Offering Insurance: Build, Partner, or White-Label?

So you’ve heard that the insurance market is set to pass $700B gross written premiums this year¹, and that changing consumer expectations are creating big opportunities for companies that haven’t traditionally offered insurance. Now what?

If you’re ready to get started with offering insurance, your options fall into three general buckets: build and sell the insurance product yourself from scratch, partner with an insurance company to offer their product, or work with an insurance-as-a-service provider to offer white-label insurance products.

So, which is right for your business? We’ll go through what’s involved with each option, as well as some pros and cons to be aware of.

Option 1: Build It Yourself

Your first option for offering insurance to your customers is also the most intensive: you can create the insurance products you want to offer, in-house. With this option, you would essentially create a business within a business: an insurance agency that operates as part of your company.

Advantages of Building Your Own Insurance Business

As with most business-DIY options, the big advantage of building your own is that you can create exactly what you want. You’ll be responsible for the concept, design, operations, compliance, and tech, so you can approach each area in a way that centers your business needs.

Disadvantages of Building Your Own Insurance Business

Building a new business from scratch is never easy, but insurance is a particularly difficult vertical to get into. It’s complex and heavily regulated, and getting started requires a significant investment of time and money.

How significant? Here’s a quick overview of the steps you’d need to follow to create your own insurance products and offer them on your website.

1. Get licensed as an insurance agency.
   Time required: minimum 5-6 months
2. Be appointed as a producer/agent broker by an insurance carrier.
   Time required: minimum 3 months
3. Become a Managing General Agency (MGA).
   Time required: Varies; each state has a different set of requirements 
4. Create your insurance forms, rates, and underwriting guidelines.
   Time required: minimum 6 months
5. Get a carrier to provide capital backing for your product.
   Time required: minimum 1 year
6. Create claims administration capability.
   Time required: 3-6 months
7. Build technology to sell your product through your website.
   Time required: minimum 1 year

All in all, you’re looking at a multi-year timeline to build your insurance products in-house from scratch, with a considerable financial investment as well (and that’s not even considering the ongoing financial investment to maintain them - long-term program management requires significant resources). Besides just the effort involved, the long lead time for getting an insurance product to market means that by the time you get there, the market may well have changed.

On top of time concerns, there’s another disadvantage you should weigh before going the build route. Everything we just covered about starting your own insurance program probably falls outside your company’s core business and specialization. What’s more, recruiting and hiring the right people to manage it may be significantly more challenging than hiring the right people for your core business. It’s often difficult to know what to look for when hiring for a completely different skill set, outside your core industry. Once you’ve brought all these new people on board, you’ll also have to manage them in an area where your core leadership has little experience.

Consider whether the benefits of building it yourself outweigh the inevitable distraction of running an entirely separate secondary business within your company.

Option 2: Partner with an Insurance Company

Instead of creating an insurance product yourself, you might choose to partner with an established insurance company to offer your customers their product. In this scenario, you would have a link on your site for the customer to buy insurance; when the customer clicks it, they would be taken to the insurance partner’s website to buy the product from them.

This is sometimes called affinity marketing, or click-through affinity. In this situation, you would be essentially acting as lead gen for your insurance partner. Your partner may pay you a certain amount per click, but after that you would not participate in the transaction. Your insurance partner would complete the transaction, collect the premiums, and own the insurance relationship with the customer.

Advantages of Partnering with an Insurer

A click-through insurance partnership like this is both fast and simple to set up. After you’ve worked out the details of the partnership agreement, all you’ll need to do is add the link on your website to direct customers to the insurer.

A partnership like this is also relatively low-commitment. Because you’re simply passing web traffic on to the insurer, you can later switch insurance partners or even remove the insurance option from your site altogether with a minimum of disruption to your business.

Disadvantages of Partnering with an Insurer

The easy setup of a click-through affinity partnership also comes with considerable drawbacks. Because you’re just providing a link to your partner’s signup form, you lose control of the customer immediately after they click the link. Whatever comes after that is up to your insurance partner, and if the customer has a negative experience during the process, it might reflect badly on your brand for offering the referral.

Even if the experience is a good one, losing control of the customer comes with another big downside: you also lose control of the revenue. The insurance customer relationship will be with your partner, and they’ll collect the premiums. While a click-through partnership is a fast and straightforward way to connect your customers with insurance, it also removes one of the major benefits for offering insurance on your site in the first place. With this option, you won’t see the kind of regular recurring revenue that you would if your company were able to collect the premiums.

Further underlining that it’s not your product (or your customer), with this kind of partnership you’ll have little to no input into the insurance product you’re offering. Your insurance partner will build, develop, and sell the products that best fit their business interests, which may or may not be a good fit for your particular customers. As just another marketing partner, you won’t have much influence to try and get a product created that closely matches what your customers need from insurance.

Option 3: Offer a White-Labeled Product with Insurance-as-a-Service

A relatively new third option is to work with a company that offers insurance-as-a-service, and white-label the insurance product they provide you with.

If you aren’t familiar with insurance-as-a-service, it generally works like this: insurance-as-a-service providers are companies who have already done the work we outlined in Option 1 (Boost is one example). They’ll have all the necessary state licenses to create their own insurance products, and they will have already negotiated with licensed carriers to back those products. A good insurance-as-a-service provider will also already have built the necessary technology to offer an embedded insurance product experience. Your company can then sign on with the provider to offer one or more of the insurance products they’ve created, under your own brand name, on your company’s website or app.

Unlike with affinity partnerships, partnering with a white label insurance-as-a-service provider doesn’t simply generate customers for someone else. Your company will be the one selling the insurance product, on your own website. The customer will buy the policy from you, and you’ll be the one to collect the premiums and own the ongoing customer relationship.

Advantages of White Label Insurance-as-a-Service

White-labeling an insurance-as-a-service product offers many of the advantages of building it yourself, but at a fraction of the time and cost. Because your partner will have already done the heavy lifting on things like operations, technology, compliance and capital, you can easily offer the right insurance products for your customers - and get to market in a dramatically shorter timeline versus trying to create an insurance company from scratch.

A white-label insurance product also allows you to reap the full business benefits of offering your customers insurance:

• New recurring revenue stream.Your customers’ premium payments create a significant new source of recurring income for your business.
• Increased retention and engagement for existing customers. Adding an insurance product to your lineup helps you increase per-customer revenue, and also helps strengthen the customer relationship. The more things they buy from you, the less likely they are to buy from (or switch to) someone else.
• Enhanced brand authority through highly relevant offerings. You’ve already invested a great deal of time and resources getting to know (and acquire) your customers. By working with an insurance-as-a-service provider to create insurance products tailored to your customers’ real-world needs, you can enhance perception of your brand as an expert, and increase ROI on your customer acquisition.

Disadvantages of White Label Insurance-as-a-Service

While white-labeling an insurance-as-a-service product is much faster and easier than building one yourself, it’s still more involved than simply adding a link to your website. Working with an insurance-as-a-service provider may take longer to implement than partnering with an insurer for click-through affinity, since you will be building the full experience into your website rather than just linking out to an insurance partner's website.

Selling white-label insurance policies also requires an important additional step: someone at your company will need to be licensed as an individual broker, then sponsor a license for your company. You may recall this as Step 1 in the build process - the broker license is required to legally sell insurance, which your company will do with its insurance-as-a-service products.

This sounds much more intimidating than it actually is; the licensing process itself is relatively simple and straightforward. However, it does require additional effort from one of your employees (usually a senior executive who is unlikely to leave the company).

The other good news is, not only is the licensing process easier than it sounds, but once it’s done, it’s done. You’ll need to maintain it with fees, renewals, etc, but you won’t need to go through the process again as long as that employee is still at the company. A good insurance-as-a-service partner will also help you with this step, so you can check the box and start offering insurance to your customers as soon as possible.

The insurance market is changing quickly, and there’s never been a better time for new entrants to take advantage of the embedded insurance opportunity. Depending on the route you take to get there, however, the cost, time to market, and experience for your customers can vary a great deal. When starting out on the road to offering insurance, it pays to carefully consider your budget, your timeframe, and your business goals, so that you can choose the option that’s right for your company.

Is insurance-as-a-service the right option for you? Boost can help get you started.

¹ Triple-I/Milliman: Property/Casualty Underwriting Profits to Continue in 2021