Article Synopsis :
This report from Tallt says we should stop comparing the insurance market to that of banking.
Banking innovation has focused on delivering new and better products that suit the customer better. But insurance hasn’t experienced the same level of activity and for a few really good reasons.
Harder than it looks
Firstly, breakthrough innovation is difficult. Few consumers engage regularly with insurance until they have to. That won’t change overnight, even if the market is flooded with highly tailored products.
Startups are not necessarily threats, but can be seen as potential partners. Hooking up with those that have proved their use case is likely to be a lot cheaper, easier and faster than trying to replicate what these specialists are already doing.
And optimisation really can deliver major returns to the business. This is important to remember when considering new products, which carry more risk than improving the processes you already have for existing products.
There’s still a lot of money around insurtech and innovation, but it has got to be tied to strategic reality, and that means working quickly and transparently, and starting from real customer and business need.
Organic innovation is better for your environment
Tallt has identified four models for organic innovation that embraces a combination of a broader organisational culture with sponsorship for leadership.
Embedded innovation + external partnerships – empowers business leaders to be innovative in their thinking and make use of third parties to execute. This requires the right environment for collaboration with external experts.
Separated innovation + accelerators and consultancies – creating separate innovation functions with accelerators or consultancies creates capacity and mitigates constraints from within the organisation. However, it comes at a cost and can lead to the innovations being dissociated from the rest of the business.
Embedded innovation + internal secondment – using secondments to embed teams can spread the innovation culture through an organisation. However, a team that is constantly changing introduces inefficiencies and bottlenecks can be caused when reliant upon external design and development teams for execution.
Separated innovation + new internal capability – building new teams creates internal capacity to think differently and introduces new ways of working into an organisation. There remains the risk of a disconnection from the rest of the business to be managed.
Easier said than done
All this is easier said than done, because inertia is a major force in traditional businesses. To be culturally innovative, organisations must disseminate innovation throughout their teams.
There are three key principles for creating cultural change through innovation, says the report:
- Encourage customer-centricity
- Be transparent about process, tools and techniques
- Advocate accountable freedom
For the innovation to have value, it must: meet customer needs, be possible and be worthwhile.
Innovation happens quickly. If it doesn’t, it isn’t innovative. And organisations that cannot innovate swiftly will lose out to more agile competitors, or will find themselves trying to keep up with the customers they need to be relevant for.
Front end changes are simple when compared to the monumental legacy problems behind the scenes. Innovation teams need to think laterally to get to grips with these matters.
Preparation is essential
Anticipate frustrations between traditional businesses that would like to move as quickly as the startups it has partnered, but cannot for a host of reasons.
Invest time upfront, as it will tell you where to embed the right processes, build relationships with parts of the business that may impede progress, and make space for new thinking.
But it takes commitment, because it won’t generate revenue or savings straight away, but it will pay off in the long run.
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Digital Insurer's CommentsJust because this paper from Tallt acknowledges that implementing insurtech is difficult, don’t expect insurers to be given an easy ride in the rest of the report.
They must still mobilise their resources if they are to achieve digital transformation and this paper offers some interesting insights into how organisations might best put their resources to work.
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