business as usual than to have to take unnecessary risk to realize
some hidden benefit.
Next, take the external influencers, like Google, Apple, Facebook or Amazon. Companies with traditional innovation-pho-bic views look at external influencers as threats against business
and develop strategies to avoid them. Rather than looking to
integrate and expand on capabilities, these insurance companies
Like GEICO 30 years ago, it used to be easy to operate a profitable business without innovating. Companies could keep market
share while still affording the luxury of doing “business-as-usual.”
However, all that changed with the dot-com boom, Web 2.0, social
media explosion, and globalized e-commerce.
If the reality of the web isn’t the biggest deterrent from holding onto this innovation as a threat view, the changed role of the
consumer certainly should be. Today, the collective insurance
customer has a voice. A bad experience with an insurer has the
potential to go viral from Facebook to Reddit, and the expectation business transactions are private is a thing of the past.
In addition, customers have ever-rising expectations of how
companies should interact with them. There is a demand for
customer choice regarding channels to research buy and service
policies. Customers have increasing demands for mobile, social,
gamification, and other technologies to be used in the customer
experience. Finally, customers now have at their fingertips more
data on who and why they should choose an insurance provider
than ever before.
Mark Breading, SMA partner, recently blogged on SMA’s
website: “We are now entrenched in a digital revolution that
is powered by these maturing and emerging technologies.
This revolution is driving transformation across the insurance
industry, impacting every internal process and every external
interaction. The adoption and deployment of maturing and
emerging technologies is fueling this revolution, and insurance
as an industry has little control over it. Attempts to control the
use of these technologies by putting exclusions in existing policies, failing to offer new solutions, or denying claims will only
provide the incentive for customers to seek alternative options
and encourage new competitors to develop novel solutions that
will spur further disintermediation and disruption.” This quote
sums up the reality of the market.
While we recognize, it is natural for many insurers to view
innovation as a threat. What we would argue, though, is in
today’s world there simply is no other choice. The baseline
expectation of collective consumers will force these insurers to
not only innovate but to embrace it. But how?
Realizing the Opportunity
We have established that innovation is a necessary reality.
Now, let’s understand how to embrace it for an opportunity to
become a Next-Gen Insurer. Innovation does not have to be a
wide-eyed idea from leftfield. It can and, in many cases, should
be part of the organization culture, process, and environment.
Innovation can be a systematic business decision and integrated
into our day-to-day business models.
One way SMA recommends managing change or innovation is to leverage the established risk management methodology everyone has—to view innovation as a system, just as you
would view any type of risk. By viewing potential changes or
threats in a systematic way, companies can prioritize and rank
potential changes or even investments, then allocate resources
based on the rankings of importance.
Another aspect of this method is to realize the potential
with each of the proposed changes. Through this exercise you
can also track which are priorities, which will drive more profitable growth or improve customer experience and formulate
which ones to ignore, which to monitor, and which to embrace
and manage. By imagining a future and putting priority and
investments behind proposed changes you realize the opportunity of innovation.
The Next-Gen Insurer Model
The Next-Gen Insurer framework identifies eight major influencers, coupled with the explosion of data, which are creating
the pressure points for change and demanding insurers to
rethink the fundamentals of their businesses around customer,
products and services, infrastructure, and business model.
The core of the Next-Gen Insurer is culture. Creating a culture where innovation is supported is a key to viewing innovation as an opportunity versus a threat.
Strengthening the four pillars around the core culture of
your company (customer, products and services, infrastructure,
and business model) is a great place to start when you look
at where to innovate. By making those four areas as strong as
possible, you can mitigate the real external threats.
Where Do We Go From Here?
In conclusion, by understanding the “threat view” more closely
we can start to pull apart the arguments that are holding so
many back by facing the realities of today. It is a busy world, but
it is an exciting one. What we once thought was impossible, is
today’s reality. We owe it to ourselves and our business to treat
innovation as a tangible opportunity to modernize the core
capabilities of what makes a Next-Gen Insurer.
SMA’s annual Summit provides a great place to think
beyond just modernizing core capabilities. This year’s focus is:
Becoming the Next-Gen Insurer. It is an opportunity to hear
what insurers are doing to cultivate, activate, and accelerate
transformation and differentiation. ITA
Deb Smallwood, the founder of SMA, is recognized for her
expertise in how insurers can deploy technology to innovate and differentiate in the insurance industry. Deb can
be reached at email@example.com or
603-770-9090. Learn more about SMA at www.strategy-meetsaction.com.