Build, Buy, or Boost: A Cost Breakdown for Insurance Infrastructure
A big reason that businesses choose Boost is that we can help them launch scalable, profitable insurance programs much more quickly and cost-effectively than the alternatives. In this blog, we’ll explore the time and cost requirements for using Boost to develop a new program vs traditional build or buy, and how Boost is able to offer a better option. We’ll break it down by the three main components you need for a new program: the MGA infrastructure to support it, the new product itself, and the distribution technology to sell it online. The first step to developing a new insurance program? Being legally permitted to do so. And if you want to create your own product versus just selling someone else’s, your company needs to be an MGA. In this section, we’ll look at the cost and requirements for building a new MGA. There are two big requirements for building your own MGA: hiring the right people, and securing the right partnerships. On the hiring side, you’ll need to build an organization to run a full-stack insurance business. This includes everyone from underwriters to claims administrators to compliance managers to regulatory experts. As you might imagine, this is a significant, ongoing resource commitment, particularly for positions requiring experienced senior employees. On the partnership side, you’ll need to build relationships with reinsurers and other risk capital providers, and with fronting carriers who will allow you to write on their paper. This can be difficult, especially without existing connections. Total estimated cost: $5 million Total estimated time: 2 years When creating an MGA, there’s actually not much difference between building and buying. You can contract with qualified professionals instead of hiring directly (like using a licensed third-party agency for handling claims instead of building an internal claims team), and work with consultants that specialize in other MGA requirements, but you’ll still need to do a lot of the same things that we saw in the build section. The most important and challenging pieces, like the reinsurance and fronting carrier partnerships, can’t be bought. Total estimated cost: $5 million Total estimated time: 2 years Boost has already invested the time and money in building a robust MGA infrastructure to support our customers’ insurance programs, including: When you work with us, you can leverage our already-existing infrastructure to get what you need to support your insurance programs right away, for an annual platform fee. Total estimated cost: $150,000 annually Total estimated time: Immediately available The core of a new insurance program is the product itself: the coverages you’re going to offer, the risk capital to back them up, and the administration to support its operations. In this section, we’ll look at what it takes to create a brand new insurance product from scratch. If you choose to build your product from scratch in-house, you’ll need to hire experienced people to do everything mentioned above, including: Additionally, you’ll need to secure capacity for your product. This is often harder than it sounds, especially if you don’t already have relationships in place with risk capital providers. Particularly in the current economic environment, convincing reinsurers to commit financial resources to insuring a new, unproven risk can be a long, difficult journey. Total estimated cost: $8 million to set up, with $2 million annually to maintain Total estimated time: 5-6 years If you go the “buy” route for developing your new product, you’ll need to contract out to a number of partners to get what you need, including: Each partner will deliver their piece of the puzzle, but it will be up to you to assemble the pieces and ensure everything happens as it’s supposed to. You’ll need to invest resources in project-managing a complex multi-year, multi-partner project. Additionally, some partners’ contracts may include ongoing fees, or a certain percentage of the product’s GWP. Total estimated cost: $5.8 million + 1% of GWP Total estimated time: 3-4 years If you choose to partner with Boost to create your product, you’ve already streamlined the process considerably. Boost can provide everything you need to build and launch your new insurance program under one roof (in fact, we’re currently the only partner that can). Boost’s in-house team of insurance experts will work with you on market research and scoping for your opportunity, then develop a product sketch for how to address it. Once you and Boost have agreed on what the new product should look like, our team will get to work developing the forms, guidelines, and other program documentation. They’ll also help you design the program’s operations and claims workflows. When the product is ready, Boost will submit it to our panel of reinsurance and fronting carrier partners. Once we’ve secured paper and capacity for your product, our compliance specialists will start the filing process with the states that you intend to sell in. Total estimated cost: $400K Total estimated time: 4-7 months Modern buyers expect convenient, all-digital purchase experiences, and delivering those experiences requires a policy administration system (PAS) with the right capabilities. In this section, we’ll look at options for acquiring a PAS that can support end-to-end digital workflows. A PAS is a very complex piece of software, in no small part because of varying insurance regulations between each state. To function smoothly, your PAS will need to automatically identify and follow all applicable laws for the state a policy is sold in. This includes areas such as: The time and difficulty of building a PAS also increases with each additional insurance line that it must support. If you build in-house, you’ll also need to plan for regular updates and maintenance to the software, and ensure your organization has the necessary resourcing in place. Total estimated cost: $2 million annually Total estimated time: 1-2 years If you opt to buy the technology you need, the cost will vary by PAS vendor pricing, and also by the amount of development work necessary to customize an off-the-shelf PAS to support your product and workflow needs. Traditional vendors often charge per-year service costs for your PAS buildout and subsequent maintenance. Newer vendors tend to forgo the large fixed annual rates, and instead collect a relatively low baseline platform fee along with a percentage of your gross written premium. In many cases, however, you’ll also need to separately arrange and pay for the custom dev work to configure your PAS for your products. Total estimated cost: $250k + 1% of GWP Total estimated time: 6 months to customize/implement Boost’s state-of-the-art PAS is at the heart of our platform, and is pre-configured to support all Boost products. The annual $150,000 Boost platform fee includes access to the PAS - just integrate with your front-end via API, and you’re ready to get started selling your Boost-powered insurance product. The Boost API was built from the ground up to be easy for developers to build to and implement, reducing deployment times vs. complex legacy software. This includes a design that leverages RESTful patterns, comprehensive API documentation, and permanent access to a dedicated testing environment, at no additional fee. Total estimated cost: Included in the platform fee Total estimated time: 4 weeks deployment Considering if a new insurance program is the right move for your business? Learn everything you need to know with our free ebook How To Succeed with a New Insurance Program. And if you’re ready to get started with Boost, get in touch today.
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Boost in Q1 2024: $130M in New Capacity with 12+ Reinsurance Partners
Feb 8, 2024
Risk capital is one of the most critical components of an insurance program: a program can’t operate without sufficient capital to respond to its policyholders’ potential losses, and it can’t grow unless its capacity does too. At the same time, risk capital is also frequently one of the most difficult components to obtain, especially for products aimed at new or emerging risks. Insurance and reinsurance providers can be understandably hesitant to commit their resources to unproven programs, or to expand in areas they feel are high-risk. In the current macroeconomic environment, with investors increasingly prioritizing profits over growth, the already-difficult risk capital market has grown even tighter. That’s why we’re excited to share an important milestone here at Boost: at a time when the risk capital market as a whole is contracting or staying stagnant, we’ve just added over $130M in new reinsurance capacity, and expanded our reinsurance panel to over a dozen partners. This is great news not just for Boost, but for all of the insurtechs, MGAs, brokers, and embedded insurance platforms that work with us. We’ll be able to expand the capacity behind all of the programs we support, including SMB commercial cyber, startup management liability, parental leave, pet health insurance, and more. This in turns means our partners can scale even further with the programs they white-label from Boost. It’s not just our current programs that can grow. One of our specialties here at Boost is developing innovative new programs to address emerging market risks, which requires new risk capital. Some of our additional capacity is earmarked for new program launches throughout 2024. While we can’t talk about our plans yet, we’re very excited for what’s coming down the pipeline later this year. This expansion is also a big vote of confidence in Boost by our reinsurer partners. If you read our press release, you know that one of our partners said that they expanded their relationship with us because of our consistent track record of program profitability, with a data-driven and technology-enabled approach to risk management. We’ve worked hard to deliver great results for our capital partners, our customers, and their customers, the policyholders. We look forward to doing even more in the year to come. If you’re looking to expand your insurance offerings, or develop an innovative insurance program for emerging risks, Boost can help you get started today.Continue Reading
What is Startup D&O Insurance?
Jan 26, 2024
In this blog, we’ll cover what D&O insurance is, why it’s necessary for businesses, and how the D&O insurance needs for startups differ from more established companies. Directors and Officers Insurance (D&O) is a type of liability insurance that focuses on protecting a company’s senior management from lawsuits related to carrying out their roles at the business. This can include lawsuits against the company itself, or against individual executives (“directors and officers”). These suits might be filed by employees, vendors, shareholders, or other third parties. If a lawsuit is filed naming one or more directors and officers, a D&O policy ensures that the cost of resolving the suit does not endanger their personal assets. D&O insurance is often included as part of startup management liability insurance packages, but can also be available as a standalone coverage. While specific policy details may vary, D&O insurance typically covers the costs related to resolving the lawsuit. This can include anything from legal fees for defending against the suit to penalties or settlement payments if the suit is lost or settled out of court. Some of the most common lawsuits covered by D&O relate to: Some common exclusions in D&O policies include: This list is not exhaustive, and there can be variation in what individual products do or do not cover. If a business is large enough to have a management team, then D&O insurance is a must-have. There are two big reasons for this: risk reduction, and raising money. The first reason is pretty self-evident: buying insurance for a specific risk reduces the chances that the risk will negatively impact the business. In this case, the risk is that a person or business entity might file a lawsuit alleging misdeeds by the management team. Even if the lawsuit were ultimately found to be groundless, defending themselves in court could still cause the targeted person or company to rack up significant legal bills. A D&O insurance policy can recover any losses resulting from a covered lawsuit. The second reason relates especially to businesses looking to raise capital: many investors require a company to have D&O insurance before they’re willing to provide financial backing. Investors want assurance that their funds will be used to grow the business (and their potential returns), not be burned up in possible legal costs. Additionally, investors may require it for their own protection. It’s common for an investor to join the portfolio company’s board, and without D&O insurance their assets could then be at risk in a lawsuit against the company. Just like more established businesses, startup businesses need to have D&O insurance (especially as they prepare to fundraise). However, traditional D&O underwriting guidelines can make it difficult for startups to get the necessary coverage . The biggest obstacle? How traditional D&O products evaluate risk. D&O products designed for large, established companies tend to assess a business’s risk based on factors like historical revenue, balance sheet quality, number of employees, and how long the company has been in business. This is a problem for startups, which are generally small, recently established, and may not have any revenue yet. Under traditional underwriting guidelines, startups are often flagged as high-risk, making coverage very expensive (if they’re even offered coverage at all). This can lead to startup companies being priced out of D&O policies, or needing to go to the non-admitted market to purchase coverage. While the high-risk assessment might make sense for the kind of company it was designed around - if a company were in business for ten years with hundreds of employees and little to no revenue, it would certainly raise questions about its management - it ignores that startups are a different kind of entity. For young companies still building their products and business, a small team of recent hires and no revenue doesn’t mean the organization is poorly run; it just means it’s new. Startups need D&O insurance products that provide the coverage they need, at a price they can afford. This means products that assess risk differently than traditional D&O aimed at established companies. For example, at Boost we tackled this problem by building a risk assessment algorithm that considers a startup company’s institutional backing. When a VC firm is considering whether to back a startup, the firm has access to a huge amount of information related to the startup’s business and practices - and generally goes through it with a fine-toothed comb. If a startup is included in a top-tier investor’s portfolio, then it’s reasonable to conclude that the startup has a viable business proposition, access to funds and mentorship from the VC management, has a larger potential to succeed - all things that make their risk profile acceptable in a D&O portfolio. This alternate assessment allows us to offer startups significantly lower rates for D&O and similar coverages than traditional insurance products. For businesses that provide commercial insurance, offering D&O insurance geared at startups can be a strong growth opportunity. Providing insurance specially tailored to startups’ needs allows you to build relationships with early-stage businesses that can grow as they do. For example, while a startup might start with D&O, as their business grows they’ll soon need a combined management liability product that includes D&O along with Employment Practices Liability (EPL), Fiduciary Plan Liability, and cyber liability coverages, which will protect the directors, officers, managers and the entity from governance, finance, benefits and management activities. As your startup customers mature into growth-stage companies, their insurance needs are likely to increase even further. Having a business relationship in place positions you for future upsell and cross-sell opportunities. Ready to add startup D&O insurance to your lineup? Get in touch today to get started.Continue Reading
How Does Captive-as-a-Service Work with Boost?
Jan 11, 2024
With the launch of Boost Re, Boost now offers captive-as-a-service as part of our insurance infrastructure platform. Launching a captive insurance program for your business has never been easier, or more cost-effective. This blog is here to explain exactly how it works, and what to expect when you build your captive with Boost. As a first step to setting up your captive with Boost, you’ll meet with our team to discuss what you’re trying to build, key motivations, and what you intend to do with your new captive cell. We’ll be gathering a wide range of information about your proposed captive, such as: Once we’ve scoped out what you want to do with your captive, we’ll put together a business plan for your prospective cell. All captives must be approved by the Department of Insurance (DOI) in their domicile state. For Boost’s captive, the domicile state is North Carolina. In order to approve your captive cell, the North Carolina DOI will want to see detailed information about your prospective program. The DOI is generally interested in both the business plan for your cell and how the cell’s operational management will be handled. The latter includes things like: For this step, Boost will handle all filings and communications with the DOI, including addressing any questions or concerns the DOI may have. Once the North Carolina DOI is satisfied with the cell proposal, they will approve it, and the cell will be incorporated. Once your cell is incorporated, you can begin preparing it to accept business. The most important preparatory step? Adding the risk capital you’ll need to back your offering. This isn’t as simple as just opening a bank account (although you’ll need to do that too!). The structure of the cell’s capitalization will need to be negotiated with all stakeholders, including any collateral requirements; contracts will need to be secured with fronting carriers; and you’ll need to determine how the cell’s capital assets will be managed. Depending on your preference, Boost can handle all or part of this step on your behalf. Once the cell is fully capitalized, you’re ready to start writing business! From start to launch, the average Boost CaaS implementation time is 2-3 months, versus the year or more often required to build a single parent captive. Once your captive is officially live and your program is generating premium, it’s not the end of the story. An insurance captive is a significant responsibility, and the DOI requires regular check-ins to ensure that everything is staying on track against expectation. Boost will handle ongoing maintenance requirements on your behalf, including: With Boost’s captive-as-a-service, you can gain all the benefits of a captive insurance program at a fraction of the traditional costs and time required. Boost handles the majority of setup and ongoing maintenance tasks, leaving you free to focus on your core business goals. To learn more about a captive-as-a-service partnership with Boost, reach out to our team today.Continue Reading
Our Top Predictions for 2024
Jan 4, 2024
It’s a new year, and you know what that means: time to break out the crystal ball and make our list of predictions for the biggest trends of 2024. Here’s what we think will take shape over the next twelve months. It’s no secret that markets were very frothy in the last few years, and the fallout’s probably not over yet. While there’s some indication the Fed might start cutting interest rates this year, the days of free money aren’t coming back any time soon. For the foreseeable future, current profitability is going to outweigh future potential. In the insurance world, one of the biggest impacts is on the availability of capacity. With greater emphasis on profits, many carriers are likely to be more risk-averse than they might have been a few years ago. New and emerging-risk products in particular might struggle to get the risk capital they need to launch or expand their programs. It’s never been easy for emerging-risk products to get off the ground, but a tight market is likely to ratchet up the already-considerable difficulty. It’s not hopeless for companies looking to launch new types of insurance products (in fact, bringing emerging risks to market is a specialty of ours), but the most successful businesses will be market-savvy and well-prepared to get what they need. Which brings us to our next prediction. In boom times, investors are a lot more willing to open their wallets for a flashy presentation and the promise of eventual returns. This can allow shaky businesses to coast along much longer than they might otherwise - or, frankly, than they should. With the easy-money tap shut off, insurtechs looking to fundraise will likely need to dig deeper. For new startups, investors will want to see credible GTM plans with a clear plan for profitability. For more established insurtechs, who already have a raise or two under their belts, investors are likely to have more direct questions about growth plan and metrics. Insurtechs that can point to concrete revenue, product, and customer growth will be in a much better position to raise another round; insurtechs whose business fundamentals are largely unchanged from their previous raise are likely to have a harder time securing additional money in 2024. We’re expecting to see more failures and consolidations this year among companies in the second category. While this isn’t a new trend - 2023 had its own share of notable insurance flameouts, though few as spectacular as Vesttoo - we’re likely to see it accelerate over the next twelve months as the market continues to separate reality from hype. And speaking of reality and hype, we come to our third prediction. 2023 was the year of AI hype, and the insurance industry was no exception. At the most recent ITC conference, AI was unquestionably the focus of most discussions around innovation in insurtech - and also the biggest buzzword. While we expect both those trends to continue through 2024, we also expect to see some growing pains as insurtech AI transitions from an exciting idea to a business reality. It’s easy to just slap some AI-related marketing copy on a website, but 2024 will likely see the industry move past initial AI excitement to get serious about opportunities and results. Once various stakeholders are able to get hands-on with more AI-powered offerings, it will start becoming more obvious if a particular product or service is genuinely innovating, or if it’s just cashing in on the hype. Over the next year we’ll likely see increasing discernment on what AI means for insurtech, where it adds the most value in the insurance lifecycle, and how it helps specific products or services. Real, game-changing workflow innovations will be well-positioned to succeed in the market, and to set new standards for how insurtechs get things done. The hype train riders, however, will likely see diminishing returns. Regardless of what 2024 has in store, it’s sure to be a memorable year. And if this is the year your business wants to finally build that new insurance program or add that new LOB? Let's get in touch.Continue Reading
2023 at Boost: A Look Back
Dec 20, 2023
2023 was a big year at Boost! Now that it’s almost behind us, we’re looking back at some of our biggest wins of the year: The industry is changing fast, bringing both opportunity and uncertainty. That’s why Boost teamed up with five other insurtech leaders to found the InsurTech Coalition, a first-ever group of next-generation insurance companies intent on shaping the future of insurance. The coalition aims to foster responsible innovation, while furthering the collective efforts to provide the best possible insurance experiences to our customers. Read More Getting timely access to performance data has traditionally been challenging for insurers and reinsurers, who sometimes have to wait months to learn how their portfolio performed in a given period. Portfolio Insights enables Boost’s (re)insurance partners to immediately access real-time data across their portfolio, so they can get the information they need to drive informed business decisions. Read More For our MGA, insurtech, and embedded insurance customers, Boost Re’s turnkey captive-as-a-service solution offers a highly cost-effective path to building and scaling your own full-stack insurance operations. For our risk capital partners, Boost Re provides a reliable and streamlined conduit to deploy reinsurance capacity across Boost-powered insurance programs through dedicated captive cells. Read More We were honored to be chosen out of thousands of applicants for Inc Business Media’s 2023 Power Partners award list, highlighting B2B partners that support startups across all business functions and empower their growth. Read More As part of this partnership, Canopius will provide us with long-term, dedicated risk capacity to back our insurance programs. With Canopius as a partner, we’ll be able to accelerate our new offerings, and build out even more innovative new insurance programs. Plus: they’ve also made a strategic investment in Boost. Read More We wanted to get the story straight from the source, and so in Q4 2022 Boost surveyed 650+ US consumers. We asked about their experiences with insurance, how they felt about their options, what mattered most in their insurance purchases, and more, and shared our findings here on the blog. Read More Happy holidays from all of us at Boost, and we can’t wait for what 2024 has in store!Continue Reading
What is Captive-as-a-Service?
Dec 11, 2023
An insurance captive provides businesses with considerable opportunity - and considerable cost. In this blog, we’ll go over what a captive entity is, the benefits and drawbacks, and what captive-as-a-service brings to the table. Before we go into captive-as-a-service, we need to be clear on what a “captive” means in the first place. In insurance, a captive is an insurance entity that a business creates in order to insure risks for itself. Let’s break that down in a few examples. Say a large cybersecurity company wants to start selling cyber insurance to its customers. Traditionally, the company would partner with a third party like a carrier or an insurance-as-a-service provider to offer the partner’s insurance product. The cybersecurity company could then sell the third party insurance product to its customer base, either under its own brand or as an affiliate. In a captive scenario, instead of partnering with a third party, the cybersecurity company would essentially build an insurance company under its control. The cybersecurity firm would be responsible for all the product and regulatory requirements, and would fund the insurance entity with its own capital. It could then sell its own insurance policies to customers, with all the returns - and risks - on its own balance sheets. Companies also sometimes use captives to self-insure against risks to their own business. In this scenario, rather than selling insurance to outside customers, the captive would just provide risk protection to the business that owned it. For example, a ride-sharing business might want to provide insurance coverage to its drivers in case they’re in an accident while working. The ride-share business could work with a third-party insurer to create the product, but the insurer might not be willing to offer the coverage at a price point that works for the ride-share company (or, the coverage might not be something the insurer wants to offer at all). Creating a captive entity to provide the insurance for itself would allow the ride-share company to build the exact coverage it needs for its business goals. There are a number of reasons a business might want to create an insurance captive: While there are many benefits to creating an insurance captive, there are also some potential downsides to be aware of: Captive-as-a-service offers a mechanism to access the benefits of owning a captive, at far lower capital and operating costs. To create such an offering, a captive-as-a-service provider must first go through the full process of creating a captive insurance entity, like we discussed above. After this captive is approved, instead of simply using it to insure their own risks, they are able to rent out “cells” within their captive (provided this structure has been applied for and approved) that other businesses can use. Thanks to this structure, if a business wants to utilize a captive, rather than constructing an entire captive entity from scratch, they can simply rent a cell from the captive-as-a-service partner. The partner will then handle negotiations with the relevant DOI to work through approval of the cell and determine how it needs to be capitalized. The business can then put risk capital into the cell, and use it to run their captive business. Since the cell is part of the larger captive-as-a-service entity, however, the ongoing operational management will be handled by the partner. Captive-as-a-service makes captives more accessible to a wider range of businesses: Insurance captives offer a significant opportunity for businesses to increase revenue, improve risk management, develop innovative new coverages, and more - but they also come with significant costs attached. Captive-as-a-service allows businesses to take advantage of the same benefits as a captive entity, for a fraction of the capital and operating expenses. Contact us to learn more about building your captive-as-a-service offering on Boost Re.Continue Reading
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