Partnering with or investing in startups has helped established insurers reach out to younger consumers and explore new offerings and technologies to strengthen their business. However, it’s not always a perfect match. Because insurance companies typically are risk-averse, there can be roadblocks along the way, and while the concept of established companies partnering with startups makes sense, there’s a lot that happens between the 30,000-foot level and the ground level that can threaten success.
Here are five best practices that insurers should follow to forge a beneficial partnership:
- Establish investment objectives. Strike up a partnership because there’s a strategic fit. The partnership should fill some type of gap that you have in the markets you’re trying to serve or in the way that you’re trying to deliver your product or service. For example, some partnerships might be based on increasing share of wallet or average revenue per individual, whereas others are about delivering a better experience with claims or payments. For instance, some companies are thinking about how to let people file claims on a mobile app.
Many insurers establish a ventures team in their organization. However, a venture arm could come with a multitude of business objectives, from seeking a pure return on dollars invested, to improving results within the carrier’s existing business lines.
- If improving your core business, set the KPI targets in advance. Most insurance carriers are looking to startups to bolster their core business. In that event, it becomes even more important to isolate which KPIs the investment seeks to improve from those affected by business-as-usual operations.
- Seek opportunities that create mutual value against shared business objectives. If your goal is to reach a different customer set, then you have to be more open to the different paths that are required to get there. Don’t just pursue the obvious partners. Instead, do due diligence to find the best options that will add value to the business. There also should be a leadership and organizational commitment from both the insurance carrier and partner. Think about whether the partnership truly is a one-plus-one-equals-three opportunity and—most critically—whether it will address your objectives as an organization.
- Think about a bigger picture. Insurance companies also should think about how partnerships can propel their existing products and services, as well as broader market opportunities that could result from the partnership.
- Consider operational fit. Every insurance company is caught up in following an IT road map while managing and supporting the existing business, making it easy to forget about operational considerations that are crucial in making a partnership successful from a technology and a data standpoint. Think about the nuts and bolts of integrating a potential partner’s technology offerings with the actual IT processes that are in place at your company, including implementation costs.
We recently developed a partner program for a Fortune 200 insurer, assessing the client’s current partner program and interviewing cross-functional teams to understand their current roles for the planning and execution of partnerships. The outcome was a partner program management process that led to:
- Clearly defined roles and responsibilities for each cross-functional team, with expected milestones for each stage
- A flexible prioritization tool that enabled the client to prioritize potential partners based on quantitative and qualitative evaluation criteria
- Standardized templates for partner level status reports and scorecards tied to pre-established KPIs
Remember that each partnership will come with unique opportunities and challenges, which is why the most progressive organizations consider taking a “portfolio” approach toward partnerships and take a long view toward realizing benefits.