Archives for January 2013

Failing is the first step of Innovation

Most cultures reward and encourage success. Growing up, we learn quickly to highlight our brilliance and down play our mistakes. The corporate world we operate in only reinforces that. Do you remember how many times you had to fall off your bike before you could ride it successfully? You had to fail before you got it right. Had you been laughed at or criticised in those moments of lying on the asphalt would you ever have picked yourself up and tried another time? Being an innovator or supporting innovation in your organisation requires a willingness to embrace failure.  And I mean really embrace it. It means allocating money to ideas that have no apparent business case. It means creating certain spaces for staff to experiment with no fear of retribution (think Google’s 20% idea). It means falling of your bike, again, scraping your knees, in the knowledge that at some point, something might come of the endeavour. From failure comes huge learning for the people and the organisation. Failure uncovers a gold mine of information that you had no access to before you started. Many readers will nod sagely at what appears to be obvious. But my experience tells me that most of us go out of our way to avoid failure. We have been institutionalised to only ever succeed (or at least be seen as succeeding) at every step and at every endeavour. Don’t believe me? Here’s my challenge for you – write your own failure CV. Look back on your career, and write up each failure and what you learnt from it. My own experience and that of friends shows me that putting pen to paper to outline our failures is remarkably hard because of our conditioning. And this is symptomatic of our unwillingness to see failure as the necessary stepping stones of innovation. I remain convinced that we need to face failure head on. Failure is good. Embracing failure will allow us as leaders to unlock the innovation potential that currently lies dormant in our companies. ______________________________________________________________________________________ Our competition for “Innovation in 6 words” is still open. We have received over 110 submissions so far! You can check out your competition here. To take part in the discussion, join our LinkedIn discussion group (Innovation is…) devoted to the topic.  To participate in the challenge, e-mail your definition to Erica Ferguson at using the subject line “Innovation is” along with your contact information. We will be announcing the winning entries during our Innovation & Insight (I&I) Day on February 27, 2013. Regular readers of our blog know that I&I is a flagship Celent event. As always, it will host a variety of Celent and non-Celent speakers and will be a great opportunity to network with the industry peers. If you’d like to see the full agenda and learn more details, please visit our registration site.

How is Social Media Being Used in Insurance?

Social Media has established a foothold in many insurers in the United States. However, strategies, goals and results vary widely. In order to shed some light on why and how this new tool is being used by insurers to enhance their businesses, Celent and Locke Lord LLP are conducting a survey among their respective clients that answers the questions most often received about the use of social media by insurance companies in North America. The survey explores the benefits, barriers, plans, legal considerations and business results of social media in insurance. The data collected will provide a picture of the current state of play and will also provide a look at what insurers expect in their “social” future. To begin, just click on the link below So that we can get the results back to you in a timely manner, the survey will close on January 31, 2013. If you have any questions, please contact Mike Fitzgerald  

Auto Insurance Vanishing? Don’t Hold Your Breadth and Don’t Close Your Eyes

On January 17 I&T posted a story about an exchange that took place at the Property/Casualty Joint Industry Forum between State Farm’s CEO, Edward Rust Jr., and an industry analyst, Brian Sullivan. Mr. Sullivan said, “It’s impossible for anyone to look at the data and say there won’t be fewer accidents than before. The technology is getting better and drivers are getting safer. I think this business is shrinking: Fewer accidents means fewer exposure.” And Mr. Rust responded, “I don’t see the risk being mitigated so much that the premium falls significantly,” Rust added. “The cost to repair a vehicle that has been in an accident is much greater. It’s not your Grandpa’s Olds.” I will judiciously say that both Mr. Sullivan and Mr. Rust are correct—but the real question is the timeframe during which each of them is correct. This year and next year and maybe the year after, there won’t be much technology-driven reduction in auto losses (and associated drops in premium). But inexorably collision avoidance technology is going to get better, and even more importantly, it will become more pervasive among the vehicles on the road. And while insured losses depends on severity (i.e. the cost to repair partial losses or replace total losses), it also depends on frequency. As collision avoidance technology (and automated traffic law enforcement, and yes eventually driverless cars) advances, frequency will drop. And in all likelihood severity will also drop—for example when an automatic braking system reduces the speed at impact from 15 mph to 5 mph. So losses will drop and insurance premiums will follow. The big questions are how much and how soon.

There’s Still Time to Enter Contest: Innovation in Six Words or Less

Preliminary entries are in and they are strong! As many of you know, Celent kicked off a contest to define innovation in six words or less. Based on the principle that scarcity breeds creativity, we challenge you all to stir your creative juices and give it your best shot. We have received over 90 submissions so far! You can check out your competition here: As I read the list, I am struck by the optimism and energy that comes through.  The comments sound like people who love making change happen while, at the same time, recognize that it is not always easy but is consistently rewarding! Of course, there is no right answer, but we will be announcing the winning entries during our Innovation & Insight (I&I) Day on February 27, 2013. Regular readers of our blog know that I&I is a flagship Celent event. As always, it will host a variety of Celent and non-Celent speakers and will be a great opportunity to network with the industry peers. If you’d like to see the full agenda and learn more details, please visit our registration site. You can leave comments on this blog, send an email to Erica Ferguson at using the subject line “Innovation Is” along with your contact information, or join our LinkedIn group created especially for this. I can’t wait to read your thoughts on innovation and seeing you at Celent’s I&I Day in Boston. PS. I just sent mine to Erica: “New customer value discovered and delivered”

Another view on the future of auto insurance

PwC has just published an interesting and thoughtful paper on, “The Reshaping of Auto Insurance.” The paper describes the possible impact of various on- board technologies (automatic braking, telematics, etc.) on auto losses and the longer term potential for changes in auto insurance business models. Here are a few Celent comments: It is true that changes in frequency, and especially severity, of motor vehicle accidents will not drop overnight. But the PwC paper looks only at “on-board” technologies. By doing so, it ignores the potential impact of automated traffic law enforcement (e.g. speeding and red light cameras). Depending on the political will (and desire for revenue) of state and local governments, these technologies may have a quicker and more dramatic impact than onboard technologies. There is also a potential incentive for governments to mandate Vehicle to Vehicle (V2V) communications as a way of increasing the carry capacity of roadways, and avoiding costly construction–plus, arguably, it is a green technology. If and when liability for many accidents shifts to the manufacturers of the automobiles (and/or the on-board equipment); it is likely that the frequency of accidents will be significantly lower, leading to lower losses, and lower premiums for auto insurers. So change is coming for auto insurers in terms of business and operating models. The big question is how quickly.

New Year, New Tools to Service Insurance Customers

For those interested in how new data techniques and availability are changing business models, I can recommend the article Smarter Information, Smarter Consumers in the latest edition of Harvard Business Review. The central premise is that legislation in the U.S. and U.K. now requires government agencies to make public data available and consumable in electronic form. This enables new techniques that leverage this information and provides increased value by making the purchasing process more intelligent. The authors offer their concept of “Choice Engines” – on line tools that guide consumers to make better purchasing decisions more efficiently using public information. At some point in the future, they also predict that private data will be added to the mix and allow the engines to work at a personal, individual level. Most of the use cases are consumer product-oriented, but as this blog has described previously, customer service expectations in other industries will influence insurance purchasing. The person who benefits because their cell phone company suggests ways to lower her bill (the authors’ example) will also want the same service from her insurance agent/company. Consumers and businesses will expect to be contacted by their agent/insurer when their risk profile changes. For example, if an addition is added to a house, insureds will expect that their insurance will be monitoring building permits and will want to be contacted proactively so their insurance can be adjusted appropriately. Two questions specifically related to insurance deal with timing and distribution models. Which insurance company will be the first to employ a choice engine for its insureds and prospects? Can an insurer with a mediocre data infrastructure and skill base compete with those which invest early and heavily in data techniques? Will independent agents embrace choice engines as an enabler, or reject them as a threat to their value proposition? Would an insurer be willing to offer such a tool to a distribution force that they don’t control? There is no question that managing risk will move from a point-in-time (usually renewal) event to a more continuous process. What is to be seen is which company changes the insurance purchasing model and transforms the buying process by using a tool like a choice engine.