Start-Up Mistakes (Insurance)

A recent blog post at Both Sides of the Table on common mistakes made by startup companies triggered some thoughts based on our experience in specialty insurance (see here).  The author is in the tech business, so some items on the list do not apply to insurance.  A couple of the most interesting:

• Moonlight responsibly (or Plan Responsibly) – This is particularly important in the insurance business. Not so much in terms of the ownership of intellectual property, but certainly in terms of the ownership of customer relationships and any non-compete agreements.
• Founding Members – the post says 2 at most. Not what we would say (see below).

What we see:

• Adding too many founders – The development of a business starts with strategy and then works its way through multiple iterations of business plans and financial projections. Along the way, things change. Having a large team with areas of expertise can create problems with a team, and the result can be fitting the plan to the team. Start the strategy with a core team, which may be one person, build the plan and projections, and add expertise as needed, not before.
• A lack of focus on breakeven – We have seen significant focus in the planning process on huge revenue numbers residing in spreadsheets. What is more important is figuring out how to make actual sales fast enough to get to breakeven (see below).
• No proof that it can sell – Can they show that the product will sell? This is typically answered with a lot of assumptions, and no real life testing.

Brought to you by Tennant Risk Services.

 

 

Comments

[Arizona Life Insurance]

Nice blog. These are helpful reminders. Thanks a lot.

[Lemore Aizenman]

I have one insurance agency and now, 11 years later I as starting another one. I forgot all the details that have to be taken care of. And sales projections are one of the most difficult areas in the business plan. As you say, nobody really knows if the sales will happen. All you can do is give it your best and hope you make it.

[Insurance South Africa]

Hi thanks for the post. How bad is it for your insurance policy to have claims on it. doesn't it mean that you have to pay more if you are seen as someone that is high risk??

[Mike]

Thanks for posting this article. I found it pretty helpful, especially the part about # of founders. I'm starting a business and am kind of dismayed at a lot of the logistical things I didn't really plan for, including insurance. I've seriously read so many article on this subject that I'm starting to turn up some really crazy stuff, like Kebab Shop Insurance (lol!):

[Chill.ie]

We ourselves are an Insurance start up in Ireland, www.chill.ie. We believed there was a niche in this market for basically making insurance easy, we want to be your one stop shop for example. Would appreciate some feedback on our site if you get a minute. Thanks

[Jean]

Strategy with a core team is a great advice. You can focus in a not-so-many founder in this case.
Jean@Insurance Agent Forum

[learner_insurance]

Adding one more thing,to be eligible for moonlighting, the resident must Submit a request to moonlight to his Program Director.

[Marc Lanzkowsky]

I was referring to Insurance start-ups -

[Marc Lanzkowsky]

Don't forget claims. Too often the view is to not worry about claims until they occur. That may be true, however, claims issues arise from the start. Systems must be developed with claims in mind and policies need to be drafted with consideration as to how will the claims be serviced. By adding a claims process early companies can avoid costly and expensive mistakes later.