Collaboration: Startups – Incumbents

By FINTECH Circle Contributor, Yuri Poletto
Follow: @YPstartup

Collaboration between Insurtech startups and incumbents is gaining momentum, as it is a win-win solution able to generate benefits for both parties: startups can fill those regulatory and capacity gaps that often slow down their growth, and incumbents can avail of startups’ entrepreneurial approach and their ability to leverage on new technologies.

However, startups and established insurance companies are very different organizations, and often those collaborations don’t generate the expected results. The main disrupting macro-factors are the slow decision processes of insurance companies, and the different level of pressure on the achievement of the partnership goals (low pressure for incumbents, high pressure for startups).

In my personal experience, both as an InsurTech start up founder and as consultant and mentor for other startups, there is a set of conditions that, if satisfied, can increase the chances of success of those collaborations.

Achieve the support of C-levels. Insurance is a complicated business, and even if the value proposition of a start up is positioned in a specific ring of the insurance value chain, the start up will likely be required to deal with people from different departments of the insurance company. The personal commitment of a C-level will guarantee the commitment of the insurance company’s stakeholders and will be of help in case of a change of the internal person of reference (it happens quite frequently, particularly in innovation departments). Also, it will reasonably safeguard the partnership in case strategic decisions or changed market conditions move the focus of the insurer to other priorities.

Be doubtful about pilots. Unless a pilot is strategic for a start up to test or roll-out its solution, pilots often hide a lack of commitment of the insurer, that through the pilot might just aim to “have a ride” with the solution provided by the start up. The time frame for the measurement of the partnership’s results is key in this case: a pilot is for definition a short term experiment, but a partnership often don’t deploy its effects in the short term. If a start up decides to go for a pilot it is crucial to agree with the insurer a shared set of KIP’s, in order to be sure to measure the achievements on shared parameters.

Let the insurer consider the partnership’s success his success. Startups have scarcity of time and resources, then they need to make wise decisions when it’s about deploying resources into a new venture. Differently, insurers have running businesses and often innovating is a long term strategic objective for them, without pressure on the achievement of short term results. Letting the insurer own part of the startup equity is a smart way to create a stronger bond with him and to nurture a sincere and mutually beneficial cooperation.

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