Don't let insurance innovation season pass you by
The insurance world of tomorrow is part of an ever-evolving, ever-growing ecosystem of partners.
InsurTech has taken hold in the market. Disruption is here, and the pundits have predicted dire consequences for many insurance incumbents. This environment has led to a remarkable number of insurance carriers to establish formal innovation programs.
But can we say that we’re really innovating as an industry? Perhaps we’re doing the right things, but not getting the right outcomes.
It’s innovation season
Autumn brings that magical time of year when innovation conferences are in full swing. On stage are the latest and greatest InsurTechs, and in the audience are eager insurance innovators.
Innovation groups seek out the newest and most disruptive technologies while identifying tremendous possibilities to change the fortunes of their companies. After a short courtship of pitching demos to one another, they decide to move aggressively to incorporate this or that great technology into their product, or business process or customer experience. They are ready to change the world.
Hold on
Not so fast. I know of at least one instance in which it took two years for the insurer to execute an InsurTech POC. Innovators are having the same problems all over again. It is not uncommon for innovation to break down to such an extent that precious time is lost before real test-and-learn can take place.
It comes down to organization, prioritization and agility. Changes in culture can influence the first two factors. But agility? That’s another matter altogether.
In today’s world, agility is all about technology enabling ecosystems and operations, and that’s what needs to change.
It’s the same as 10 years ago.
I remember back in 2010, I was doing innovation at a national insurance carrier. We identified a great innovation that we believed was going to revolutionize how we price and underwrite policies and dramatically change the complexion of our book. We wanted to run a large-scale pilot to determine the efficacy of the technology.
We had everything ready. All we had to do was to make one small change in our legacy systems to track the results.
Then, IT told us that it would take one year and $1 million to complete, and that was if we could get the business lines to de-prioritize a few of the projects they’d been waiting for.
That’s when I learned that the words “all we have to do” and “legacy systems” should never be used in the same sentence.
Agility in the ecosystem
The insurance world of tomorrow is part of an ever-evolving, ever-growing ecosystem of partners — often technology partners. Carriers who understand this are partnering with technology innovators instead of trying to build something new from scratch.
Back in 2017, a Capgemini survey found that 53% of insurance executives around the world prefer partnering with InsurTech firms to leverage digital technologies, as opposed to 36% who favor in-house development.
That’s why the insurance innovation conference circuit is growing so rapidly.
Extracting the agility provided through an ecosystem requires carriers to be agile themselves. Paradoxical, I know, but unless the carrier can connect to the ecosystem and incorporate its innovations, that organization will always be on the sidelines, with plenty of great ideas but limited results.
Tellingly, the same Capgemini study found in 2019 that only 30% of carriers have projects that are implementing open APIs — a critical component of connecting to an ecosystem and agility.
Agility in technology
So much about innovation comes down to the technology. The platforms of yesteryear served their purpose when insurance was an island and the carrier had all they needed to process business; they simply didn’t need to connect to the outside world.
Platforms of tomorrow are designed with the base understanding that connectivity is key; they are designed to be accessible with APIs that open the platform up to the outside world.
In such platforms, the ability to connect to an ecosystem partner and bring the innovation into the carrier’s core processing systems and customer experiences are natural and often straight forward.
Agility in operations
The platforms of yesteryear were built for a static insurance model where upgrades could take place in five-year increments and business would continue to be processed. But in tomorrow’s insurance industry, the ecosystem is ever-growing and ever-evolving. Consumer expectations continue to shift, and carriers need to adapt — or better yet — set the pace of innovation.
Innovation is about test-and-learn and adapting. That means having the ability to upgrade frequently without interruption. By frequently, we’re talking about on-demand frequency, the push of a button type: weekly, daily, hourly — as soon as the new technical capabilities are built, they are deployed. This requires an efficient DevOps practice where development, operations and product management are in sync, operating as one and letting the technology do the work of testing and deployment. It’s about automation.
To support transformation with any seriousness, and expect lasting results, insurers need to make a commitment to open operating platforms that can absorb the innovation currently on offer.
Tony Grosso (agrosso@eisgroup.com) is vice president of product marketing and industry strategy at EIS Group, and the author of the new ebook, “The Greenfield Field Guide for Insurers.” These opinions are his own.
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