Insurers and intermediaries know that they need to innovate faster than their competitors to defend and grow their business, yet few have found a ‘winning formula’ for embedding insurance innovation into their people, products or processes.
The fact that new technologies, innovations and insurance business models are changing the dynamics of the market is clear. More than 8 in 10 insurance executives responding to our recent survey, Innovation in Insurance, said that they believe their organization’s future success to be tied closely to their ability to innovate ahead of their competitors.
But many insurers are also concerned that innovation will bring more insurance disruption than value. In fact, almost half of our survey respondents said that their business models were already being disrupted by new, more nimble competitors.
While many insurers recognize the vast possibilities that insurance innovation brings, many seem reluctant to be first out of the gate. Most organizations responding to our survey reported that they lack the hallmarks of an innovative organization, such as dedicated budgets, formal strategies, executive-level support and measurement processes.
Even those that want to take first-mover advantage (as almost a third of our respondents’ claim they wanted) face significant challenges catalyzing innovation. In part, this comes down to capacity: 79 percent of respondents across the globe told us that they were already running at full tilt just keeping up with their core requirements.
Capability is also a key concern. Lack of skills and capability was ranked by 74 percent of respondents as a top three barrier to innovation, particularly for smaller and mid-sized organizations and those based in Europe.
To be fair, most insurers have been working hard to improve their innovation strategy and capabilities. Many have already implemented cultural change programs focused on fostering innovation and training programs to develop idea generation and innovation skills. Some have even changed their business models or created innovation ‘hubs’ or ‘labs’.
Our experience suggests that while all of these previous initiatives are valuable, few organizations have been bold enough in their objectives or their execution to truly drive change. We have identified six key ways that leading insurers are becoming more innovative.
Our research and discussions with established and start-up players suggest that — to make the most of this new world of opportunity — the insurance industry needs to pivot from a traditionally risk-averse culture to one that encourages experimentation while mitigating financial risk.
To achieve this, insurers will need to tap into new sources of innovation, accessing fresh ideas from employees, customers, investors and partners, which, in turn, will require progressive leadership at the top of the organization.