Build, Buy, or Boost: A Cost Breakdown for Insurance Infrastructure

New Product Development Insurance Infrastructure

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New Product Development Insurance Infrastructure

By Laura Knight on Feb 28, 2024

8 min read

A businessman types on a calculator while holding a pen. His desk is covered in financial charts.

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.

Building MGA Infrastructure

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.

What’s Involved with Building MGA Infrastructure

Getting an MGA license. In some states this is as simple as an extra form, in others it may require an additional exam.
Establish underwriting systems & processes. An automated underwriting workflow will significantly improve your efficiency.
Establish claims administration capabilities. By law, all claims must be processed by a licensed claims administrator, so you’ll need to either hire or contract to qualified professionals.
Establish reinsurance treaties. Any policies you sell will need to be backed by risk capital capacity, which requires negotiating relationships with reinsurers.
Receive full delegated authority and appointment by a fronting carrier. Legally, your policies must be written on licensed carrier paper, which means you’ll need to develop a partnership with a fronting carrier that will permit you to write and modify policies without their direct involvement.
Bordereau and regulatory data reporting. Both reinsurers and regulators will require regular reports on the health and status of your various programs.
Ongoing program underwriting and book management. Selling a policy is only the beginning; you’ll also need systems and resources in place for ongoing maintenance.

Build: Costs and Requirements

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

Buy: Costs and Requirements

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: Costs and Requirements

Boost has already invested the time and money in building a robust MGA infrastructure to support our customers’ insurance programs, including:

Fully delegated authority from ‘A’ or ‘A-’rated fronting carrier partners
Dedicated reinsurance capacity from a diverse panel of reinsurers
Filing, regulatory, and compliance management resources
Full-service claims administration
End-to-end program management

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

Developing a New Insurance Product

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.

What’s Involved with Developing a New Insurance Product

Identifying a new opportunity. This first step encompasses researching the market, scoping the potential product, and building the business plan.
Developing rates, forms, underwriting guidelines. This includes how your product will be priced, which risks you’re willing to insure (or not), and how to determine who qualifies for a policy.
Determining program operations and claims flow. You’ll need to design the workflows for when your customers make claims, and decide how the ongoing administrative needs for your product will be managed.
Secure backing from reinsurance and fronting carriers. Your new product will need to be written on licensed carrier paper, with sufficient capacity behind it.
State filing and compliance. Your product will need to be filed with the Department of Insurance for each state you intend to sell it in, and reviewed against each state’s compliance requirements.

Build: Costs and Requirements

If you choose to build your product from scratch in-house, you’ll need to hire experienced people to do everything mentioned above, including:

Actuaries
Underwriters
Insurance regulatory attorneys
Compliance specialists
Product managers

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

Buy: Costs and Requirements

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:

Experienced law firms that specialize in insurance
Reinsurance brokers, who can help secure risk capital for the product
A project management firm to keep everything on track

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

Boost: Costs and Requirements

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

Insurance Distribution Technology

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.

What’s involved with building the technology for insurance distribution

An API-driven policy admin system. A modern API-based system will make your PAS far more straightforward for developers to work with than notoriously complex traditional insurance software.
Automated, end-to-end policy admin workflows. Your PAS will need to be able to digitally support the entire policy lifecycle, including rating, quoting, binding, policy issuance, modifications, claims management, payments, and more.
Programmatic underwriting. You can’t offer a fast, all-online purchase experience if your workflow requires manual underwriting review. You’ll need a programmatic underwriting system that can make automated decisions in line with your risk preferences.
Automated policyholder notices & state-by-state compliance. Each state has its own regulations around why, how, and when you need to contact policyholders. Automating state-by-state compliance into your PAS removes a cumbersome manual process from your workflows.
Claims intake via API for full policyholder lifecycle control. Even if actual claims are handled by a TPA, routing claims through your system allows you to retain control of your customers’ experience.
Integration with your front-end for full UX control. For a truly seamless customer experience, you’ll need to integrate your insurance product with your digital front-end, so that buyers need never leave your site.

Build: Costs and Requirements

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:

Document generation and delivery, which can have state-specific requirements for timeline, contents, contact method, and even things like font size.
Cancellation notices, which can have varying mandated notification timeframes.
Regulatory changes, which require ongoing monitoring of contract and insurance laws in all fifty states.

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

Buy: Costs and Requirements

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: Costs and Requirements

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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Offering Insurance: Build, Partner, or White-Label?

Nov 1, 2021

So you’ve heard that the insurance market is set to pass $700B gross written premiums this year and that changing consumer expectations are creating big opportunities for companies that haven’t traditionally offered insurance. Now what? If you’re ready to get started with offering insurance, your options fall into three general buckets: build and sell the insurance product yourself from scratch, partner with an insurance company to offer their product, or work with an insurance-as-a-service provider to offer white-label insurance products. So, which is right for your business? We’ll go through what’s involved with the top 3 options, as well as some pros and cons to be aware of. Your first option for offering insurance to your customers is also the most intensive: you can create the insurance products you want to offer, in-house. With this option, you would essentially create a business within a business: an insurance agency that operates as part of your company. As with most business-DIY options, the big advantage of building your own is that you can create exactly what you want. You’ll be responsible for the concept, design, operations, compliance, and tech, so you can approach each area in a way that centers your business needs. Building a new business from scratch is never easy, but insurance is a particularly difficult vertical to get into. It’s complex and heavily regulated, and getting started requires a significant investment of time and money. How significant? Here’s a quick overview of the steps you’d need to follow to create your own insurance products and offer them on your website. All in all, you’re looking at a multi-year timeline to build your insurance products in-house from scratch, with a considerable financial investment as well. And that’s not even considering the ongoing financial investment to maintain them - long-term program management requires significant resources. Besides just the effort involved, the long lead time for getting an insurance product to market means that by the time you get there, the market may well have changed. On top of time concerns, there’s another disadvantage you should weigh before going the build route. Everything we just covered about starting your own insurance program probably falls outside your company’s core business and specialization. What’s more, recruiting and hiring the right people to manage it may be significantly more challenging than hiring the right people for your core business. It’s often difficult to know what to look for when hiring for a completely different skill set, outside your core industry. Once you’ve brought all these new people on board, you’ll also have to manage them in an area where your core leadership has little experience. Consider whether the benefits of building it yourself outweigh the inevitable distraction of running an entirely separate secondary business within your company. Instead of creating an insurance product yourself, you might choose to partner with an established insurance company to offer your customers their product. In this scenario, you would have a link on your site for the customer to buy insurance. When the customer clicks it, they would be taken to the insurance partner’s website to buy the product from them. This is sometimes called affinity marketing, or click-through affinity. In this situation, you would be essentially acting as lead gen for your insurance partner. Your partner may pay you a certain amount per click, but after that you would not participate in the transaction. Your insurance partner would complete the transaction, collect the premiums, and own the insurance relationship with the customer. A click-through insurance partnership like this is both fast and simple to set up. After you’ve worked out the details of the partnership agreement, all you’ll need to do is add the link on your website to direct customers to the insurer. A partnership like this is also relatively low-commitment. Because you’re simply passing web traffic on to the insurer, you can later switch insurance partners or even remove the insurance option from your site altogether with a minimum of disruption to your business. The easy setup of a click-through affinity partnership also comes with considerable drawbacks. Because you’re just providing a link to your partner’s signup form, you lose control of the customer immediately after they click the link. Whatever comes after that is up to your insurance partner. If the customer has a negative experience during the process, it might reflect badly on your brand for offering the referral. Even if the experience is a good one, losing control of the customer comes with another big downside: you also lose control of the revenue. The insurance customer relationship will be with your partner, and they’ll collect the premiums. While a click-through partnership is a fast and straightforward way to connect your customers with insurance, it also removes one of the major benefits of offering insurance on your site in the first place. With this option, you won’t see the kind of regular recurring revenue that you would if your company were able to collect the premiums. Further underlining that it’s not your product (or your customer), with this kind of partnership you’ll have little to no input into the insurance product you’re offering. Your insurance partner will build, develop, and sell the products that best fit their business interests, which may or may not be a good fit for your particular customers. As just another marketing partner, you won’t have much influence to try and get a product created that closely matches what your customers need from insurance. A relatively new third option is to work with a company that offers insurance-as-a-service, and white-label the insurance product they provide you with. If you aren’t familiar with insurance-as-a-service, it generally works like this: insurance-as-a-service providers are companies who have already done the work we outlined in Option 1 (Boost is one example). They’ll have all the necessary state licenses to create their own insurance products, and they will have already negotiated with licensed carriers to back those products. A good insurance-as-a-service provider will also already have built the necessary technology to offer an embedded insurance product experience. Your company can then sign on with the provider to offer one or more of the insurance products they’ve created, under your own brand name, on your company’s website or app. Unlike affinity partnerships, partnering with a white-label insurance-as-a-service provider doesn’t simply generate customers for someone else. Your company will be the one selling the insurance product, on your own website. The customer will buy the policy from you, and you’ll be the one to collect the premiums and own the ongoing customer relationship. White-labeling an insurance-as-a-service product offers many of the advantages of building it yourself, but at a fraction of the time and cost. Because your partner will have already done the heavy lifting on things like operations, technology, compliance, and capital, you can easily offer the right insurance products for your customers - and get to market in a dramatically shorter timeline versus trying to create an insurance company from scratch. A white-label insurance product also allows you to reap the full business benefits of offering your customers insurance: While white-labeling an insurance-as-a-service product is much faster and easier than building one yourself, it’s still more involved than simply adding a link to your website. Working with an insurance-as-a-service provider may take longer to implement than partnering with an insurer for click-through affinity since you will be building the full experience into your website rather than just linking out to an insurance partner's website. Selling white-label insurance policies also requires an important additional step: someone at your company will need to be licensed as an individual broker, and then sponsor a license for your company. You may recall this as Step 1 in the build process - the broker license is required to legally sell insurance, which your company will do with its insurance-as-a-service products. This sounds much more intimidating than it actually is. The insurance licensing process itself is relatively simple and straightforward. However, it does require additional effort from one of your employees (usually a senior executive who is unlikely to leave the company). The other good news is that not only is the licensing process easier than it sounds, but once it’s done, it’s done. You’ll need to maintain it with fees, renewals, etc, but you won’t need to go through the process again as long as that employee is still at the company. A good insurance-as-a-service partner will also help you with this step, so you can check the box and start offering insurance to your customers as soon as possible. The insurance market is changing quickly, and there’s never been a better time for new entrants to take advantage of the embedded insurance opportunity. Depending on the route you take to get there, however, the cost, time to market, and experience for your customers can vary a great deal. When starting on the road to offering insurance, it pays to carefully consider your budget, your timeframe, and your business goals, so that you can choose the option that’s right for your company. Is insurance-as-a-service the right option for you? Boost can help get you started. Contact us today to learn more about your options for offering the different ways to offer insurance with one of our Boost product experts.

The top 3 takeaways from our embedded insurance consumer survey

Embedded Insurance Survey Results: What We Learned From Consumers

Feb 3, 2023

You may have heard that embedded insurance is a big opportunity to grow your business, but are your customers actually interested? 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 current insurance options, and what mattered most in their insurance purchases. Here are the top 3 things that we learned from our consumer insurance survey results. [See Full Size] In our insurance survey, a whopping 73% of consumers had either already bought insurance from a non-insurance brand, or would be interested in doing so. While price was mentioned most often, other reasons included brand loyalty and convenience. Trust was another important factor. 62% of respondents were interested in buying financial products from a trusted brand, rather than a bank. For millennials, the number went up to 95%. First movers might have an advantage here as well. 20% of our respondents had never been offered financial products from a retail brand - but they liked the idea. All this is promising news for companies outside the traditional insurance sphere who are looking to build revenue and customer loyalty with embedded insurance. If you can deliver the product and experience consumers are looking for, the appetite is there. It’s hardly a secret that convenience is crucial to customer experience in the digital age, so it comes as no surprise that it was important to our respondents. 59% told us that they’d be more likely to buy insurance if it were offered digitally, as part of a related transaction. Younger consumers were more likely to be enthusiastic about digital insurance: nearly 70% of respondents aged 18-29 were interested in buying insurance directly through a transaction on a retail website. For half of our respondents, embedded insurance wasn’t a novel idea. 50% had already bought embedded insurance at least once, at the point of sale in a related transaction. For many consumers, insurance is a long-term purchase. 68% of our survey respondents told us they’d had the same insurance provider for at least two years, and 10% had had the same provider for more than five years. For retailers, insurance could also be an overall boost to retention. 62% of respondents said that when a retailer offered protect-your-purchase options, they were more likely to be repeat customers. Learn more about offering embedded insurance in our free guide, or contact us to get started.

How to Market & Sell Pet Insurance

Mar 11, 2022

Offering embedded pet insurance is a great way for companies that already serve pet owners to bring in an ongoing source of revenue. But just like every other product out there, marketing and advertising are key contributors to your overall sales. If you’re new to the industry, here are six pet insurance marketing tips to keep in mind when selling pet insurance. Because pet insurance is still relatively new in the US, some of your customers may not even be aware that it’s an option. So how do you convert them? From industry experience, we know that customers are most likely to sign up for insurance when it’s offered as a complement to their existing pet purchase. If you can make them this offer at the point of sale as an add-on to what they’re already buying, you are much more likely to win that additional revenue (and turn a one-time customer into an ongoing one). Your existing relationship with your customers can help you make the right insurance offer at the right time. From their purchase records, you probably already know what kind of pet(s) your customer has, and how much they tend to spend on pet expenses. Leverage that data in your pet insurance marketing strategy. A customer who regularly buys vitamins and specialty food for their pet might be interested in a wellness package. A customer with several pets might be interested in a multi-pet discount offer. Additionally, you likely have a database of prospects that you’ve identified as your target audience, but who haven’t purchased with you yet. Since you’re already actively marketing to this group, you can add your pet insurance offer into the mix and the additional value may help nudge them over the conversion line. Insurance is complicated, and sometimes consumers miss out on the coverages they need because the details are confusing or buried in legalese. As a trusted source for information about their pet, your brand is in a great position to break it down for them. In your pet insurance marketing, offer detailed explanations of how your pet insurance works, and what is or isn’t included, in clear, natural language that your customers can easily understand. Avoid confusing your customers with jargon or complicated legal statements, and don’t try to hide details in small print. Everything in your pet insurance advertising should be understandable by the average consumer, and any information about what is or is not included needs to be easily visible. One of the most powerful sales tools you can get is a real-life story about how your customer’s pet insurance made a difference for them. Consider reaching out to insurance customers who save on big bills, and see if they’d be willing to share their stories so you can leverage these in your pet insurance marketing. When sharing testimonials for insurance, there are a few things to keep in mind: This sounds like a marketing no-brainer, but this is particularly important for insurance advertising. If a state insurance commissioner finds your ads to be misleading or deceptive, you could be hit with fines and other enforcement actions, so it is always advised to be transparent when selling white-label pet insurance. If you use any statistics in your insurance ads, you’ll need to cite where that information came from. It pays to go the extra mile for good, credible sources - a great statistic isn’t so great if you have to attribute it to “koolstats4u.biz” in your ad. It’s a good idea to make sure that nothing related to insurance goes live without first passing a compliance review. If you use external marketing agencies for things like paid search ads, set up a review process to ensure that all insurance-related copy is vetted by your team before going live, including for A/B tests and similar experiments. If your company offers pet-related products or services, selling pet insurance is a great option and it is so easy to do with Boost. If you’re just getting started with pet health insurance, our team is here to help. Get in touch with us today.