Using technology to improve the insurance experience for brokers, agents, and their clients is complex and challenging. These hurdles are precisely what make innovation so important and impactful. Vertical-specific GTM requires specific market knowledge and expertise. Selling to brokers is a skill set that is often underestimated by outsiders. While the market is ripe for new products, success is unlikely to be achieved without unlocking the market-specific distribution.
Insurance brokerage was a relationship-driven consulting-centric business for many decades. While technology enabled parts of the transaction, relationships trumped mindshare for customers, and therefore brokers. We believe this is changing. Partially, there has been a large consolidation wave over the past few decades. Small, independent brokers still playing a vital role in the market, they need an edge to compete with the large consolidators. Likewise, the large consolidators can no longer just rely on inorganic growth, and therefore need technology to expand margins. So, how do you make sure your product and messaging can meet that moment?
Here are four questions to consider when planning your insurtech GTM strategy.
Who are you selling to?
Small brokerages and large brokerages have different sales motions and often different needs when it comes to acquiring technology. The most obvious difference is that the smaller the customer, the more likely the decision-maker is also the business owner, whereas the larger organizations have complex procurement cycles. Both have advantages and disadvantages, but regardless should be considered when constructing your product and GTM.
Less obvious is that many smaller agencies are family businesses that are either being built to, or will eventually sell themselves to bigger firms. When agencies are sold to larger brokers, it is usually a multiple of EBITDA. Your software costs money and therefore decreases EBITDA. In order to sell to smaller brokerages, you need to demonstrate how your software can help that agency grow more revenue and therefore more EBITDA, or reduce people costs and therefore increase EBITDA. People are the largest cost in an agency. A third avenue would be increasing the size of accounts somehow with technology since larger accounts are generally more profitable, but we have seen less demonstrable success in technology being the enabler for this.
Large brokerages have their own unique set of behaviors. Their complex procurement organizations means that the length of the sales cycles associated with the likes of a Marsh is upward of several years (of course they can buy software much faster, but building a business around being an exception is risky). That’s not unusual across SaaS—even in horizontal SaaS selling millions of dollars in software takes years—but still something to keep in mind. Marsh and Aon are insurtech’s Everest. The view is nice from the top, but many don’t make it. Prepare accordingly and make sure the trek is worth it for you. There are other ways to create value.
Though they’re less talked about, there are folks in the middle as well: the regional brokerages. They have a bit of flavor from each, and are a great place to start if you intend to go for the largest target, or a place to graduate too if you start with small, independent brokerages.
Where in the brokerage are you selling to?
There are broadly three types of products sold to brokers: 1. Those that require full commitment of the whole broker firm, 2. Those that require the commitment of an office or a group of individuals, and 3. Solutions that sit in the back-end, where brokers may not even need to be trained but streamline the operations somehow.
The first type of product is very hard to sell with a long sales cycle, making it a risky place for startups to start. The second is an easier sell in that you need buy-in from a smaller group and can more easily tailor your offering. This is where we see the most startup activity. The last is quite easy to sell if the value is there, and surprisingly, an area with less startup activity, so consider this as an opportunity.
How does your product fit with the existing tech stack?
Keep in mind that because many brokerages have grown through acquisition, meaning that they have a heterogenous technology stack. Therefore, their priority is streamlining operations. Many large brokerages started bringing on technology leadership in the form of a CIO or CTO over the past decade, with few today not having such a role. This focus on technology is a shift in these organizations, and means some are more able to make quick technology decisions than others. We definitely see these larger brokerages as active as ever in technology circles which we believe is a confident indicator for the future. Nevertheless, these are businesses that were historically built on relationships and so the shift to a technology-forward mindset may have some bumps in the road. Be cautious in getting buy-in from multiple stakeholders in the organization in your sales process. If you find yourself siloed in production or in IT, you may discover that your stakeholder is not ultimately in control of the budget, deployment, or adoption.
One of the easiest ways you can smooth out these bumps by understanding the roadmap for these brokerages and by offering out-of-the-box integrations with their existing tech stack. If the CTO is standardizing on a single system (e.g. their agency management system) this year and you go in to sell them new software, it’s like trying to sell someone a new house when they’re in the middle of a remodel. In these situations, try to understand where they see the risks in their roadmap, and tailor your GTM to enable success in their existing roadmap. If you can make your champions successful, they will find budget for your product.
Regardless of what you’re selling or who you’re selling it to, integrations are almost always bottlenecks in the sales process. Vertafore and Applied are the two main systems almost all brokerages use. If you have a pre-existing integration, you’ll get where you’re going a lot faster.
What is the value you can deliver to brokers?
In the end, remember that your customer the broker has a business with customers as well. Care about their problems and their customers. Most brokers are aware that their customers do not love insurance, or the insurance buying process, and/or engaging with their brokers. Taking the time to understand the relationships that underpin the market will help you both build and sell a better solution. If you can make them look like heroes to their customers, they’ll perceive you as very valuable.
And, remember that like in most businesses, brokers are first focused on increasing revenue, and second on decreasing costs. They will quickly adopt solutions that improve their sales velocity and enable them to make more or bigger deals. Likewise, their back office is often a cost-center, or time-cost-bottleneck so solutions that tailor to solving these costs will get the attention of your desired software buyer.