With the WeGroup project, we have established a startup company in Ghent, Belgium. Our goal is to disrupt the insurance sector by using a peer to peer insurance model, combined with cutting edge technologies. Adding new tech to an old sector is by no means an easy task to do. Here are our creative solutions to some profound challenges we experience every day while making our insurtech project a reality.
1. Fighting Goliath
Should one call the financial sector ‘old’, then one must surely call the insurance sector ‘ancient’. The last couple of years we’ve been witnessing some important digital transformations by the banks. All major players (in Belgium at least) have released smartphone apps and provide at least basic features on their web platforms. With ING for example, it is possible today for example to open an account and request a loan, completely online. Digitalization can take a part of the paperwork away, but requesting a loan for example still needs manual work in order to assess the risk. With other words, there still is a lot of room for innovation today.
But changing the direction of a big and old ship is a lot more challenging than changing course with a speed boat. Banks such as BNPP or KBC have old IT infrastructures which cost a lot to maintain. Developing the required systems and upgrading the infrastructure costs a lot. And doing this while maintaining the old existing systems costs even more. If a budget can be provided, a bank can in fact do what must be done and bite through the sour apple that is called digital transformation. And that’s what KBC is doing right now, as it will invest 1.5 bln EUR spread over the next three years to try to catch up.
With such an amount of money, they may be able to do some awesome things, but keep in mind a digital transformation is way more expensive than starting with a clean slate, which is advantageous for fintechs and startups in particular.
When you want to buy an insurance online, only a handful of brokers or insurance companies really provide a way to do that (when we take a look at the Belgian market at least). The aged broker network is still very strong today but costs a lot of money. It can be up to 30% of the premium you pay that goes straight to the broker. But the number of brokers are declining nontheless, just as it has been doing for the past few years in the Netherlands. There, all advice and support the brokers provide is no longer paid by commissions but rather becomes fee based.
Another challenge is the fact that the big players have been there and done it before. They know the in’s and out’s of the sector because of their years of experience. It takes a team of seasoned experts in insurance, law, finance and technology to launch an insurtech project and finding the right people in a startup environment is tricky. There simply is not very much to give to seasoned experts who are usually used to getting big pay checks, besides unparalleled stress levels, worries and the occasional existential crisis.
The biggies also posess already all required licenses and political connections to make their business possible. For a startup to challenge the giants of this world can be discouraging at times. But the fast rate at which decisions are made and the much lower overhead costs of a startup really do give us an edge, which is very encouraging.
While existing big players already have their banking or insurance licenses, a startup like our own has to go trough the slow and messy process of obtaining the required licenses to sell insurance products. During the months these procedures took, we were able to take the time to focus on talking with our future customers to learn to know their wants and needs. Doing so, we discovered a lot about the market. Based on the acquired knowledge, product and marketing strategies were developed and put in place during this waiting period.
While regulations are obviously a good thing, they tend to obstruct innovation. Since 2011 the Belgian Financial Services and Markets Authority (FSMA) and the National Bank of Belgium are putting an end to many of the insurance broker’s cowboy practices by enforcing extra regulations. However, I am not fully convinced these requlatory bodies were established for that reason alone. The financial giants must have been pretty satisfied when the FSMA was established as they would have helped creating much of the regulations themselves, possibly to their own advantage. This leaves new financial initiatives with great challenges in order to deliver something completely new that might have the potential to disrupt the whole sector. One of the last insurers incorporated in Belgium was Piette & Partners in the nineties (but they recently were bought by P&V). Not that this stopped us from incorperating WeGroup. We decided to do whatever it takes in order to reach our goal of bringing peer to peer insurance to the Belgian market and going through the arduous process of obtaining the needed licenses and compliancies.
3. Trust From The Market
Since our customer research last year, we continue to bond with our market every day. The main thing we learned so far is no big secret: people have lost a great deal of trust in the financial institutions. Things only got worse during the last recession, when normal working people heard that executives throughout the sector were getting big bonusses and receiving enormous severance pays even after having done a very bad job. Simply too many dirty inside stories from banks and insurers emerged and the lost faith of people has yet to be regained. Even despite the millions thrown at marketing campains picturing the biggest and sluggish institutions as ‘modern’, ‘reliable’ and ‘fast’. Imho you have to be a dog not to be able to see through the expensive charade. To make matters worse we’ve heard only about more layoffs, leading to higher work load for the processors of all the manual work, which leads to an even worse customer experience.
As a potential disrupter, our best shot at changing the insurance game for the better is to absolutely not profile ourselves as an insurance company. Rather, we want to make it clear that we want to provide happiness by taking care of the things you love as a customer. This core mission combined with a visual corporate identity that looks more like a night club dan anything financially related, allows us to appeal to millenials and digital natives who already expect to be able to do everyting on their smartphones.
4. Expertise Needed In Completely Different Domains
Insurtech stands for the combination of the best parts of insurance and technology. It became very clear in the beginning we needed an A team to pull this off. Imho, that last one worked out quite well. My co founder and CEO, Arvid De Coster, is an insurance specialist with top sales skills. My other co founder and CFO, Rémi Wildschut, is a seasoned financial expert with great negotiation skills. I am the technical founder and now CIO. Having years of experience in full stack web development and system administration, makes myself the last addition to our diverse founders team. But the missing links within our current team are a legal professional and marketing specialists, so these branches of our business are happily outsourced for the time being.
While the biggies can seduce the required field experts with big monthly bags of money, we have to super enthusiastic about our project and our mission and vision (which is totally not a problem by the way) to attract experts to our project who are willing to help us along for little or no compensation at this time. I am proud at our team for having succeeded in assembling a top notch advisory board, consisting of senior specialists in management, technology, insurance and marketing.
In order to add expertise to the executing team, we continually recruit students in IT & engineering, marketing, insurance, sales and other young potentials who make valuable contributions to our project. Most of them work with us as interims, others receive only the compensations we can offer as a startup. The key is to keep everyone super motivated and thus far, I am proud to say we as a team have been able to succeed at doing that by providing a modern and dynamic work environment, flexible work hours, occasional free dinners and task oriënted work packages rather than “the number of hours you must be at the office”.
5. How To Be Unique
Fintech and insurtech startups are sprouting like mushrooms, all of them ready to disrupt some facet of the sector. Many of them are sold before long to bigger companies but others just don’t make it. It can be challenging to come up with an idea that no one ever thought of before and if an existing initiative in fact has thought of it before, it is great a challenge to still be different. At WeGroup, we like to think of ourselves as a unique alternative to Lemonade, with a focus on the European market, a completely different way of approaching customers and many unique improvements accross the entire value chain. Some examples are usage of smart contracts on blockchain technology to replace traditional insurance policies, implementation of IoT applications to measure the graveness of casualties and machine learning to reduce risk and fraud and optimize slow, messy processes.
We are previleged to live in a time of co-creation, where partnerships with tech companies, other fintechs and even the giants themselves can be mutually beneficial. That’s why we are working on proof of concept projects involving beforementioned technologies together with other companies.