Insurance is one of the least start-up friendly industries in the world. It’s a regulated industry, so you can’t just have an idea, buy a domain and start making money. You’ll need to be licensed to sell insurance, and that takes between 6-12 months and costs thousands of pounds.

It’s a lot of time and money to spend on something before you’ve validated you can make money doing it.

That was the problem I had. I’d imagine a lot of others wanting to get into the industry have this problem, too. Perhaps this is why the VC model is popular in insurance right now—because the start-up costs are so high.

Not only do you have the regulatory aspect to pay for, you still have to fund building the tech! But for those of us who don’t want to raise, how can you quickly and cheaply get started in insurance?

Step One: Affiliate

I needed to find out if businesses would pay me money for this and what kind of businesses would pay me money for this. But I didn’t want to wait a year for an application to be approved, nor did I want to spend thousands on FCA fees.

The quickest way for me to get started was to sign up as an affiliate for an insurance broker. This meant I could;

• Skip the regulatory aspect because I’d be under the broker’s umbrella of authorisation
• Build and launch a website quickly to start gauging interest

This was the quickest, easiest and cheapest way to getting started in insurance. However, it came with all kinds of downsides.

1. I couldn’t build my own tech. This was really important to me and one of the reasons I’ve stuck around in this industry for so long. I wanted to create a better customer journey. People would land on the website and were met with a striking brand that looked different to anything else in insurance, but when they clicked the CTA to get a quote they were sent to a third-party website—the broker’s website
2. I didn’t ‘own’ the customer or have access to customer data because I was an affiliate. People were coming to the website and they were converting… but I had no idea who they were. I couldn’t have customer conversations and I couldn’t make better decisions for the business based on who was buying from me… because I had no idea who was buying from me!

A simple fix for the second issue was to ask for their email address before sending them to the third-party site.

People thought this was part of the onboarding. It wasn’t. It’s not something I felt comfortable doing, but it was the only way I could see what type of businesses wanted to use this service.

Because most businesses use an email address with a custom domain, it meant I was able to build a picture of the type of businesses using this. And it turned out to be overwhelmingly freelancers.

Being an affiliate was never the end goal, but it helped me to define my target audience and see if I could make money doing it. This was the quickest and cheapest way to validate With Jack (it was actually called Insurance by Jack then).

The affiliate model is incredibly restrictive. The only time I think it could really work is if it’s baked into a popular community site or blog instead of a standalone business model.

Early validation

• 55 Customers
• £14,000 of sales

Step Two: Insurance incubator

Building my own tech and forming a relationship with customers was non-negotiable, so the next step had to allow me to explore these two areas. I decided becoming an appointed representative was the logical next move.

Being an appointed representative meant I could run regulated activities, but my principal firm would manage compliance and the operating requirements to the FCA.

I was still apprehensive about getting a license from the FCA because—despite my affiliate website validating there was interest—I hadn’t yet turned it into a profitable business.

Note: I’m really glad I didn’t dive straight in with the FCA. I think it would have been too overwhelming and added a lot of pressure to the early days. This route freed me up to focus on one thing—getting my first customers.

I’m pretty risk-averse. Many people could skip this step and go straight for direct authorisation, but I wanted to alleviate some of the risk, cost and responsibility. I also had close to 0 contacts in insurance and needed help with forming partnerships with insurers and getting a binder.

I joined an insurtech incubator and became an appointed representative. With an insurance incubator you get;

• access to compliance, mentoring and contacts within the industry
• to market quickly because you’re operating under their FCA authorisation
• funding and studio space (depending on what incubator you join)

This is in exchange for equity or commission split.

Quite simply, this route gave me the ability to dip my toe into the industry without all of the compliance costs and responsibility.

A lot has changed since I first got into the industry and there are more options available. Here are just a few;

• Insurtech Gateway
• Startupbootcamp InsurTech
• Purple Partnership
• Worry+Peace InsurTech Incubator

I signed up to the Worry+Peace incubator on a commission split model. The idea is that a lot of the regulatory stuff is handled for you. Whilst you have to remain compliant, you’re not carrying the cost or having to submit reports to the regulator.

This freed me up to focus on becoming profitable, but it does have some downsides. You won’t have full control over every aspect of the business, and I find the more third-parties involved with the running of your business the clunkier it becomes. Becoming directly authorised by the FCA provides you more internal control over your business.

A big drawback for me was payments. Either the insurer handled payments via Direct Debit or premiums would be paid directly to our principal firm.

Customers would get in touch to ask if we’d received their payment… and we couldn’t tell them. Being authorised by the FCA means being able to handle client money and generally run a tighter ship.

However, I am really glad I took this step. It gave me a low-cost route into the industry, helped me grow my confidence and I was able to build With Jack to profitability.

To profitability

• 380 customers
• £150,000 of sales

Step Three: Directly authorised

When it was clear With Jack was growing and starting to feel like a real business, it was a no-brainer to apply for direct authorisation. I had validated this and was making money.

This meant that—whilst I’d incur the upfront costs of becoming directly authorised—I’d retain 100% of the profits. The business had gotten to the point where I’d save money by being directly authorised.

Let’s take a look at some of the costs with becoming authorised:

• £1500 application fee. It’s non-refundable even if your application isn’t approved
• Annual fee to be paid to the FCA. This depends on the size of your firm, but for With Jack it costs around £1200
• Compliance costs. Mine totalled £3600
• £10,000 capital in a client fund account because I want to be able to handle client money

See how it adds up? It’s a lot of money to spend if you’re just getting started.

As for how long my application took… I started putting my application together in April and got the green light in October. 6 months all in.

Scrappy beginnings

Here’s how I got started quickly and cheaply in a regulated industry.

Affiliate

Pros: Launched a landing page quickly, identified my target audience and discovered I could monetise it.

Cons: No control over the customer journey and no access to customer data. Not a viable solution long-term.

Things don’t have to be perfect at this stage. Think of it as an experiment. Use this phase to collect as many insights as you can. For example, I used my landing page to collect data as to what kind of businesses wanted to sign up.

Insurance incubator

Pros: Could now perform regulated activities, build my own tech and get to know my customers.

Cons: Didn’t have complete control over the business.

This is a stepping stone, but there’s a bit more skin in the game now. With the incubator there’s the freedom to see if you can turn this into a real business, minus the regulatory overhead and pressure.

Directly authorised

Pros: Gives you more internal control over your business.

Cons: Requires a lot of capital and comes with more responsibility.

You’re all in now.

I’m happy with the approach I’ve taken. Instead of diving into the deep end, every step has been methodical and organic. This was the easiest and smartest way for me to break into the industry and grow my business.

If you’re building something in healthcare, banking, financial services etc, it can be difficult to get started quickly and cheaply.

It’s not just regulated industries. A lot of the low hanging fruit has been done—I don’t think we need another to-do list app! Many of us are moving into industries that are complex or coming up with ideas that are more elaborate. Sometimes it might take more workarounds or hacks to get started and validate something.

I hope this proves there are other options than taking VC funding and going in all gun’s blazing. That does work for some people—it just never appealed to me.

My journey from affiliate and scrappy landing page, to appointed representative in an insurtech incubator and finally becoming directly authorised is what’s worked for With Jack.