December 05, 2019| By Dan White, Managing
Partner, Ninety Consulting (guest contributor)
Innovation
is in the air. Imaginative digital technologies have been plugged into existing
Life and Health insurance processes and products in multiple markets, injecting
new life into customer engagement, risk assessment and claims management.
Except they haven’t. Not yet. Despite the clever digital ideas being built by
enthusiastic startups, evidence of their adoption remains scant, with few
insurers prepared to take a risk.
This
reluctance to get off the mark is puzzling and odd because insurers stand to
gain as much from smart investment into innovation as anyone else. Watch or
wait? Which is better? At Ninety Consulting, we sought to understand the
relationship between an insurance company’s investment into new ideas and its
financial performance. The findings we published in a whitepaper earlier in
2019 are positively encouraging for such investment, though with some clear
watch-outs.
It’s true
that firms that innovate are more likely to produce more growth than those that
don’t innovate. Investment into new products and processes both contribute to
enhanced financial performance. Yet insurers are shown to be currently
under-investing when benchmarked to other heavily digitised businesses. One
concern is whether the money invested will indeed positively affect company
value and another, more fundamental concern, is how best to engage with
innovation partners.
Compared
with newer, smaller companies, well-established insurance firms can spread
their innovation risk across larger numbers of customers, offering them a mix
of incremental and new products, funding only those innovative technologies
that are likely to succeed. Innovation offers the potential for insurance
companies to capitalise on changes in social behaviour and regulation, new
technologies and digitised processes. Insurance is a knowledge-intensive
industry with high barriers to entry. Such businesses tend to enjoy a direct
value payoff from investment in innovation that is sustained through both
stronger and weaker economic cycles.
Insurers
seeking the best returns should align their innovation and business strategies,
selecting only the “best” projects to work on. Top-down, company-wide support
and incorporating end-user insights are key to the success of those projects.
Success also requires lowering innovation risk, cost and delivery times. In the
end, what matters most is how companies combine all this to create products and
services that connect with customers.
It is,
however, a puzzle that can come together. Once the investment, strategy and
end-goals are clear, the next step is engaging with technology. Here the
greatest gains come from strategic outsourcing. Open-minded insurers should
allow collaborators open access to their core skills to leverage the skills of
start-ups and related technology. This involves creating a long-term ecosystem
running common standards.
A few
insurers are independently creating the right environment for innovation to
thrive. Others may tap in to the type of preferred vendor ecosystem that is
curated by Gen Re. Open collaborations like these two approaches offer the
greatest chance to invest with confidence, to think creatively and to execute
ideas in a disciplined fashion. The time has come to innovate.
This blog
is abridged from a whitepaper published by Ninety Consulting: “Examining the
Direct Relationship between Insurance Innovation and Company Value.” You can
read the full report on their website. http://bit.ly/2XnP3i8.
Ninety
Consulting are insurance-specialist innovation practitioners with a mission to
help insurers innovate and thrive in a fast-changing world. Ninety is a Social
Enterprise, and 90% of the company’s distributable profits go to charity.
About the author
Dan White
is Managing Partner at Ninety Consulting.
He is involved with Ninety’s thought leadership in insurance innovation and
building relationships with global insurers with ambition to be more effective
at innovating.
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