TL;DR — no, it isn’t. The insurance industry is changing. But it is an evolution more than a revolution.
Insurance, by design, is a change-resistant industry. It’s entire reason for existence is to price and mitigate risk. So it follows that change in the insurance industry will always come slowly and carefully.
Our company (Sentro) has been in the thick of insurance innovation in recent months. We were recently accepted into the Plug and Play Insurtech Silicon Valley accelerator program. As part of that we recently spent a week in Sunnyvale, where we met leading insurers and innovators.
Our learning from Plug and Play has re-enforced what we have learned in our home market of New Zealand. In group insurance, there is scope for big efficiency gains by doing the basics (customer onboarding, member adds and changes) better. And, if in the process you can give your customers and partners a better service experience, you can give yourself a competitive edge.
The innovation challenge facing group insurers is a patchwork quilt of legacy systems, and business processes designed in the 1960’s in a time of posted documents and annual sales visits. How do you break this Gordian knot and move your service experience forward?
At Insuretech Connect, which claims to be the largest insurtech event in the world, we could see hints of how this can happen. It was our first ITC, and it was quite the sight to see 7500 people, all involved in insurance innovation, in one place at one time.
The first thing that stood out was the participation of the insurers themselves. They know better than anyone that they need to continuously introduce improvement. Their customers are demanding it, and they are on the lookout for technologies and business approaches that can help them achieve it.
Of course, the insurers are also looking out for disruptive new players, and business models, which could directly compete and potentially threaten them.
As a heavily regulated industry, incumbent insurers have occasionally used regulation as a defensive shield — it makes it harder for new players to enter and compete.
But we spoke with insurers who are losing business today, because they can’t deliver the kind of modern service experience that today’s always-connected consumers have come to expect from all walks of their life.
So now insurers are looking for ways to re-invent themselves, and their service models.
Quite often the status quo is biggest innovation barrier insurers face. We spoke with multiple insurers who lamented that their operational teams themselves were the biggest challenge to implementing a new way of working.
This shouldn’t be at all surprising. Operational teams are the ones that front the customer — they make the most of what they have available to service the customer well. If the core systems are old and clunky, they’ll develop an operational process that shields the customers from the worst of that limitation.
Operational teams are also always maxed out with ‘the day job’. They very rarely have any additional time or capacity to experiment or trial new ways of working. So potentially useful improvements get shelved in the name of keeping the operational show on the road.
But there is good news — customer (and in the case of group insurance, the customer is both the employer and the employee) centered design is now very much the order of the day. This is being driven into operational teams, and is seeing a new openness to customer-driven innovation.
There is a huge difference between invention and innovation. There is a boatload of new and interesting technology solutions that could benefit the insurance industry. That’s invention.
Innovation is the application of a new way of doing something. Invention is useless, unless it is used to solve a problem.
So the collective challenge for insurance innovators is to find new ways to try and apply new stuff.
We’re seeing a lot of approaches to this. Some are running trial projects. Some are forming joint ventures. Others are acquiring businesses.
What does all of this mean? The insurance industry is definitely trying to innovate. It takes two to tango — as would be catalysts for innovation, insurtechs also need to learn how to work with insurers to help all of us make positive change for everyone.
We are still learning how to do this better, and we are enjoying the learning process!