Searching for Scale in Insurtech

You may already know my background, in short, I made a leap from a corporate career as a C-level exec in insurance to an exciting and rapidly evolving world of insurtech. Half a decade later, first as a founder of Insurtech Asia Association and later as a co-founder/CEO of my own startup, I have learned many valuable lessons. Lessons that both blew my mind and at the same time humbled me to the tremendous challenges of reshaping insurance industry.

So whether you are planning your next digital initiative or are an entrepreneur in the midst of contemplating your new startup, this will give you a fairly unique vantage point. I found the following three insights especially powerful when thinking about what’s coming for insurance next. Firstly, the importance of scale, then obsessing over customers, and finally, owning the product. Today I’d like to start with the first of these three topics.

As always, I appreciate your thoughts / questions and encourage you to reach out if I can be of any help.

Scale and the magic of product-market fit

Bear with me as it may seem like an absolute no brainer. At the core of any successful initiative lies this very simple fundamental, for anything to matter it needs to reach a critical mass of X (users, customers, policies, etc.) collectively referred to as scale. Especially the case with insurance, where the whole industry is based on the law of large numbers. You’ve got a scale, you’ve got control over unit economics, your risk pool is large enough to absorb any losses, you’ve got a chance to build a successful business.

How do we get to scale and what scale makes sense? The answer to the first question is by finding a product market fit. Product market fit is a function of a product that strongly fits a painful problem that currently exists for a big-enough market. The best description I came across for strong product-market fit are painkillers while the weak fit would be nice-to-have vitamins.

So why is the product market fit so elusive? The strong fit is difficult to achieve as it is a function of multiple convoluted variables with few of them either unknown or rapidly changing. The only way to solve product market fit is by making an intelligent hypothesis and testing it as cheaply and quickly as possible. The product market fit testing is done by building and launching a minimum viable product (MVP).

Building the minimum viable product

The key to building the MVP is to put artificially tight time constraints that force the absolute minimalistic decisions. For example, at Anapi we started with an MVP cycle that was retrospectively way too long and we’ve managed to push it down to less than two months to a launch followed by a month of fit validation via market testing. 

It’s critically important to set expectations upfront with the team on the parameters that will be used to determine the success of an initiative. It could be at least 100 customers signing up in the first month or having 200 businesses purchase your product by month two. Without clear set of parameters it’s very easy to slip into an initiative which did not achieve a scale and is just there in perpetuity ... adding a significant drag on the future search for product market fit.

A quick word about compliance: it is particularly important to spend as little time as possible on the supplementary areas. No customers ever got excited about a product because of its compliant nature, so as long as it passes a sniff test, the risk of regulatory being the reason why your initiative fails is extremely low. 

Testing and scaling in Southeast Asia

Southeast Asia (SEA) is the place to be. While the markets in SEA have traditionally been fragmented with an added complexity of multiple languages and cultures, the sheer size of internet economy and the explosive growth is making it the perfect place to test and scale innovative insurance products. There’s an untapped $3bn market opportunity for digital insurance and it is on track to more than triple in size to $10 billion by 2025. 

So in summary, scale is the true north star and the way to get there is by building MVPs and quickly launching them to validate the strength of the "fit" to the market. Once a strong product-market fit is achieved, the rest becomes about the team and growth execution ??

In the next post, we'll dive deep into my favourite topic of the customer obsession and cover all things that are related to market and distribution.