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InsurTech Rising 365

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Innovation as a discipline, not a side show

Rob Galbraith is the author of the new bestseller The End Of Insurance As We Know It and regular speaker on on the topics of innovation, insurtech and the future of insurance as well as the role of insurance in disaster preparedness and mitigation as well as climate adaptation and resiliency. Here, he explores why innovation should be more than your team's side hustle. 

I recently generated some hubbub among a group of professionals with the assertion that innovation is a functional discipline – no different than other parts of an insurance organisation such as Underwriting, Claims, IT, or HR. However, innovation is often treated as more of a side show in companies and, as a result, becomes more of a drag than an enabler in achieving success.

My thoughts on the subject come from 20+ years of experience working in a Top 10 P&C carrier in the USA, most of that time spent in the underwriting department focusing on managing catastrophe risks. Our goal was simple: find ways to write more policies in catastrophe-prone areas without putting the company at great financial peril from going insolvent. I spent the last 5 years of my career laser focused on this objective, and encountered many promising technologies, innovative data sources and engagement models to work with policyholders to help reduce losses.

Having seen the promise of “insurtech”, I have also seen my fair of BSOs – bright shiny objects. These technologies are often impressive on their face, but do not have a clear application in the insurance space. Worse, both technology startups and traditional insurance organisations often try to force new technology into poorly defined “use cases” – the proverbial square peg in a round hole. Most disingenuous in my view is the amount of puffery that takes place around this perceived innovation. Start-ups hype to their board and investors that they are in “advanced negotiations” with a carrier partner based on a couple of brews with one individual. Meanwhile, the carrier team proceeds to hype the start-up’s technology as helping them achieve true market “disruption” in hopes of earning a promotion or two (or three) while the ink is not yet dry on the contract. Never mind if the tech does not even work or causes more headaches than problems it solves!

A knowledgeable executive in the midst of a multiyear digital transformation at his organisation gave me wise advice. He said,

 “To achieve success when fully replacing your core systems, you don’t just have to get into the weeds, but you actually have to spend most of your time digging into dirt.”

The executive related that the effort was taking longer and costing more than originally anticipated, and his organisation was getting frustrated and fatigued. Yet, slowly, they were enabling capabilities that would allow them to dig out of their “technical debt” and move onto platforms that could last another 30-40 years. The ability to leverage APIs to connect to all manner of new solutions, both on the market today and those yet to be developed, was truly game changing.

How was this organisation slowly finding success? By realising that nothing ever works “out of the box”. By recognising the need to dedicate full-time subject matter experts to be devoted to requirements sessions, not just rely on consultants. By making it a full-time responsibility for some of their most seasoned and best professionals, not a side job. By ensuring that innovation was seen as a true strategic imperative worth devoting a talented cross-functional team to, not just something the corporate executives paid lip service every so often.

How to structure an approach to innovation varies with each organisation – and rightly should. Some have dedicated innovation teams, but too often they act simply as a front door to filter out insurtech startups – a glorified gatekeeper. Innovation teams sometimes go beyond this role to run internal innovation initiatives – a chirpy cheerleader. Finally, innovation teams can produce new products and services through partnerships, hack-a-thons and other “skunk works”. But if the business is not intimately involved along the journey, these minimum viable products (MVPs) often lead to the “Island of Misfit Toys” syndrome. When should a dedicated innovation team hand off to the business? When the idea is hatched on the back of a napkin, when the blueprints are complete, when the auto rolls off the assembly line (hopefully without square tires) - or somewhere in between?

Conversely, if your organisation does not have a dedicated team focused on innovation, it will be nigh impossible to create anything tangible of value. Usually, attempts to innovate “on the side” do not go beyond modest gains in efficiencies to save expenses and reduce internal pain points. These can be valuable efforts, but no one should mistake process engineering for true innovation that vastly improve customer experiences. Asking employees to spend a fraction of their time on innovation project ideas, whether their own or not, can only take your organisation so far. This work is the first time to go by the wayside when time is tight due to other deadlines. The energy required to overcome the inertia behind “that’s the way we’ve always done it” cannot be underestimated!

If your organisation does not have a dedicated team focused on innovation, it will be nigh impossible to create anything tangible of value.

How then do you decide to build innovation as a discipline? It depends on what your objectives are for innovation. I often hear a lot of tired clichés in response to this question such as “we want to be a thought leader” or “we need to stay ahead of our competition”.   These vague answers simply won’t get it done. Everyone in the organisation must be clear on WHY you seek to innovate. Three key points to accomplish this:

  1. You must tie your innovation objectives back to their business strategy – otherwise, you’ll end up with a “pet projects” department chasing every half-baked idea.
  2. You must have some measures of success for innovation efforts, both quantitative and qualitative.
  3.  You must have a vetting process to decide which ideas get pursued and which go into the “parking lot”. Additionally, you must have a process to decide how many resources in the form of money, technology and – most importantly – time is spent on each idea.

There are many outstanding books, articles, webinars and other resources available to help build a discipline of innovation within your organisation. Doing so thoughtfully requires you to spend time reflecting on past attempts at innovation and identify lessons learned to help uncover best practices. These, in turn, should become pillars in attempts to build not just a culture of innovation within your organisation, but an enduring discipline.

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