Can Fintech Insurance be disrupted by someone outside the industry?
Preface: We talk to James York, Founder of Worry & Peace, a personal insurance store for travel, phone and cycle insurance. James talks to the Startup Magazine about the misconceptions, challenges and opportunities in the insurance industry.
Despite your background in insurance, it has taken you a a long time to be approved by the FCA. Do you think entrepreneurs from outside of the industry will even be able to enter the insurance space?
I wouldn’t say that you shouldn’t approach this industry if you are not from an insurance background. I would actually say that it will be great for outsiders to the industry to see that there are great minds here.
You will just need to get over the perception that insurance is a vertical that is unwilling to innovate, and can’t be made better in anyway.It’s an issue that has been created by the industry itself, and this is something I want to help us change. We (the insurance industry) need better self esteem. Insurance does a really bad job of showing it touches every point of the economy. ”
If you are coming to the industry from the outside, you will get an AR (appointed representative). The appointed representative can give you a ‘skinny’ authorisation. This is when someone in the industry extends their insurance certification around you and gives you 25% control over the whole insurance process.
You wouldn’t have any direct relationship with underwriters (those who determine the risk of the insurance), or complete control over the business. This is not ideal for someone who needs complete control, which more often than not, I believe a startup team does.
Getting direct authorisation from the FCA (Financial Conduct Authority) can take between three to to six months. Beyond that, there is no guarantee for a relationship with an underwriter. This is because business relationships in the insurance industry are based on trust, this is a problem for newcomers. To sell someone else’s insurance paper, you don’t give them consideration like you would in a wholesale environment (for example when selling chocolate bars or jeans), and then add a markup. Therefore the trust level is really critical, if you don’t have the reputation, or prerequisite skills, it will be very tough for you to get over the FCA regulations as well as making the right wholesale deals with insurers.
Where can innovation in the insurance industry?
I believe there are still ways industry newcomers can innovate. There are three ways I see this happening:
Point of choice
We, Worry and Peace, are innovating on the point of choice, helping you make a more informed decision on what insurance you would like to buy. We have created a price tariff which breaks down the structure of the pricing, to give transparency to our customers. Our fees are like shipping fees, it’s an important thing for consumers to understand that behind the retail process there is a supply chain, and they have a direct relationship both with the insurer and us.
Point of problem
Bought by Many are a company looking into the point of problem. This involves creating specific insurance products for very specific problems, for example insurance for pugs or travel insurance for people with diabetes and clustering them with a good underwriter who can cover them in at a reasonable price.<
Peer to Peer
Peer to peer<, works to give consumers a new way to purchase insurance. This is what Guevara have done. Guevara works by having people take out insurance as a group, allowing them to keep the the money that they don’t claim.
What do you think is the biggest problem the insurance space is facing? How is Worry and Peace addressing it?
The biggest problem in the insurance industry is that consumers have been programmed to switch insurer every year which in the long run is bad for the consumers. This is because the value is trapped in the supply chain, due to the cost of acquisition of new users becoming so high. We want our users to understand the benefits of staying with the same insurer, and allow them the option to switch.
Insurance can’t change the fact that by buying insurance you are “betting” on bad luck happening, but the insurer is in that bet together with the consumer. If something bad happens to you, the insurer will have to payout. In fact you both benefit from good luck, because hopefully over time the insurer will build a relationship with you and reduce your price.
At Worry and Peace we are focusing on our own branding, we don’t use words such as compare, market or protect. This means we are not saying the same thing the insurance industry has said to consumers historically. We are working on creating lifestyle content on our website, that readers will find relatable.
We help them discover things to spend their time, money and brainpower on. That gives us an edge, because that makes consumers relate to us. We are able to then have better conversations with them, and offer them the right services. We operate this way because we believe that ultimately everyday life determines what you need to insure.
We are creating our own insurance products and differentiating over price,focussing on usability and clarity. There are two key ways we are doing this. Firstly, we are building tools that help users to manage their finances, including an organisation tool with reminders.The second part is through sharing the tools built buy other brands and startups. We would love to put their work in front of our community.
What is the future for Worry and Peace?
Our long term ambition is to help the industry change for the better,, for the good of the customer. Insurance can do amazing things, it has tons of capital, and great talent. Insurance touches every walk of life, there is no limit to the products we can create to benefit customers. In the future, I see Worry and Peace with a wider range of insurance products on offer, and a richer digital experience. We also aspire to continue to have more meaningful conversations with shoppers, and to help insurers achieve that too.
