How to meet the growing imperative for insurance innovation

The digital age is disrupting every industry, and insurance is no exception. While insurance companies deal with constant pressure to innovate and compete with unexpected new entrants, insurance buyer profiles and their needs continue to rapidly evolve.
Written by 
Indradeep Dasgupta
Business Consulting Leader

Industry analysts agree insurance is ripe for disruption, and a KPMG survey of insurers found technology innovation is a growing imperative for the insurance sector:

  • 43 percent say they have engaged in partnerships with academics, FinTech organizations and other third parties to drive innovation
  • 34 percent have hired an outside firm or outsourced their innovation function
  • Other insurers have changed their business models and organizational structures to stimulate change, including creating 100 percent dedicated innovation teams.

However, not all are seeing the kind of transformations they were hoping for. I spoke with Dhiraj Singhvi, Insurance Delivery Director at ICC, and asked him to share some lessons learned and gotchas that may help you when it comes to leading innovation.

Identify your innovation theme and purpose

Set the tone for the team and establish a clear focus on the end game, by first understanding what type of innovation outfit you’re in and the team’s overarching purpose: 

  1. Technology lab is a pure tech play, focused on what technologies to adopt to reduce cost and improve the efficiency of the business. This team works on mainstreaming big data, artificial intelligence, Internet of Things, blockchain, and machine learning.
  2. Product launch acceleration focuses on speeding up launches for an early mover advantage and alternatively can be a product incubator. This model also aims to improve the pace of the rest of the organization by spearheading faster launch cycles.
  3. InsurTech disruption catch-up helps the organization counter start-up companies from stealing market share, by rapidly developing equivalent offerings. Metered insurance, insurance for the sharing economy, and coverage for digital nomads are high on everyone’s radar.
  4. Collaboration and co-branding both recognize non-insurance companies and technology companies are encroaching into insurance territory by offering insurance as add-ons to their products. Likewise, insurance companies can embed their brand into other products and services, even beyond underwriting add-on insurance sold by others.

Being clear on the innovation theme has a significant impact on the makeup and mindset of the team, as well as identifying the right talent.

Understand insurance business fundamentals

Understanding the fundamental underpinnings of the industry can help innovation teams understand why disruption is happening, locate the potential opportunities, and study the competition through a more precise lens:

  1. Insurance business models: In addition to the traditional corporation, you should understand the mutual insurance model (a company owned by its policyholders) and the exchange model (an online marketplace where consumers can compare and buy individual plans).
  2. Risk demographics and groups: Knowing the various risk groups will help get beyond the concept of just insuring baby boomers and millennials.
  3. Incentive levers: While not specific to insurance, having a firm grasp of what motivates all the actors in the industry will help tie your innovation to customer drivers and motivations. 
  4. Regulation: This might look boring but isn’t. A lot of innovation stems from finding markets not restricted by statute, or by clarifying initially misunderstood regulatory regulations.

Give multi-disciplinary teams time to Form-Storm-Norm

When you bring together a multi-disciplinary team, especially one that hasn’t worked together before, allow the team to go through Forming, Storming, and Norming, before they start Performing.

Management plans that don't factor in the gestation needed for the cycle to come to fruition will fall short. It’s painful – and inefficient – to disband or reorganize a team just as they are on the cusp of performing.

Get Ahead of the Roadmap Curve

Unless you’re an offshoot company or an incubated product, you likely will rely on shared infrastructure and services. The most common are:

  • Infrastructure: Application and database servers, and storage networks.
  • Master Data Systems: Where your current customer base is.
  • Enterprise Services: Typically for payments and other shared services (credit check, claims, etc.).

Get on their calendars early to ensure the shared services teams can address your needs in their roadmap. Don’t assume everyone else will clear their priorities for you just because you’re on a special initiative.

Use creative thinking to find opportunities in the boring stuff

Plenty of opportunities exist for creative thinking in the organization’s seemingly dull activities. For example, you will be amazed at how sophisticated some “archaic” document printing systems are.

There’s a creative workaround to nearly every constraint, and sometimes creative thinking means pivoting in a different direction.

Pivoting is easier if you’re entering a new market segment, or if you have baked in a transition plan for your customers. This is where design thinking, and your customer experience map, can help you.

Make your launch easier with digital on-ramps and experience maps

Understand your customers’ motivation levers. As you get to a product launch or a release, find ways for customers to transition to your new products and services. Even if your customers are digital natives, don’t assume they will download your app or connect to your services just because they can.

As you prepare for launch, don’t forget there will be unforeseen circumstances. Your customers would be more upset by a botched fix than an initial problem, so pull out that experience map you created when you first researched your customers. Use it to design a troubleshooting and escalation path.

Overall, by staying close to your customers’ needs and motivations, your technology innovation will make the disruptive forces of the digital era work to your advantage.

Learn how ICC can help your insurance company achieve an advantage with innovation. Feel free to email Dhiraj at dsinghvi@icct.com with questions. 

Also see:

Digital is disrupting the insurance industry. Are you covered?

 

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