Thursday September 13th. The clock indicates 6 past and the day is over. I walk out from what has been a very busy conference room. My head still spinning around so many ideas and concepts speakers and audience have interchanged in the context of our 2012 Creative Disruption Event.
Phrases such as “Excellent- thought provoking”, “Interesting topic that we all struggle with in our respective organizations. Good tools to bring into prioritization discussions and to reframe conversations about change”, set the tone of the audience feedback.
How to discover a new or underserved market to approach with a new value proposition based on the use of a specific and unique technology was the common theme along the day and definitely this is a topic that attracts the industry’s attention but also one where it still has problems executing it.
One of the many take away of this event, besides the signed free copy of “The Innovator’s Manifesto” by Michael Raynor, is the insight on how to deliberately pursue creative disruption.
It is very interesting that the day started with a fresh wake up call for insurers in terms of how consumers perceive that they are not being bold enough in addressing their needs and especially not taking advantage of the new technological means to interact and serve them. While this might be the general perception we are starting to see how some companies, generally new players, are walking along the direction of creative disruption.
UK based ingenie for example shared with us how they have addressed the needs of a specific segment of consumers (young drivers aged 17-25) usually not considered by traditional players because of risk. ingenie offers a fresh approach to insuring young people. With the use of telematics they treat every young driver as an individual. Just drive well, and you could pay less for your car insurance. The cost of your insurance is reviewed every three months and offers incentives to those that change and adopt a better driving pattern. With the combination of technology and a clear understanding of their consumers, they have come up with a new solution and business model that changes how they manage the risk of youthful drivers.
It seems it is under the most challenging situations that creative disruption emerges. When faced to a challenge and with the application of the right technology, some people discover a new market or how to make money out from one that was considered unattractive, like in the success stories we learned from Tom Hammond, Executive Vice President, Agency Operations of BOLT Insurance Agency; John Roblin, Former CIO, Chubb Insurance and current Chairman & CEO, Cover-All Technologies; and Davinder Singh, Head of Third Party Distribution and Products for DLF Pramerica Life Insurance Co., Ltd from India.
· Tom shared how BOLT applied the use of the right technology they had developed to serve the smallest businesses. The challenge was the fragmentation of the selected market and that it is dominated by independent agencies. They applied marketing and affinity strategies and created a call center with licensed agents using their software. They use this comparative rating to get all of the top insurers they have in their portfolio transparently compared and offered to their customers.
· John took us into a journey of discovery on how Chubb had created one of their most successful products. In a challenging situation, thinking to discontinue personal lines, they figured out there was an opportunity with the high income segment of customers who prioritize prevention on top of claims payment. They worked all aspects of the business. Processes were rethought to make it simple to customer. They worked on every “touch” and point of contact with customers, including the insurer-agent relationship. Underwriting was focused on the person and not exclusively on the peril. They emphasized on prevention during the inspection process where they could work in tips, loss control ideas and ensuring that all gets covered. While today, with the existing technology and systems, this is might look much simpler back then it was a great challenge.
· Davinder exposed maybe the most challenging situation in terms of execution as he shared how DLF Pramerica untapped the opportunity of selling insurance in rural India 4 years ago. The challenge was how to serve a high cost business (fragmented distribution – market of 600,000 villages and 33 dialects), with a low average written premium per policy and no banking institutions presence to support the required financial process. They used technology and straight through processing to close the deal in one step without need of further interventions. They also relied on local people to sell simplified products as a way to introduce insurance in the villages and they also looked into other industries best practices. DLF Pramerica is currently serving villages in rural India covering 11 languages.
Fostering creative disruption requires focusing on people, vision leadership and execution. Mike’s and Jamie’s presentation and review of Celent’s innovation model came very handy to understand this linkage.
The objective of Celent’s Innovation Model is to effectively manage insurance innovation, so we can always have the chance to ask the right questions and be sure that our project portfolio has the correct balance of improvements, innovations and disruptive initiatives. It provides a framework for insurers on how to build a path to create disruption.
After reviewing many cases of effective use of technology in insurance we have concluded that it is hard to find a handful of them that could be considered disruptive. Recently, we were able to take an insurer’s pilot strategic initiatives (for life insurance) and map them into the framework with a result of no initiatives to be found in the disruptive category.
It is understandable for some companies to show this type of project portfolio at some given point in time. It is also certain that it must not be pursued without being sure that you have the required execution capabilities, but it is healthy to start discussions around disruptive initiatives at some point, or other competitors will come up with an initiative that will threaten our established position.
This model will help business and IT to have the right discussions. Companies have traditionally looked into technology from an in-to-out perspective; technologies that implemented in the inside could have some impact in the outside. Examples of these are PAS, Claims, Billing, BPMs, Agent/Customer/Prospect Portals and BI/Analytics.
Consider the UK market for example, the auto insurance industry started mainly as broker based, then evolved into direct insurance. It got somehow more sophisticated with the segmentation of net worth customers and then disruption came in again with telematics and products based on pay how you drive (moving away from pay as you drive which could also be considered disruptive at its time) but still all of these mostly triggered by an in-to-out perspective of technology.
If something has changed radically in the last few years is how technology has invaded our daily life. Computers are everywhere, even in our phones and they are re-defining how we interact with others. Consumers are demanding a new way to interact with companies, which need to come up with business models and processes that take advantage of these technologies but also provide the user experience and level of service they now expect from this digital world. This view of outside technology impacting inside the companies brings a whole different perspective.
Today we are looking on how aggregators and Google’s very recent move into the industry might be the first signs of a new disruption for the Insurance Industry.
It is in these times that companies require the vision, leadership, methodologies and toolsets to drive the execution of creative disruption initiatives. The risk is for other new players to displace you from your current market position.