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I build software for a similarly-disruptive insurance-selling company that has evolved from aspiring to replace brokers to collaborating with them. It took us at least 5 years to fully reverse our strategy from being broker-antagonistic to broker-collaborative. It has done wonders for our business. Excuse my rant, but I hope somebody finds it helpful!

I'd offer a strong word of caution against the attractive idea of viewing brokers as rent-seeking middlepersons. As a seller, you are probably very well-informed on the relative quality of your product. From that perspective, it's a simple mistake to assume that consumers have better information than they do, and thus don't need a broker.

The reality is that insurance (just like any kind of financial instrument) is extremely complicated. Brokers are a individually-tuned filter of information, telling clients exactly what they need to make an informed decision. In the insurance industry, consumers can often get this value at no cost to them (the insurance carrier pays the commission). Premiums are priced identically, whether you purchase through a broker or not; so, as a consumer, why not choose a broker?

To help people (investors?) escape this mindset, I like to compare brokers to Certified Financial Planners. To the informed, CFPs seem like an embarrassing inefficiency in a marketplace that's vibrant with free information. In reality, CFPs provide a real value to a large segment of the population: decent returns, accountability and agency, a human to soothe them through tough times, and a filter for information that feels irrelevant to daily life. Most people want to think about insurance exactly once per year, for as little time as reasonably possible, and no COO got fired for purchasing insurance through a broker.

Bottom line, if your value prop to investors is selling directly to avoid commissions, you're selling them on:

(1) your ability to convince consumers that your information funnel is a better UX (arguable)

(2) your customer support is more versatile than a broker's (unless you're open to encouraging customers to go to a competitor, this is impossible)

(3) while you're accuring brand value to satisfy (1) and (2), you're comfortable with having a growth curve with a low ceiling.

Instead, I'd recommend seeing brokers as external salespeople. If you make a product that is easy to explain and sell, and develop a first-class broker experience (receiving commissions, viewing book of business, CRMing with clients), they will actively convince their clients to switch to you at that one time each year. Brokers already have a rapport of trust with their clients, that you can leverage, even as an upstart, to win market share.

More concretely, in our experience brokers can convince people to change their carrier more effectively than world-class marketing. I'd recommend visualizing your commission spend as marketing spend. Commissions and broker tooling are levers you can pull to grow faster and higher.

It's a harder-to-sell vision, because investors tend to see brokers as an economic inefficiency to be "disrupted" away. But, again in our experience, it's the only practical way to bootstrap some table stakes in the market.

Anyways, hope whoever else reads this finds this insightful. Just my two cents; I think you all have a great vision, and I wish you the best! Learn from our hard-earned mistakes, please :)






Interesting comments. Wanted to add some thoughts from an insurance guy view:

>> Instead, I'd recommend seeing brokers as external salespeople. If you make a product that is easy to explain and sell, and develop a first-class broker experience (receiving commissions, viewing book of business, CRMing with clients), they will actively convince their clients to switch to you at that one time each year. Brokers already have a rapport of trust with their clients, that you can leverage, even as an upstart, to win market share.

I think there are two (or more) positive aspects to the Vouch approach:

1. Vouch's distribution is fueled (in part) by relationships with investors (e.g. YC). YC's twice-yearly batch is a wonderful source of start-up business. I don't by any means think it is the only source of business, but that relationship is a positive for Vouch. I've not been through YC but imagine they're happy to recommend Vouch to the folks they're coaching through the year.

2. Intermediaries are rightly lambasted for many reasons, but I think it's silly to assume that the entities that control distribution are doomed. I agree with you that brokers can be valuable, but I think their value to Vouch is different. It isn't to help funnel business in the door (though perhaps that will come), but instead they are partners that can help Vouch scale its offering as start-ups grow and require more complex insurance. Vouch helps create a distribution channel the brokers today don't do a great job servicing, and it enables the business of those brokers when/if the underlying businesses are ready.


Thanks for the thoughtful post -- let me expand on what I wrote previously, as I want to be clear: our goal is not to disrupt brokers; rather, it's to build new insurance products that uniquely meet the needs of high-growth technology (and over time, other entrepreneurial) companies. Our view is that brokers are very valuable for some clients -- and for certain other companies, especially very early stage ones, it's more hit or miss -- my experience is that's the case because it doesn't make sense for most brokers to serve small commercial accounts. We're very open to working with brokers over time for some clients/products/etc. Thanks again for the thoughts.

Thanks for expanding. Brokers that work in brick and mortar have their place. Based on reading about your company I would make the pitch that the customer wouldn’t hire a defense attorney to incorporate your company (though you could and not that they wouldn’t do a good job) and likewise you wouldn’t hire silicon legal to defend you in a criminal trial. The last thing you want would be a broker or ultimately an underwriter that is unfamiliar with your business model that fights tooth and nail with you on simple stuff that the Hartford would take care of in a heartbeat.

We're in a very similar business. And have embraced the existing broker network. gen220 -- mind if I ask what company you are part of?

I'd love to hear as well!



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