Innovation in insurance: A 10-year journey

In the past decade, we've seen a lot of progress in adopting innovation and driving real transformation in the insurance industry.

Will there come a point in the transformation of the industry where innovation has run its course, and the industry once again stabilizes? (Photo: Shutterstock)

Innovation has gone from a word barely spoken in property and casualty insurance to a trend that has swept through the industry.

The past decade, in particular, has seen enormous progress in adopting innovation, operationalizing it into mainstream plans, and driving real transformation in the industry. This is, in large part, due to the change in the industry mindset on innovation over time. Even so, the industry, overall, could be characterized as in the early stages of innovation-driven transformation.

Go back 10 or 20 years, and most industry participants held that insurance was different from other industries, somewhat immune to external change factors. The product complexity, regulatory environment, and fundamental nature of the product (pay for something you may never use) did tend to insulate the industry from rapid change. Add to that the actuarial need to understand historical changes over long periods before making big adjustments to product or pricing, and you have a formula for a stable, slow-changing industry.

All of those factors are still in play, yet new factors have created the conditions for insurers to think differently, reimagining their businesses, and developing bold new strategies for success in the digital age.

The increasing power of the consumer, the sea change in how we communicate, and the rapid advance of technologies has created a whole new context for developing strategies. And the central ingredient in envisioning and implementing these new strategies is innovation. SMA’s new e-book, ”Insurance and the Innovation Journey: Lessons from a Decade of Progress,” describes what has changed over the past decade as insurers have adopted innovation. A wide variety of organizational approaches, culture initiatives, technology tools, new roles, and more have contributed to a growing understanding of how best to harness and institutionalize innovation.

Is there one right answer; a secret formula for success regarding innovation? Of course not. But there are some great lessons learned and a large palette of tactics and plans from which to choose. One way to make sense of the possibilities is to think of activities in five inter-related areas:

And perhaps the most important of all:

Will there come the point in the transformation of the industry where innovation has run its course, and the industry once again stabilizes? Perhaps that is possible, but our view is that it’s unlikely, at least in the next decade.

Mark Breading (mmbreading@strategymeetsaction.com) is a partner at Strategy Meets Action (SMA), a strategic advisory firm working with traditional insurers and InsurTech solution providers to manage unprecedented industry change. These opinions are the author’s own.

This column first published at SMA’s blog and is republished here with consent from SMA.

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