Charlotte Koep, COO of Root.

Insurtech, a blend of innovative technologies that’s disrupting traditional insurance processes, is reshaping the insurance industry. The goals of insurtech businesses include offering personalised policies, streamlining claims processes, reducing costs, to name a few.

One study shows that 63% of insurtech companies have a collaborative approach and focus on helping traditional insurers transition towards a more digital future, improved efficiencies and better customer experiences. These are key in today’s market.

Customers get faster, more tailored and more affordable services. Insurers, in turn, become more efficient and competitive.

Driven by the rising demand for digital insurance solutions, there has been a steady rise in the number of insurtech startups in South Africa, but what does it take for these businesses to be successful?

Charlotte Koep, COO of Root, says the insurtech platform’s leadership team learnt seven hard lessons in the process of launching both the company and insurance products developed on it:

1. Sales can be difficult

Recognise that insurtech sales can be challenging. Merely having a product doesn't guarantee success. 

“Defining the right product starts with choosing the right problem to solve – one that is worth paying money for, and that is wide enough to enable you to build a successful tech company,” Koep advises.

2. Marketing matters

Planning your marketing is as vital as developing your product, says Koep. Don't just focus on building your product; invest significant effort into strategising promotion and marketing. As a start-up, your brand is fresh, but unfamiliar and not yet trusted.

“One effective strategy is to collaborate with bigger, established brands to increase visibility and borrow credibility,” says Koep. “Brand value plays a significant role in sales. An established brand can make sales and partnerships easier.”

3. Adaptability is key

Flexibility in business models can lead to surprising successes. This is especially true if the initial approach is proving difficult to convey to potential customers. For instance, Root changed course from a direct-to-consumer (D2C) approach with its original open banking solution to working solely with large enterprises that have existing consumer relationships.

These days, Root offers an insurtech platform following a purely business-to-business (B2B) strategy, which has proven beneficial - and easier to export to other geographies, like the UK.

“Our platform now helps insurers develop products, which are white-labelled by retailers, telcos and financial institutions. This model is proving very useful for insurers across the world, allowing us to expand beyond our initial success in South Africa and Mauritius,” says Koep.

4. Collaborate, don't compete

Instead of viewing big insurance companies as competitors, see them as potential collaborators, Koep advises.

“Not only is collaboration the most favourable option, but it's also the most productive. Up to 40% of short-term and life insurers’ expenses are spent on core processes and can be significantly reduced by digitisation. It makes much more sense for a startup to target this opportunity at existing insurers than to compete outright with companies that have much bigger war chests and marketing budgets,” Koep explains.

5. Niche vs. broad

In smaller markets like South Africa, having a broad, end-to-end approach is necessary because a niche might be more limiting than it would be in a larger market. As a result, South African insurtechs have the advantage of being able to address the full value chain in insurance, something that isn’t a reality in larger markets such as the UK and USA. In those markets, Koep says, insurtechs tend to be very niche in their approach. Root’s experience in building a platform across the value chain has been part of what made it possible for the company to expand into other geographies.

“For example, don’t shy away from building a frontend to complement your backend systems, if necessary. Be open to giving clients the tools they need to be better in a sector where the technical deficit is enormous,” Koep adds. “This runs counter to advice startups are generally given, which is to find a niche and focus there. The market forced us to go wide and we are now benefiting from this.”

6. Customer experience rules

Understand that in today's age, integrating tech-forward solutions and prioritising the customer journey is crucial. So few do it well.

“Focus your efforts on integrating the customer experience throughout, and helping incumbents do the same, because true customer-centricity is the biggest gap in the market,” says Koep.

7. Be about more than just tech

Technology alone doesn't cut it. Human experts not only see that the technology is implemented correctly but also guide organisations through the change, ensuring that employees understand, accept, and are trained to make the most of the new system. Be prepared to offer that combined value and be a change agent.

“Again, remember that the technical deficit in insurance is enormous - we have found that the ability to help our clients to implement and run our platform has been critical to their success,” Koep says. “Insurance is too complicated an industry to think that merely selling licences will lead to success in software and product development”

“Disrupting the industry doesn’t mean disrupting incumbents. Collaboration with traditional insurance companies enables insurtech businesses to grow and helps established players improve their offerings, all to the benefit of the end-consumer who for too long has had to put up with solutions that are well below par” concludes Koep.