5 Challenges Facing Startups (Part 2)

The insurance industry is a $4.6 trillion market worldwide, but it lags when it comes to digitization and providing consumers with great experience and service. We are looking in some depth at the five main challenges that startups are facing. Today, we look at Challenge No. 2. Find Challenge No. 1 here. Challenge No. 2: Providing real innovation that gives a competitive advantage and that provides real value in the long term will be the only way to prosper. Innovation can come by improving the consumer experience in buying and using insurance or offering more relevant insurance at affordable and lower prices. In insurance jargon, this involves optimizing risk protection. Startups can and are focusing mostly on digitizing distribution, especially through a mobile consumer approach. This improves consumer engagement and may quickly generate interest and traffic but ultimately needs to be converted into sales and new customers. See also: Where Will Real Innovation Start? Product innovation involves better and personalized dynamic pricing, which means savings for the consumers and providing targeted and relevant risk protection (coverages). Getting new product into the market with limited data and pricing experience will bring risks. This will, of course, be initially mitigated by low volumes. There is also greater scope for risk prevention. Technology can support consumers by automated monitoring and response, as well as giving real time feedback. In addition, technology provides the opportunity to reduce the claims costs (frequency) impact. Insurance, at the end of the day, is about service - a payment today for a future promise. Having access to the relevant services during an accident or adverse event is crucial for insured consumers. This includes making it easy to report and pay a claim. Having a seamless service will be important for the startups' reputation and operational and innovation capabilities. Startups will need to collaborate and have outsourced arrangements with a range of partners with different mindsets and systems. Takeout Building a robust, full-stack technology platform and end-to-end processes will be critical. Many startups have started, understandably, with the distribution, and few appear to have fully operating platforms that stretch back into the full value chain of insurance operations from selling, distribution, product manufacturing, policy management toward customer servicing and claims management. A full-stack technology platform supports a seamless process for the insured consumers, not only in the buying process but also for policy changes and claims handling. A full-stack technology platform with enhanced data management and analytics at its core will be required in the case of making differentiating, relevant and attractive insurance products and services. The explosion of data must be translated into improving insurance. Data needs to be converted into insurance pricing, more accurate prediction of future claims risk and enhanced and innovative risk prevention services. See also: Innovation — or Just Innovative Thinking?   Excellent service and product differentiation requires full control. Startups will need to be in control of not only marketing, distribution and customer experience but also dynamic data analytics, pricing, product development, policy administration and claims servicing. Even if startups do not provide these activities directly and hand them over to outsourced service providers including traditional insurers, they will need interfaces into other systems that may not be as robust as a new platform. In addition, they will need in-house staff to manage these processes. This will take expertise and time to build out. We are curious about your perspective.