From The Insurtech Frontier

Walk the exhibition floor of InsureTech Connect, and you’ll find a wide range of companies dedicated to finding new value in insurance and all its attendant businesses. The vibrant nature of this world masks the real challenges of opening up a new frontier. What’s the road to launch for an insurtech? How do they see the opportunities and where do they see them? Understanding this new insurtech startup ecology provides a window into the future of insurance.

Fortunately, we’re coming to know one startup well - PolicyMe, a Canadian insurtech founded recently to “simplify life insurance” by providing “customized and automated advice on your life insurance needs.” They have a prime viewing spot at the intersection of technology and risk, and we’re happy to welcome a regular contribution from Laura McKay and Andrew Ostro, who left Oliver Wyman to take up a role as Co-Founders at PolicyMe, on the up, down, and sideways of startup life in this new world, starting with an explanation of the reasons why they started in the first place. We hope to check in with them regularly to see how things are going and how they're meeting the challenge of innovation in this new world.
Why did an experienced team of insurance experts see a portal into the sometimes opaque world of life insurance as an opportunity?

Funny enough, the journey for us started at InsureTech Connect. Getting the chance to meet and speak to other entrepreneurs who had taken the dive into the world of startups was one of the main reasons that we developed the courage and confidence to believe that we could have an impact.

But the real reason? We saw an opportunity to make a difference.

And, as we’re sure many fellow entrepreneurs would tell you, when we started talking about the opportunity, we couldn’t stop. It doesn’t take long for you to start telling friends, coworkers, family, and pretty much anyone who will listen about “this idea for a new company” and “how we’re going to create value for the greater good”. Every piece of feedback on the idea just drives you to brainstorm and explore further.

And then you reach a point in these discussions where you need to make a decision. You can’t just keep talking about it. It is time to pursue it full time or drop it altogether. But by that point.. it’s not a hard decision at all. You are in. At all costs.

Some would tell us we were crazy. Why leave the security of a job, a salary, benefits, a permanent workspace, a real URL? I wish we could tell you that that was harder than it was to walk away from. But to be honest, it was refreshing. The thought of having to figure out these things ourselves was more exciting than stressful.

In the last two months we’ve found a company name, secured office space (free for now thanks to a generous supporter of our vision!), onboarded a CTO, became licensed life insurance advisors, developed sophisticated and customized advice algorithms, established sponsorship with a number of leading life insurance companies in Canada, got a lawyer (who was willing to defer fees!), signed a shareholders agreement, tested our product more times than we can count and even sold our first insurance policies. Reaching each one of these milestones… on your own … those are accomplishment that we’ve yet to feel in our careers.

To be fair, it isn’t always easy. It doesn’t take longer than a few weeks for the stress and doubts to set in. Worries about the business, cash flow, strategy, and product market fit keep us up at night, but you learn to cope, surround yourselves by people who’ve done this before, and enjoy the process of failing quickly.

So what is that opportunity that we couldn’t stop talking about? And why did we start a company to address that opportunity? Here are three reasons.

We saw a real need for a customer-first approach. While more and more digital life insurance platforms offer cheap, quick to bind solutions, what we didn’t see was the advice that helps Canadians to select the right protection and policy structure that matched their needs in an experience that was understandable and useful.

Deciphering life insurance jargon is about as easy as trying to crack an ancient code. As a result, the traditional way of buying life insurance is still usually the only option and we saw an important disconnect between the language of current providers and the needs of customers. Many online insurance calculators and quote comparison tools ask customers to “pick their coverage amount and term.” Our thought was, “How does anyone answer that question?” Identifying how much coverage you need and how long you need it for isn’t like selecting the toppings you want on your custom pizza. It’s much more complex (and far less delicious). When you buy life insurance, there are lots of unique factors to think about: your family composition, financial situation, partner’s current and future financial situation, debts, and lifestyle.

So, we created proprietary algorithms to provide transparent and unbiased advice, guided by actuarial principles. Deliver them to a desktop computer or mobile device, without the stress and pressure of a sales-oriented, in-person interaction. And then allow the relationship to grow with the client so that at each critical step in life, needs are reassessed and coverage and policy terms can be changed.

We saw room for a product that stripped life insurance back to its core purpose: protection. The life insurance industry has become far too focused on wrapping affordable pure protection solutions into costly investment and tax efficiency strategies. And when you start to break these strategies down and map out the potential outcomes, we rarely see value for most individuals (more on this later). It also seemed to us that there was an unmet need around simply addressing life insurance protection for a majority of Canadians. By stripping life insurance down to the basics, a large portion of the policy fees can be eliminated, making life insurance a lot more affordable than most people think.

The focus would not be on making a sale. Instead, our goal is to have customers understand exactly what they’re buying and feel confident that their families will be protected. We also want them to be engaged in the process, think about the tough questions (a brief brain workout never hurts), and know they’re getting a personalized recommendation in a convenient, stress-free environment, without being oversold.

There was room for an approach that took out the financial incentives that could impact the advice. Ah, incentives. They’re far too common in the life insurance industry, and we noticed that they tend to pop up in all the worst places. And they can bias the kind of advice customers receive about the insurance they need. What exactly are we talking about? As an intermediated industry, insurance distribution relies on incentives. Specifically, insurers pay commissions to advisors to sell their products. (No one’s working for free here.) Ideally, advisors will recommend insurers that provide the best products and prices, and who are standouts when it comes to handling claims and providing customer service. But more often than not, the choice can come down to which insurer is providing a higher commission. And the biases don’t end with selecting the insurer. Recommending a higher coverage amount or ‘upgrading’ a customer from a pure protection term policy to an investment linked permanent policy increases commissions significantly.

We thought there was room for something that takes potential bias off the table. If you don’t need insurance, the product will tell you. And if you need only a small amount of insurance for a short period of time, the product will tell you that, too. The protection consumers need at the most cost-effective price, and not a penny more.

When Oliver Wyman suggested that we become contributors to this platform we got excited (and not just because it provided us with visibility and some more of those sought-after backlinks for SEO purposes). We look forward to sharing our story, our milestones, and (most likely) our “lessons learned” from the failures along the way.