Is Building an Insurance Product Right For Your Business?
Insurance is a hot market right now, and there’s a lot of interest in developing innovative new insurance products. But is it the right opportunity for your business?
Maybe your business already sells insurance, and you’re thinking of going after a new market segment with an unmet need. Maybe you’re in a complementary business, and considering if a new type of insurance product could help grow your revenue. Either way, creating a new insurance product (and the program needed to support it) is no small task. Here’s a few things to think about as you decide if developing a new insurance product is a good fit for your business.
The Insurance Opportunity is Real, and Significant
It’s no wonder you’re considering developing a new product: in many ways, the timing has never been better. The insurance market is particularly ripe for new entries, and the rewards for success are high.
Insurance revenue compounds as you grow. Insurance revenue is recurring revenue. Your customers pay their premium amount for as long as their policy is active, and that can add up quickly as you add more customers. Once a product picks up momentum in the market, its revenue growth can rapidly start to multiply as new policyholders’ premiums are layered over existing ones.
The P&C insurance market is huge. The U.S. property and casualty insurance market wrote more than $775B in premiums in 2022 - a 25% increase over the last 5 years. Put frankly, there’s a lot of money to be made in the insurance market, and the overall pie just keeps getting bigger. Creating new product has the potential to increase that even further by reaching previously unavailable customer segments.
Many existing products are behind the times. Now, there are some excellent products in the insurance market today…but there are also a significant number that haven’t been updated in years (or decades). Older products that might have been a good value when they were first built often don’t match the needs of today’s buyers. For businesses that can offer new, modern products built for current risks, there’s a big opening to fill in the market.
The Challenges Are Also Real (And Significant)
While we’ve seen the opportunity is a big one, building a new insurance product to take advantage of that opportunity is not a simple undertaking. There are several very real challenges that can catch businesses by surprise, and derail their new product development plans.
It requires patience, and a willingness to invest. Even with the best partners to help you, building a new insurance program is costly, and takes at least six months (and if you plan to build it from scratch in-house, it can easily take two or more years). The payoff can be totally worth it, but businesses that expect the build process to be fast and easy often don’t make it to the finish line.
The regulatory requirements are complex. It’s no secret that insurance is heavily regulated. There are already a number of rules around selling insurance (that vary between states), and doubly so for building a new product. Paying close attention to all compliance and licensing requirements, in every state you intend to sell in, is critical to success.
New products are a higher GTM lift than existing ones. In any industry, first-of-their-kind products need more go-to-market resources than products the audience is already familiar with. If your product is aimed at a currently-unmet market need, you should plan for a period of educating your potential customers on what the product does and how it can help them. Expecting a new product to immediately achieve big market traction can lead to disappointment (this actually ties back to our first point - patience is a must!).
Preparation is Key to Success
While the challenges to building a new insurance product shouldn’t be taken lightly, they’re also very manageable with the right approach. The key is to lay the foundation for your initiative, before you kick it off.
Your business needs to take the long view. As we’ve discussed, a new product can be very lucrative, but it’s not likely to yield fast-turnaround profit. Businesses with successful new insurance program launches have a long-term vision for how the new product will grow and build revenue.
You need a business plan, and an owner for it. Like any other product, you’ll need to support your new insurance product with GTM resources, determine its business goals, and measure its performance. This is most likely to be successful with an internal owner who is accountable for getting the product to market, and later meeting the program targets.
Your executive team needs to be on board. The bottom line in all this is really that the process of building a new insurance product requires business planning, cross-functional support, and non-trivial resourcing…which means you’ll need your executives’ support. Successful initiatives for building a new insurance program generally have one or more executive sponsors, who champion the initiative, help ensure it stays on track, and hold responsibility for its outcomes. If your new product initiative doesn’t have that, on the other hand, it’ll be unlikely to get off the ground at all.
A new insurance product can help drive a lot of revenue and growth for your business, but it won’t happen overnight. As you decide if a new product is the right opportunity for your business, it’s important to carefully consider your business goals, the challenges involved, and how to put in place the foundation for success.
Decided that building a new insurance program is the right choice for your business? Boost can help. Contact us to get started today.