What is a small insurance startup? Essentially, it’s a business where you provide insurance to customers. You can offer any type of insurance you want, but the main idea is that people pay for coverage. If something happens to them and there are financial repercussions, they can use your insurance to cover any costs.
It’s a business model that clearly works – according to Statista, insurance is one of the largest industries in the world, with a value greater than the GDP of some countries. Does this mean a small insurance startup can work as a viable business idea in 2023? Let’s look at some key talking points to find out.
Insurance agencies have bad reputations
Generally, insurance agencies have terrible reputations. They brand themselves as companies that look after the little guy. They claim to have your back, but do they really? Most people only buy insurance because they have to – they don’t have very positive things to say about the big brands out there.
As such, there’s a little gap in the market for you. A small insurance startup is not a massive corporation, so you can be an agency people trust. Build your brand around the customers – make looking after them your priority. If you display this and follow through with it, there’s a big chance people may turn to you over huge insurance giants because you seem more down with the people.
Complex claims processing requirements
Starting an insurance business isn’t as easy as going “Here, have some coverage for your property or personal injuries”. It’s way more complex than that, particularly when a customer makes a claim. You need to know how to deal with and manage claims to ensure both you and the customer get the best out of the situation.
It’s difficult, but things are being made easier thanks to companies like West Point Insurance Services and their P&C claims management service. You now have software solutions to process claims, so being an insurer is more accessible than ever before.
Large running costs
As an insurance company, you make money when customers pay for your insurance services. However, when a customer makes a claim, the whole purpose of insurance is to provide financial aid. This means you need access to large sums of capital in case claims come through.
Look, in an ideal world, your small insurance startup will have many customers paying premiums yet never making claims. A lot of money comes in, and not a lot goes out. The unfortunate reality is that starting an insurance agency costs a serious amount of money. Perhaps this is why you don’t see many small startups in this sector.
After considering everything, there’s definitely a gap in the market for smaller, more independent insurance companies. This could be a viable startup idea, provided you operate differently from other insurance agencies. Make your company more customer-friendly so people have reasons to choose you over others. At the same time, be sure you understand the complexities of insurance claims and have enough money to fund this endeavor.
