by Jennifer Overhulse
Literally launched in the Lloyd’s of London coffeehouses a couple of hundred years ago, the insurance industry has been going along to get along for as long as anyone can remember. Change comes slowly in this industry, and (seemingly) there has been little impetus to change that fact until now. Pressures from inside and outside the industry are increasing, the competitive landscape is intensifying, new risks are emerging, traditional business models and product definitions are being challenged, and the insurance industry is finally starting to respond.
But, why have so many suddenly decided this is the right time to aggressively pursue innovation in and for the insurance industry?
Doug Fick, Vice President and Chief Technology Officer for Principal Financial Group, and board member for the GIA.
“The world is transforming to business models that are more and more digital and the insurance industry is no exception,” said Doug Fick, CFO for Principal Financial Group and board member for the Global Insurance Accelerator (GIA or the Accelerator).
While many believe the insurance industry has waited too long (or perhaps just long enough?) to start innovating, Fick takes “a little exception” at the thought.
“I don’t believe the industry has held back investing in innovation,” said Fick. “Rather, I think there are plenty of examples where innovation is happening in our industry. Whether it be the deployment of predictive algorithms for accelerated underwriting in life insurance to the Internet of Things (IoT) for property and casualty (P&C), to behavioral economics for improved customer experience, innovation is happening.”
That said, Fick wasn’t unwilling to acknowledge innovation may need a bit of a boost.
“Bringing the Accelerator to life allows our industry to collectively support entrepreneurial efforts alongside each company’s own proprietary activities,” said Fick. “We’ve positioned the Accelerator to solve problems for our industry, not just a single company.”
Brian Hemesath, Managing Director of the GIA
And, the GIA is not alone. New accelerators, studios and innovation labs funded from both inside and outside the industry become more prevalent in the insurance industry every day. To that point, Brian Hemesath, managing director of the GIA, indicates “the most successful insurance companies, in terms of innovating,” will be able to successfully progress the adoption of new ideas and technologies by taking the best and brightest from other industries, as well as breaking with industry tradition internally to find better processes and ways of doing business.
“Creating a culture of innovation for employees is the key to internal innovation,” said Hemesath. “There are some basic concepts inherent to startups that get lost in a traditional corporate culture. Some examples are embracing failure, learning how to pivot, and empowering small teams to move quickly.”
“Innovation happens when new products or services are built that change the way problems were previously solved,” said Hemesath. “That’s fairly universal across all industries. However, innovation in insurance and financial services is subject to greater oversight by regulators, unlike many other industries. This oversight comes into play when considering that access to data is a key driver in creating innovative products. For example, banking and financial services went through a broader application programming interface (API) evolution starting about 10 years ago. I’ve seen some insurance companies offer APIs, but on the whole, this is a hurdle that needs to be removed to allow innovation to take hold.”
And, to Hemesath’s point, it’s not just the slow move toward more prolific use of APIs that is holding insurance back. Regulatory concerns and a long-held aversion to incurring unnecessary risk also tend to damper enthusiasm for cutting-edge or previously untested technologies in particular.
“In launching the ACORD Insurance Innovation Challenge (AIIC) last year, we hoped to provide an introduction, a virtual handshake if you will, between the insurance industry establishment, and entrepreneurs breaking down the barriers and business models we have gotten comfortable with in our everyday lives,” said Bill Hartnett, head of innovation for ACORD. “With four AIIC semi-final events on tap for 2016, we are looking forward to seeing the first 18 startup pitches of the year on April 26 in Des Moines, just a day prior to the opening of the Global Insurance Symposium (GIS). Working with organizations such as the GIA, ACORD hopes to provide a platform for innovation to leapfrog into the global insurance industry.”
For more information about the Global Insurance Accelerator (GIA), please visit www.globalinsuranceaccelerator.com.
For more information about the Global Insurance Symposium (GIS), please visit www.globalinsurancesymposium.com.
Submissions for the AIIC Des Moines Semi-Final are closed, but GIS attendees can attend the pitches free of charge. Submissions are now being taken for upcoming semi-final events in Silicon Valley, New York City and London. More information is available at www.acordchallenge.org.