Why Insurers Invest in Innovation
It is easy to get carried away with discussions of the possibilities
and challenges for insurers due to emerging technologies, the
connected world, and everything digital. But insurers are not
pursuing innovation just to try out new technologies or due to
some vague hope they will hit on the right formula. The focus
on innovation tends to center on three areas that are central to
winning in this new era: the customer experience, new insights
from analytics, and modernizing core systems.
Insurers are rethinking the customer experience. Fully 85
percent of insurers have a major strategic initiative for customer
experience and engagement. To be sure, there are still many
basics to address, such as improved documents and communications and a better understanding of relationships. However,
companies looking to differentiate based on customer experience must innovate.
New ideas for products, services, and communications that
increase and enhance interactions are needed. The advent of
wearables, telematics, pervasive mobile devices, and other new
technologies creates many new possibilities for interacting
with, understanding, and serving customers. The real innovators in customer experience will find ways to transform the
way their policyholders perceive the company, moving from
a very static, infrequent (and frankly, boring) relationship
to one that is a real-time partnership that is interesting and
Analytics for Insights
A second big area of focus for insurers is analytics, including
big data. This is another area where gradual improvements are
not adequate. The leaders in the digital age will be those that are
continually gaining new impactful insights in three domains:
customers, risk, and operations. Advanced analytics are mandatory to dramatically improve the customer experience and
create innovative products, and to do so profitably.
What new micro-segments are emerging, and how can their
needs be met? How will a deeper understanding of specific perils enable companies to rethink coverages, refine underwriting
rules, and determine risk appetite? How can insurers gain new
insights into daily operations that will enable ongoing improvements in efficiencies?
Answering these and other similar questions will be more
often based on the intense and sophisticated analysis of data—
including the use of a wide range of new data sources. Insurers
must become more innovative in establishing partnerships with
tech companies, universities, and companies in other industries
to stay ahead in the analytics arms race.
It may seem like a disconnect to discuss core systems and
innovation at the same time. The policy, billing, and claim
systems of insurers are more often thought of as legacy systems,
antiquated technology that holds the company back rather than
enabling adaptation in a changing world. Yet a company could
conduct great ideation sessions yielding ideas for new business
models, new products, and new customer experiences and the
ideas would be all for naught if the core systems were unable to
support new initiatives.
Fortunately, modern core systems are being built with
flexibility and adaptability in mind. By their nature, core
systems have always been connected to many other systems
to support the business, but now those connections are more
easily accomplished, and in some cases, even pre-integrated.
Any insurers with their eyes on the evolving world of connected
cars, connected homes, connected life or connected everything
must be thinking about how the core systems can support new
and changing requirements.
Innovative solutions providers are beginning to evolve their
core systems offerings with these things in mind. Being successful in the connected world will require a connected core, which
explains why so many companies are focusing on big initiatives
to move beyond core replacement, for both the sake of efficiency and the need to establish a core platform that supports
What Steps are Required?
Capitalizing on the rapidly evolving opportunities while addressing the challenges of a connected world may seem like a
staggering task. It takes vision, talented people, and technology
expertise, supported by a culture of innovation.
To be successful in the increasingly connected world, insurers must harness innovation by taking three major steps. First,
innovation must be driven from the top. The senior leadership
team must promote and support broad-based initiatives to
innovate. Second, companies need to embrace open ecosystems—collaborating with other companies, government entities, educational institutions, and individuals to generate and
implement new ideas. Third, insurers should provide a platform
for innovation, through the right organizational constructs and
Innovation does not happen naturally. It requires a conscious and sustained effort and investment. However, the digital, connected, evolving world requires agility and new thinking
to be successful—qualities that are enabled by a culture of
Strategy Meets Action’s annual Summit provides a great
place for insurers to think beyond just modernizing core
capabilities. This event is a unique opportunity to hear
what insurers are doing to imagine, adapt, and innovate
to become a Next-Gen insurer. Mark Breading is a partner with SMA. He can be reached via email at email@example.com or by phone at 614-562-