The meeting of insurtech and incumbents has followed in the footsteps of fintech in many ways, and it’s becoming more evident that many life insurance companies are imitating the actions of banks when it comes to performing ‘innovation theatre’.
Do any of these scenarios sound familiar in an insurance context?
- Encouraging idea challenges and workshops
- Hosting events with innovative speakers
- A series of initiatives you no longer hear about
- Silos of the business focusing on innovation, but without any effect on other departments
AM Best recently announced plans to introduce a formal methodology to rate insurers’ innovation maturity, which would be based on outcomes and long-term perspectives - looking straight past performative tech gimmicks - and the announcement has made many in the industry sit up and take stock of how their own innovation efforts might rate.
Glance across chairman and CEO letters from some of the largest life insurance companies, and you’ll see plenty of mention of digitalization, disruption, and innovation. While many companies have released their own chatbots, apps, and wearable integrations - how much of this is truly innovative, and solving real business problems? Are companies spending more time marketing their innovation, than actually trying to solve existing problems with new solutions that are transformative? Using technology and innovating with technology are not of equal standings, and the reality is that many projects labeled as innovative in fact relate to maintenance, system upgrades and new regulation.
Fabric CEO and co-founder Adam Erlebacher recently spoke to Montoux’s Geoff Keast for the Insurtech Channel, about this trend of “innovation theatre”, and the lack of follow through with real, effective solutions. “Folks are looking for ways to bring technology out, and sometimes it’s just for technology’s sake.” In his previous role working with large financial institutions, Erlebacher had seen the initiative of bringing holograms into bank branches. “What is that going to do for a customer? How does that actually solve problems?”
An anonymous Forbes contributor criticized many companies’ appointment of a Chief Innovation Officer in recent years. “[They] jumped on the bandwagon and created the role without much design thought or clarity about what that individual was supposed to do.” George Bradt says in the same article that if one person is appointed to be responsible for innovating, everyone else at the company is not. “Anyone not innovating is falling behind those that are.”
CIOs must be true leaders who are accountable for making real innovative change in the company - not just coming up with brainstorming workshops on the side of their regular priorities. Without that commitment to making a new process work, how will it ever prove itself to be better than status quo practices?
Harvard Business School researchers recently published survey findings showing that the majority of business board members don’t rank “innovation” nor “technology” in their top 3 lists of company priorities.
Yet many insurance companies have established innovation labs, funding bright young innovators to work on tools and programs. Where many of these initiatives fall apart is in a lack of strategic direction and lack of alignment with the company’s real problems. For those who do succeed in creating products with good business models, they encounter crushing resistance from the parent company when trying to scale their idea. Capgemini reported that it’s estimated between 80 and 90 percent of all innovation labs fail, and Tony Saldanha made an analogy that companies being driven by their stakeholders to introduce innovation initiatives is like buying a gym membership as a new year’s resolution to get fit.
To truly innovate, an insurance company needs to do more than just implement new technology - there needs to be a culture shift of innovation, and an openness to the possibility of radical change throughout the business. Don McKenzie writes, “If innovation originates from restrictive thinking or frameworks, there is a risk of creating an environment that does not foster true innovation. The industry needs to ensure that it remains open-minded to new innovations and finds mechanisms to support delivery and development on an ongoing basis.”
A comprehensive list published by Steve Glaveski challenges the way companies tend to collect innovative ideas from their teams. Often employees are not encouraged to think critically about the business model (or their critique is not well-received), and iterating on the initial ideas is seldom part of the process - disillusioning employees about the value of participating when it comes to the next idea challenge. “Corporate executives all over the world are patting themselves on the back with a job well done because they invested weeks, if not months, into preparing and facilitating a flashy idea challenge that ultimately resulted in zero ideas delivering any real value to the firm or its customers.”
A global survey from CB insights found 60% of all companies say it takes a year or longer to create new products - and the corporate preference for slowly building solutions in-house rather than partnering or buying existing solutions slows down advancements even further. As pointed out in this recent article, insurance lagging behind other industries in tech adoption means missing out more and more on attracting the young tech talent that could really propel progress forward by changing the culture and embracing innovation; if it’s all buzzwords and hype without any real advancements, a career in insurance technology will have even less appeal.
Change is hard, but as Glaveski’s article pointed out, the oft-touted Occam’s Razor principle (the simplest solution tends to be the right one) is literally a historical artifact and to quote Robert Sapolsky, “We have to think complexly about complex things.” Being truly innovative means going far beyond adopting the latest buzzwords and quickly implemented tech gimmicks, to truly solving real business problems.
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