9NOVEMBER 2020funding rounds, startups at any stage of development may be of strategic interest to an insurance company as a potential vendor, distributor, or technology provider. If an insurer does not have its strategic venture capital unit or work with a third-party strategic VC firm, and if a startup has not initiated a connection, it is perfectly acceptable to reach out directly. The most common mistake we see insurance companies make is to enter into a commercial relationship with one startup when unbeknownst to them, there is another startup that is a better fit. In the current Covid-19 world, video meetings are the most common way to engage, though face-to-face meetings, if and when possible, are preferable. Conferences such as InsureTech Connect and Dig In are valuable for in-person connections. Incubators such as Plug and Play Insurtech provide an opportunity to meet with the earliest stage companies (bear in mind that these seed or pre-seed stage startups are often months or even years away from product launch). Once relationships are built with a handful of startups, network effects make it easier to connect with other entrepreneurs.Be TransparentStart the conversation by being straightforward about intentions. If a full commercial relationship will take a year and require a six-month pilot, let them know. If a potential investment is contingent on a commercial relationship, let them know. Most importantly, if an investment is out of the question, let them know before they share information. Startups are reluctant to share sensitive information, particularly financial and business partner information, with potential insurance customers. Other the other hand, per securities laws, almost all material information is shared with bona fide potential investors upon request. Communicate InternallyThe most important job of the person designated to engage with insurtech startups is to act as a liaison, i.e. communicate internally with the teams with relevant functional responsibility. For example, if a startup has great claims technology, members of the claims team should be included in the pitch. Afterwards, the claims team must provide feedback to the designated liaison. At insurers that prioritize technology, the functional unit heads become well acquainted with the most relevant startups. If the CIO, head of distribution, CUO, and head of claims are not meeting regularly with startups, they are not staying current on technological trends.Catalogue and TrackInsurers should maintain an internal database of the startups they have considered. If nonpublic information has been received or a non-disclosure agreement has been signed, there are legal reasons to document the interaction. At large insurers where multiple business units may have an interest in a startup, it is especially important to keep an institutional record. Third-party databases like Coverager, Crunchbase or Pitchbook can be helpful in compiling relevant information.Stay in TouchIf a startup is not the best fit, do not forget about them. They may be gaining traction with competitors, which may warrant a second look. And startups change business models frequently, so it pays to stay in touch. An investment in a strategically interesting startup can create alignment, enhance visibility into emerging technology and trends, and allow for upside potentialAndrew Lerner
< Page 8 | Page 10 >