Why are we in insurance so passionate about innovation? It’s an easy answer – it keeps us relevant in today’s world. Innovation is the element that makes forward progress possible. Innovation finds ways to create something new or helps figure out how to reinvent something old and make it entirely new again. Innovation applies new rules, new processes, and even new roles to reconstruct outdated processes. Innovation makes everything move in a new direction forward. And in our industry of tradition, innovation is essential.
SMA has been vigorously studying innovation and how it affects the insurance industry since SMA was founded. We conducted our first formal innovation research study in 2012 and have updated our research and reports on an annual basis since then, tracking the changes, comparing the trends, and reporting on new innovation practices.
One thing we are certain of – becoming a Next-Gen Insurer is required and is dependent upon innovation – from a rethink and redesign of the business of insurance – to creating game changing events to stay current and competitive. From our consulting and advisory services with insurers of various sizes, lines, and characteristics, we have seen that. Innovation is not optional; it is essential in today’s world. And based on our latest research, innovation is taking hold and gaining momentum in insurance.
The other thing we know - the external drivers (for example emerging technologies, other industries, and changing customer experience) are impacting the business of insurance, changing the competitive landscape, and showing no signs of slowing down. They are gaining momentum literally every day and they are making impacts. For example, the number of wearable devices sold has grown 200% every month since 2012. The amount of stored data doubles every 24 months. 10% of cars were connected to the Internet in 2012, but by 2020, it is estimated that 90% will be connected! And insurers like John Hancock, American Family, State Farm, Allstate, Erie, and many others are embracing the influencers and changing their businesses as well. All very good reasons to adopt, continue, or augment innovation practices as much as possible.
SMA’s new report for 2015, Innovation in Insurance:Continued Momentum and Making Impacts, highlights the next stage of the innovation journey and reveals that innovation is normalizing across the industry, meaning that it is becoming a fact of life in insurance, a necessary key to success. Over 10% of insurers are declaring that they are mature in innovation, with 54% maturing – up significantly in just one year. Another indicator that innovation is becoming a permanent fixture in the insurance business is the fact that most insurers now acknowledge the need for change and innovation, and an overwhelming number of insurers are coming to accept that they may not succeed on the first attempt at innovation. This is a very big step for an industry that is risk-adverse at the core of its being. It also means that more and more insurers are progressing toward higher maturity levels, moving toward being leaders in the new world of insurance.
Over 10% of insurers are declaring that they are mature in innovation, with 54% maturing – up significantly in just one year.
There are no business areas that are off limits as far as the need for change and innovation is concerned. Insurers are adapting to become Next-Gen Insurers – changing business models and even their organizational structures to take advantage of the opportunities that technology offers them, incubating internal and even external start-ups, creating new products and services, and finding new ways to strengthen and expand relationships with their customers. There will be continued momentum in ideation and the emergence of some surprising new solutions. Insurers that have sponsored ideation or think-tank labs for their employees will begin to see the benefits of ideation from within. Others will look externally to find inspiration and knowledge.
Becoming a Next-Gen Insurer is a process that will take time. But innovation can and should be occurring all along the way. Seneca, the Roman philosopher, famously said: “Every new beginning comes from some other beginning’s end.” This is especially applicable for insurers that are working to make progress along the journey of transformation. The dramatic changes that are taking place in the insurance industry and those outside insurance make it crucial to start – or keep – taking action. Make your new beginning – now.
This blog entry has been republished with permission
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