners and hire internal claims professionals.
Third-Party Administrators
Startups often partner with Third-Party Administrators (TPAs) to manage claims efficiently without having to build a complete in-house team from the outset.
TPAs can handle everything from claims intake to field adjusting and final settlements. Choosing a TPA requires careful vetting to ensure they align with your company’s values, claims philosophy, and service expectations.
In addition to TPAs, your claims platform should be able to integrate with your policy administration system, providing a seamless flow of information. The platform should also include tools for adjusting claims, evaluating damages, and communicating with claimants in a transparent and timely manner.
Develop a Claims Plan
Developing a Claims Plan that includes a Catastrophe Management Model is essential for P&C insurance startups, especially those in regions prone to natural disasters. Your claims plan should outline how the company will manage claims surges during catastrophic events, ensuring that policyholders receive prompt service even during peak periods.
Equally important is designing your claimant experience. Policyholders expect transparency, speed, and fair settlements. A well-defined claimant experience blueprint should outline how claims will be handled from submission to settlement, with an emphasis on communication and customer service.
3. Product Development and Filings
A well-defined insurance product offering is the foundation of your business model. Startups must create a detailed filing for each product, outlining the coverage, pricing, and unique features. These filings must comply with state regulations and demonstrate how your products meet the needs of the market.
Designing and Pricing Products
When designing and pricing insurance products, startups should test them with independent agents to ensure they are market-ready.
- Bureau Forms: These are standardized policy forms used throughout the industry that may simplify the process of filing and approval. They provide consistency and may make it easier to navigate regulatory requirements.
- Manuscript Policies: These allow for greater flexibility and customization, enabling startups to offer unique or specialized coverage tailored to specific market needs. However, manuscript policies require more detailed filings and may involve additional regulatory scrutiny, making the process more complex.
Next, consider the geographic possibilities for selling your products. This involves determining where you will launch your products initially and identifying the regulatory requirements in each state or region. Having a detailed plan that considers geographic risks and opportunities will help you launch more effectively.
Underwriting Guidelines and Business Rules
Developing comprehensive underwriting guidelines and business rules is another key task.
These rules determine how risks are evaluated, priced, and accepted, and they form the basis of your company’s risk management strategy. Your underwriting guidelines should be robust and flexible enough to allow for adjustments as you learn more about the market and refine your product offerings.
4. Selecting a Reinsurance Broker
Reinsurance is a critical component of any P&C insurance operation, helping to protect against large losses and manage risk.
- Reinsurance Brokers: They act as intermediaries between your startup and reinsurance companies, helping to secure favorable terms and pricing.
- National Portfolio of Risks: Your reinsurance broker will support you in developing a notional portfolio of risks that can be modeled for both profitability and reinsurance purposes.
- Property Insurance Products: This risk assessment is particularly important for startups offering property insurance products, where catastrophic risks such as natural disasters need to be carefully managed.
Reinsurance also plays a role in regulatory approval, as regulators expect startups to have adequate reinsurance coverage to mitigate risk and protect policyholders.
5. Reporting and Data Analytics
In today’s data-driven world, a comprehensive Reporting and Data Analytics Plan is essential for monitoring performance, meeting regulatory requirements, and making informed business decisions.
Startups need a robust data infrastructure to support Business Intelligence and statutory reporting. This includes building a database that can store and process data efficiently, enabling the creation of dashboards, reports, and analytics tools.
As the business develops, startups can also leverage Artificial Intelligence (AI) to gain deeper insights into claims patterns, customer behavior, and underwriting risks. It’s essential to first build a solid data infrastructure, enabling these advanced capabilities down the road.
6. Underwriting and Claims Workflows
Efficiency is key to operational success. By developing streamlined underwriting and claims workflows, startups can optimize the balance between human and technological resources. Automation tools can help with routine tasks, freeing up human resources for more complex decision-making and customer interactions.
When designing these workflows, it is important to seek out opportunities for integrating technology and human expertise in a way that enhances both efficiency and customer satisfaction. This may involve automating simple underwriting tasks, using AI for fraud detection, or implementing customer self-service tools for claims reporting.
7. Core Executive and Professional Positions
Finally, operational preparedness includes hiring a strong executive team and key professional positions. This involves not only identifying the right candidates but also:
- Perform thorough background checks.
- Draft employment contracts.
- Secure non-disclosure agreements (NDAs) and non-compete clauses where necessary.
The leadership team will set the tone for your company’s culture and operations, so hiring the right individuals is critical. Consider hiring experts with experience in both insurance operations and technology to ensure a balanced approach to your startup’s growth and innovation.
WaterStreet Company & Insurance Startups
Here at WaterStreet Company, we support P&C insurance startups with next-generation, cloud-based insurance software. From Policy Administration and Underwriting to Claims and Accounting, we provide all elements of technology for your company to thrive.
Experience firsthand how WaterStreet’s cloud-based solutions can revolutionize your P&C insurance operations. Contact us today to request a consultation and demo.
Authored by Kelly King, CFO of WaterStreet Company
