The Need For Innovation In The Insurance Industry: Is It That Important?
The insurance industry is over 300 years old and has been innovating for most of that time. So for us, the question is not whether we need to innovate more, but how we define and deliver innovation to keep pace with new trends, customer expectations, and emerging risks.
Let’s take cyber liability as an example. This is a class of risk that has been around for nearly 20 years, but several high-profile breaches keep pushing it back into the spotlight. Insurers were quick to react with ‘new’ products, in many cases bundling existing products and services. Some people might describe this as innovation, but some of us are not convinced.
When we hear customers say that insurance companies need to innovate more, we think what they mean is that they want us to anticipate and respond to their needs more effectively.
This means spending time watching and understanding the technologies and trends that may affect our customers’ businesses before we attempt to innovate. How often do we analyze the latest private equity updates to see what technology and apps are attracting investment and whether there are applications for the insurance industry?
As well as observing the marketplace, effective innovation means asking the right questions of the right people. If we’re not having a direct dialogue with our customers, innovation risks getting stuck in the middle of what we as insurers perceive the customer wants and what brokers perceive the customer wants.
By communicating effectively, insurers and brokers can play an important role as thought leaders in the innovation process. We have valuable insights to share with technology firms that can help them access a larger market and derive the greatest value from their product. By becoming trusted partners in the development process, we can influence emerging tools and products so they match more closely the needs of our customers.
However, we also tend to get stuck on developing new products as the only way to innovate. But I think there is tremendous scope for innovation, particularly concerning the commercial market, in the services we offer to customers and how we articulate them.
For most of us, we love to see a time when we stop printing brochures for the latest insurance product, and instead simply hand the customer a blank sheet of paper and say “write down what concerns you; that’s your brochure”.
So could insurers be more innovative? Yes, we believe we can be — but not necessarily in the ways, we have traditionally focused on. We can be more active in contributing to the innovation process, while not necessarily taking on the role of innovator.
But we shouldn’t attempt to innovate in isolation. We need to involve brokers and customers, and we need to be proactive in seeking out and forming partnerships with third parties who are leading the way — sharing our customer insight to shape their development.