Tips for managing talent, culture and insurtech from insurance CIOs

I had the pleasure of moderating a CIO workshop on innovation and insurtech at the 11th annual Novarica Insurance Technology Research Council meeting. These senior IT leaders all had innovation on their minds as they look to position their companies for success in the future, and participants were highly engaged in a discussion which focused on the nature of innovation, the organizational culture that fosters it, and the approaches successful organizations are taking to acquire the necessary human capital to support creating competitive advantage through technology.

Innovation vs. Disruption
The Silicon Valley-based venture capital firm Andreessen-Horowitz once said that the insurance industry is perceived as an area that remains prime for disruption. As part of a traditionally risk-adverse industry, carriers are keen to understand disruptiveness and what it means for their organizations, especially when it comes to insurtech. The potential for new competitors or, more likely, new capabilities that fundamentally alter the traditional value chain, remain a very real concern, particularly in lines of business characterized by high transaction volumes and short liability tails.

Carla Gottgens/Bloomberg

However, innovation and disruption don’t necessarily mean the same thing. New entrants into the market, in the form of insurtech startups, are spurring insurers to rethink their own strategies and traditional processes. While these new entrants won’t directly signal the demise of traditional insurers, they will raise the bar on customer experience and process efficiency, leaving an impression on the industry. As one participant noted, “innovation can come from surprising places,” and that sentiment couldn’t be more correct when it comes to technological innovation.

Managing Innovation in a Large Insurer
For insurers who are looking to get ahead and position themselves to succeed in the future, it can be a challenge to know how to handle promoting innovative thinking, especially as part of a large company. The CIOs in the room noted several things as important to managing innovation: top-down support, embracing failure, and utilizing startups as a means of supporting experimentation or investment.

Innovation cannot be confined to a lab or skunkworks if it is to have a meaningful and sustained impact on an organization. Successful innovation requires support from the very top of organizations; this starts at the CEO/president level because this is the only place to successfully frame the cultural change required to support challenges to the status quo. Failing to have this support creates an environment where the “corporate immune system” has a high probability of being triggered, leading to predictably depressing results.

It is also increasingly crucial to embrace failure, a notion championed by companies like Amazon who went from failure in the Fire Phone to huge success in Alexa with only a small pivot. Carriers need to be able to try something, fail fast, reload and determine lessons learned, and then try again. Some carriers, recognizing that the “fail fast” model is inconsistent with their own cultures, have created subsidiary operations or separate brands to support this operational model.

Innovation, Talent, and Generational Change
Without the proper cultural backdrop, innovation has little chance of taking root in a way that can meaningfully impact a carrier and its operations. Our Silicon Valley Innovation Tours have also confirmed that this is a broad organizational issue for companies like Amazon and Salesforce, not something that is limited to insurance as an industry. Beyond that, however, having the right talent to be able to explore, experiment, and attempt new and different things is critical. For many carriers, this means needing to rethink recruitment efforts and traditional human resources policies that have become outdated.

Given the clarity of the notion that “the future isn’t going to look like the past,” insurers need to engage in creative solutions to attract the talent that they need, as well as consider nontraditional talent pipelines, especially when it comes to women and Millennials. One of the lessons learned from large tech companies in Silicon Valley, and other similar venues, is that they need to start looking at talent much earlier in their development; waiting until after people graduate from a traditional four-year college experience may simply be waiting too long. In terms of traditional educations, carriers can join tech companies in their quest to influence the curricula so that graduates have skill sets that can be put to immediate use.

Additionally, insurance carriers need to be aware of changing expectations when it comes to employee retention. Millennials look at jobs as experiences from which they will build a portfolio, meaning their tenure may only be 2-3 years rather than 20-30. Carriers need to recognize this as a reality, which has implications for how both job responsibilities and “tours of duty” are structured. Also, for many, the idea of employees leaving an organization is an expected part of the relationship but having the structure to welcome former employees back into the fold is not. Interestingly, LinkedIn has said that the best hires are “boomerang employees” who return with broader experiences, and who often bring friends along. It all comes down to putting together the right team to keep up with the pace of change.

As insurers are increasingly needing to face a dramatically changing market landscape of consumer expectations, it is ever more important to operationalize innovation. For more on innovation in insurance, see our recent report on Enabling Innovation, Vol 3: More Lessons from Silicon Valley, or contact us at inquiry@novarica.com to learn more about our research and advisory work with insurers in this area.

This blog entry has been reprinted with permission from Novarica.