How to Create an Insurance Startup Business Model

It’s time for your startup to hit the ground running.

Once your startup has crossed the hurdle of raising capital and has navigated a maze of regulations, the real plans begin. The startup’s business model and product plan is the essence of the company. It’s time to capture the excitement behind why you’ve started this venture.

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
• Business Model, Plan and Product Model
• Competitive Environment

1. Prepare Your Business Plan

The first step when establishing your business model is to create a detailed business plan or Confidential Information Memorandum (CIM).

What is a CIM?

A CIM is a comprehensive document to cover every aspect of your new business, including your company’s vision, goals, target markets, distribution strategies, and financial projections. Investors and stakeholders will refer to this document to understand your growth strategy and assess the potential for profitability.

In your business plan, emphasize:

• How your startup’s product offerings differ from competitors
• Your risk management strategy
• How you plan to use technology to gain a competitive edge

Be transparent about your goals, whether it’s capturing a niche market or scaling to a broader customer base. Remember that your business plan is a living document and be prepared to adjust it as you refine your operations and receive market feedback.

2. Design Your Distribution Channels

An effective distribution strategy is vital for moving your insurance products into the hands of customers. Your choice of distribution channels can significantly impact the speed and efficiency of your market entry.

Consider the following options when designing your approach:

• Direct Distribution: Selling policies directly to consumers via online platforms, mobile apps, or call centers. This method is efficient and cost-effective, allowing you to control the entire customer experience from start to finish.
• Embedded Insurance: Embedding your insurance offerings within third-party platforms, such as mortgage or car sales websites. This approach can create a seamless purchase experience for customers and offer a new revenue stream through partnerships.
• Agent/Broker Distribution: Working with independent agents or brokers to sell your products is a common choice in the insurance industry. Agents bring their own customer relationships and local market knowledge, which can help you expand your reach quickly.
• Wholesalers: Partnering with wholesalers allows you to access large volumes of insurance buyers through their established networks of agents and brokers.

Outreach, Licensing, and Onboarding Plans

Consider how many producers you need, where they should be located, and how they can enhance your company’s exposure footprint.

• Outreach Plan: To establish a strong distribution network, your outreach should focus on regions where there is significant demand for your product offerings. Utilize industry data to pinpoint areas with market gaps, and tailor your outreach efforts accordingly.
• Licensing: Make sure your agents and brokers are properly licensed to sell insurance in each state or region where you plan to operate. Licensing requirements can vary, so it’s essential to have a process in place to ensure compliance.
• Onboarding: To onboard new agents and brokers efficiently, create an easy-to-follow process for educating them about your products and technology. This could include online training modules, in-person sessions, or a dedicated support team.

Compensation, Rollout Strategy, and Associations

• Compensation Structure: When designing your compensation structure for agents or partners, consider performance-based incentives that align with your business goals. Some companies opt for a commission-based model, while others include bonuses for achieving specific sales targets. The right structure will encourage your producers to stay motivated and help grow your customer base.
• Rollout Plan: Establish a phased rollout strategy for launching your products in different regions or with different agent groups. This staggered approach allows you to make adjustments based on initial performance and feedback from your distribution partners.
• Industry Associations: To establish credibility and stay connected to industry developments, join relevant insurance associations. Regularly attend events to keep your team informed on regulatory landscapes and to gain valuable networking opportunities. Be sure to also join your regional insurance associations for annual meetings and online forums.Associations for industry trends: Insurtech Connect and Insurance Innovators USA.Associations for agents: National Association of Professional Insurance Agents (PIA) and Independent Insurance Agents & Brokers of America (IIABA).

3. Support Agents and Enhance Customer Service

Your distribution strategy must include a strong support system for both agents and customers. Excellent customer service will not only strengthen your brand but also increase loyalty among your agents and policyholders, enhancing vital retention rates.

Agent Interaction

When relying on agents, your platform should make their work as seamless as possible. This includes providing a smooth quoting, binding, and servicing experience, along with a robust support system. During the platform development phase, seek feedback from a select group of “beta” agents who can test the system and help identify any areas for improvement. Consider a Policy Administration Solution that integrates with agencies, such as WaterStreet Company.

Customer Service

For direct-to-consumer models, it’s important to create a customer support system that prioritizes quick responses and effective problem-solving. Whether you offer live chat, phone support, or AI-driven chatbots, make sure customers can easily reach your team when they have questions or need assistance.

4. Build Your Marketing and Communication Strategy

Your distribution efforts should be backed by a solid marketing and communication strategy. If you rely heavily on agent distribution, your marketing should target agents and brokers, highlighting your unique product features and competitive compensation. For direct models, focus on customer-facing advertising that emphasizes convenience, affordability, and reliability.

• Initial Communication: Develop a clear communication plan for reaching out to potential agents, brokers, or customers. This might include email campaigns, webinars, or targeted digital ads. The goal is to educate your audience about your products and the value they bring to the market.
• Follow-Up Strategy: Once initial contact is made, maintain regular communication with your agents or customers to keep them engaged. Set up a follow-up schedule to check in on agent performance or customer satisfaction, and make adjustments to your strategy based on the feedback you receive.

5. Cultivate Values Intentionally

The culture you build within your startup will play a significant role in its long-term success. Be intentional about defining your company’s mission and values from the beginning.

• Mission Statement: Your mission should reflect your commitment to both your employees and customers. It could focus on innovation, customer service, or creating a positive workplace environment.
• Employee Policies and Procedures: Establish clear policies regarding work-life balance, remote work, and benefits. Offering perks like education reimbursements or professional development opportunities can also help attract top talent and create a motivated, engaged workforce.
• Communication: Regular and transparent communication is key to maintaining a healthy company culture. Whether through weekly team meetings or company-wide updates, ensure that your employees are informed and involved in the company’s progress.

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.