More than just new technologies, innovation should be viewed as a growth and value-driven strategy that can influence your overall business model.
Insurance executives are certainly saying all the right things about innovating to face current industry disruptions, but our recent survey of over 100 global insurance CEOs seems to suggest that many of them are not ready to put their money where their mouths are - less than half of them expect to increase investment into innovation over the next three years, and only 45 percent might increase investment into emerging technologies.
The lack of financial commitment into innovation is understandable. Today's insurance decision-makers face a number of competing and immediate priorities, often with little left over to invest into `unknown future opportunities'. Besides, our experience indicates that there is still a significant level of skepticism over new technologies, and many executives seem a bit underwhelmed by the value and ROI they have achieved from their existing innovation investments.
The truth is most insurance CEOs are trying to make a difference by visiting startups, entering into new partnerships, investing into innovation centers and capabilities and experimenting with new technologies such as drones, AI and blockchain. So why aren't they seeing any real value?
Small efforts will unlock small value. Part of the problem is that most of their efforts are being conducted in siloes or as discrete projects, more often viewed as a short-term experiment than a real growth and value-driven strategy. That means they are not able to release their actual value and full potential to the enterprise.
Similarly, insurance CEOs may be thinking too `small' when it comes to defining innovation. Many seems to think that innovation starts and ends with technology. But the reality is that innovation - when done right - should also influence the overall business and operating model of the organization.
New technologies can help you do the same things faster or smarter. New business models and operating models help you do different things. And that is what real innovation-led transformation is all about.
Almost every insurer we work with today has undertaken some form of intelligent automation and robotics program to test out relatively targeted and siloed proof of concepts within specific processes. The more advanced insurers, however, are kicking off enterprise-wide projects that integrate AI to radically change their operating models, which are leading to new (and often unexpected) sources of value.
Based on my experience working with leading insurers, here are five tips to turn innovation investments into real and sustainable value:
As our survey of CEOs suggests, insurers are keen to drive real value from innovation, but that will require more investment and radical change - this is no time to ease the foot off the gas pedal.
Insurers spend a lot of time worrying about how millennials perceive their organization. So we sat down with James Godwin, an Assistant Manager in KPMG in the UK's insurance practice and a recent graduate from the University of Surrey to talk about his thoughts surrounding innovation in the insurance sector.
Q: In your opinion, have insurers really embraced innovation?
A: I think they are starting to. The personal line insurers seem to really be taking the lead, particularly in the back office, by leveraging AI, Big Data alongside other proven technologies. The commercial line insurers are still struggling a bit it seems, largely because they manage some very specialist risks which don't offer standard policies and therefore can be difficult to automate.
Q: What type of innovation are millennials looking for from an insurer?
A: I can't speak for an entire generation, but I suspect that most of us want to see more obvious innovation from our insurers. Most insurers are doing a fantastic job transforming the back office, but you don't see as much change in the way the front office works.
Q: Can millennials help insurers become more innovative?
A: I certainly believe they can. The reality is that recent graduates and new employees are often less clouded by tradition and pessimism. Junior staff tend to be a bit more optimistic - they can afford to take more risks in their career. I think that's why we're seeing more and more insurers starting to think about how they can empower their junior staff to come up with new ideas and really support implementing them.
Q: Are there specific approaches that seem to work well?
A: I think it's more about creating the right environment for innovation: allowing young professionals to network across the organization and test out new ideas; giving people more time to experiment and grow; creating `sandboxes' where new ideas can be tested. Basically, encouraging idea generation across the organization.
Q: Are there ways for senior decision-makers to improve their innovative thinking?
A: Absolutely. One of the best ways to do that is through reverse-mentoring. I personally spend a lot of time talking with one of our most senior partners in the firm - about his business strategy, client challenges and even personal goals - and through that process I help him challenge his more traditional viewpoints and think differently about how he approaches his objectives. It's hugely valuable time invested for both of us.
Q: What advice would you give traditional insurers seeking to drive innovation?
A: First would be to make the most of the millennials you employ. Let them network, give them space to innovate and encourage them to bring new ideas to the business. I'd also suggest conducting idea generation sessions and challenge competitions that allow the whole organization - junior and senior - to collaborate on new ideas. Ultimately, though, I think insurers need to be more honest about what value innovation actually has in their organization - to their customers and stakeholders and also to their staff.