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It’s not just the tech concept…
TLDR Having the correct idea for underwriting, distributing, selling, adjusting, or scaling insurance may not be the right idea if the scheme is introduced or sold where the customer understands the plan but simply doesn’t accept it in cultural context. How and where one sells an idea in the connected global insurance industry might just be more important that what is being sold.
I had a great discussion with a very clever InsurTech company this week, Uncharted, a digital insurance sales facilitation and distribution entrant focused on health benefits and business SME markets (check out their website in the link- I won’t do their concept the justice they can). They are Singapore-based, building toward a global reach. The firm’s Chief Commercial Officer, Mark Painter, held my attention regarding how the firm was building its sales and distribution tools with the intention of giving carriers and brokers options and efficiencies from point of sale right through home office underwriting, binding and admin of data. Taking the teeth out of the unstructured data beast, so to say. Mark (who’s a pretty savvy finance and insurance guy now working alongside Uncharted’s founder, Nick Macey) recounted a recent experience in introducing the Uncharted system into a southeast Asia market carrier’s system, excitedly advising that significant sales admin improvement for the thousands of field agents will or had been gained for the carrier. That’s very cool.
But my follow-up question was: If the carrier’s products are traditionally sold by agents say, working off of scooters, meeting with small shopkeepers over tea, or noodles, and with the bound policy traditionally taking a few weeks to present to the insured, will an ‘instant’ policy innovation resonate with the known culture of doing business in the neighborhood? Will an app-based policy hold the same ‘worth’ to that analog customer? It might if the businessperson is comfortable with the growing use of digital ecosystems, it might not if the owner is not.
How the customer expects to transact business is the key- are you practicing innovation from the customer backwards?
Well this prompted a comparison discussion of what the firm is working with in Zimbabwe, where most residents/customers transact business through smart devices using EcoCash, a mobile payment platform hosted by local telco, Econet. In this instance EcoCash has an approximate 80% market use penetration, and as such adding services to the ecosystem is an accepted practice. A company looking to make inroads into the market would be wise to joint venture with or leverage the Econet ecosystem rather than try to make inroads through traditional agencies. However- once established in the market the firm would be better able to bridge to traditional insurance channels for more complex covers, riding the market awareness built through use of local, accepted practices. Know what and how the customer expects to transact business and go with that flow. It ofttimes does not matter how wonderful your product or service is if the customers simply are not accustomed to how you market. The correct answer is not always the best answer.
There are plenty of examples of companies ‘growing’ their insurance products organically through other business relationships built through understanding local needs. Take for example the relationship of ride sharing platform Go-Jek and one of its investor firms, Allianz X. The ride sharing startup was a target of Allianz’s investment, but Allianz also recognized with Go-Jek that the drivers needed insurance, and the two firms collaborated within the bounds of the business model and driver culture to make insurance available within the local reach of drivers. Don’t be surprised if a similar insurance partnership approach isn’t carried into east Africa’s burgeoning ride sharing environment as the pair of firms extends its reach with their investment into Uganda-based ride hailing entrant, SafeBoda (a timely share by you, Robert Collins ). Innovation and marketing developed from business and local culture needs.
There are many examples of firms developing insurance innovations, many successful and many not so much. The takeaway for the reader from this posting- the firms noted above are working to apply clever innovation based on good ideas, but also on integrating the ideas into what fits a respective market’s expectations, and what businesses and customers are accustomed to. Ground-breaking innovation might succeed by circumventing that of which a market is accustomed, but in most cases a firm’s best investment is understanding what the locals want and how they want it, and simply following their lead. Is your approach just a correct answer, or the right answer?
Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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They say the night is darkest before the dawn – which is certainly how it can feel in fintech startup land. You’re always $1 away from disaster, or $1 of leverage away from disaster if you’re a fintech lender. Small books can be painful beasts to manage.
Which is why it is all the more impressive to see Iwoca steam ahead of some big lenders with deep pockets in the UK market. The SME lender now has claim to 12% of all new business overdrafts, beating Santander at 9% and HSBC at 11% according to Forbes, who sourced the data from UK Finance. They aren’t far behind Barclays at 15% and Lloyds at 20%.
While overdrafts are falling out of favour with businesses in lieu of the more attractive benefits business credit cards offer, they still represent an ‘understood’ cash funding entry point into the SME lending space.
According to additional data from UK Finance, the average % acceptance rates for overdrafts is 82.6%, compared to 69.1% for business loans.
Being a funding type that is ‘understood’ is half the challenge for new SME lenders, especially given hardly any businesses understand the types of financing they can access now.
Not knowing what you don’t know is a problem in SME lending land, and could potentially be a large factor behind the estimated £3 billion to £9 billion funding gap SMEs face in the UK. SME owners rarely seek advice before seeking funding and UK Finance reports, ‘the time spent investigating options is woeful.’
With companies like Iwoca forming multi-million-dollar lending chests, along with other fintechs, the real opportunity isn’t necessarily in more Iwocas – most are probably nowhere near capacity – but in developing more pre-lending advisory services that can help SMEs navigate the plethora of choices.
In 2017 it was reported that less than 1 in 5 SMEs sought advice on lending options, despite 45% of SMEs planning growth. This is a huge disparity, and one that someone with a smart, simple and cost-effective solution could solve. Traditional business brokers are probably not the answer, especially given their advice often comes coloured with the commission they earn in the background.
It’s always tempting to solve the simple problem in front of your nose – market the product more – but the smart entrepreneurs in SME lending land need to be looking far-further up the funnel, for the marketing and sales arbitrage opportunities that exist in tangential digitised advice businesses. I’ve always considered a ‘get-finance-ready’ platform a great plug in to any SME, provided it could be done smartly and digitally.
If you come across any in your travels – let me know!
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post. I was a previous employee at Tyro.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research) [...]