Challenged business assumptions ... Change and disruption ... Winners and losers. These are big issues and some of the major reasons
the insurance industry is experiencing a mandate to innovate. The
need to respond to the changes that are happening outside the business is fueling the change that is needed inside the business.
Bigger and better versions of more of the same will not cut it
in today’s world. Insurers must respond to a changing world and
changes must be in step with everything the world has to offer.
So a true quest to rethink, reimagine, and reinvent the
business of insurance has begun. It will be a long-term, enterprise-wide endeavor that will necessitate insurers to think big and
think well beyond what they have done in the past. Even though
the first steps may seem small, they are part of a much larger
process—the innovation journey.
The pressure of influencers, both within and outside the
industry, has created an unprecedented level of disruption and
demand for change that spans the entire business and industry.
No longer will the targeted “killer app” suffice. Instead, it must be
“game-changing.” Strategies that reimagine the industry and each
company within it must propel them in the direction of becoming a Next-Gen Insurer.
The SMA Insights research report, SMA Next Gen Insurer:
Fueled by Innovation, details the fundamentals of becoming a
Next-Gen Insurer. It also emphasizes why the industry must
rethink how they respond to and embrace innovation as the core
of a new culture and foundation of a future that will give rise to
the Next-Gen Insurer.
Forward-thinking insurers as well as new competitors just entering the market are moving forward at various paces and degrees of
change, taking small or bold steps. Those taking diligent, small steps
are enhancing specific business processes such as underwriting or
claims. Those taking aggressive, bold steps are preparing to leap-frog
their competition by reinventing their businesses. Digital strategies,
innovative partnerships, the use of emerging technologies, mergers and acquisitions, leveraging expertise from other industries, or
creating new revenue and business models are some of the bold steps
being taken in the reinvention process.
There have been episodes of innovation and transformation
that have periodically sent ripples through the industry—such as
the use of portals, mobile apps, or telematics—but the intensity
and breadth of today’s change and disruption requires a different approach. What is needed is a strategic vision that can join
together the ripples of innovation into a cohesive tidal wave of
transformation for the insurance business.
Innovation means much more than gaining competitive
advantage. It’s also about long-term survival of all industries that
are in the process of transformation. And it is about the interde-
pendencies these transformations will create and foster. The inno-
vation journey must incorporate three key elements:
K Leadership that will cultivate, activate, and accelerate the
K Business initiatives that set priorities for modernization,
optimization, and innovation to create business value and
K An outside-in approach of collaboration, ideation, and
crowdsourcing that fuels the journey from within the company, and fuels it from the outside with an ecosystem.
The innovation journey will be unique for each company,
defined by the combination of these three elements, providing a
pathway to the future as a Next-Gen Insurer.
Cultivate, Activate, and Accelerate
Many insurers want to understand the who, why, how, and
where of their peers and new competitors regarding their
focus on innovation. SMA has been actively tracking and
promoting innovation in insurance for several years, and in the
SMA research brief, Innovation in Insurance: From Strategy to
Execution, SMA found the beginnings of an innovation culture
that embraces collaboration, ideation, and crowdsourcing began
prior to 2012, and has since grown and strengthened, with 87
percent of insurers now indicating they have some form of
innovation underway. And 20 percent say they have a strong
innovation culture in place. How does a journey like this start?
It starts with leadership that will cultivate, activate, and accelerate the journey. Each insurer’s journey will be unique, starting
from a different place and evolving at different speeds, with
varied priorities, initiatives, and focus. The leadership and culture
must influence the ability to cultivate innovation, the critical first
step in the innovation journey.
The cultivation stage involves the actual rethinking and
reimagining of the business and communicating that new vision.
As the vision begins to unfold, the implementations of new business initiatives lay down more of the groundwork that helps to
form the Next-Gen Insurer. With the vision defined and communicated, and business initiatives underway, a culture of innovation
begins to take hold, and insurers enter the activate stage.
During this stage, the reshaping of the business is making an
impact in terms of successful implementations, business value, and
Challenges, Changes, and Disruptions
The innovation journey for insurers pulls them out of their comfort zones.