A Tale of Two Cities: Insurance Peer Networking Week @ Celent

A Tale of Two Cities: Insurance Peer Networking Week @ Celent
The week of April 22nd was something of a landmark in the Celent Peer Networking process. For the first time, we held two events in the same week; the first in Wellesely, Ma. focusing on Group and Voluntary Insurance, and the second in Columbus, Oh. with a focus on Innovation across business lines. I was fortunate to be able to participate in both events and will give you a summary of the events which really speak to the depth and breadth of the issues we are discussing with insurers today. Tuesday April 23rd, Wellesley, Ma. – The Group Experience Sun Life Financial was kind enough to host this session in their offices and representatives of eight insurance companies focused on the Group and Voluntary Insurance markets joined Karen Monks and I to discuss the changing Employee Benefit space.  We used some concepts from the recent Celent research note “US Group and Voluntary Employee Benefits: Changing Markets, Changing Technology” to kick off the discussion. Key points and questions from the discussion included:
  • How the Patient Protection and Affordable Care Act (PPACA) disrupts the current distribution/carrier détente, making direct to consumer and alternative distribution a more attractive option
  • IS PPACA creating an opportunity for cradle to grave products more strongly aligned to key lifecycle events that require less broker planning/intervention?
  • Can exchanges really disrupt the Group/Voluntary market when PPACA is major medical and dental only? A discussion of state sponsored ancillary exchanges and private exchanges ensued.
  • Enrollment was a key issue for all the carriers in the room and we discussed where enrollment fits in the sponsor/broker/carrier world, how carriers continue to promote brand through third party enrollment and service providers, and how carriers should architect for enrollment and self -service going forward.
  • One of the carriers led a discussion around the specific challenges Group carriers have in handling billing.  While there was an in depth discussion of specific billing issues for the Group market the big issues fell into three major categories:
    • Data Management
    • Lack of standards
    • Convergence of Group and Voluntary products
Karen Monks finished the day with some Celent data from two recent reports,  “2013 North America Insurance CIO Survey: Pressures, Priorities—and Innovation and  “IT Spending in Insurance: A Global Perspective” Karen highlighted the current state of the life insurance industry across segments and talked about the opportunity in the Group space to create a more interactive, four-season approach to Employee Benefits. Karen then spoke about IT spend in insurance and then dove into the issues CIO are thinking about today and in the future.   As we wrapped the day, the insurers decided we will maintain the “Group of Group Insurers” as a focused segment within our PNE process and will meet again in the fall.  For those insurance carriers that are interested in the Group space, I hope you will join us by reaching out to Chuck Smith csmith@celent.com.   Thursday April 25rd, Columbus, Oh. – The Innovation Agenda Nationwide Insurance graciously sponsored the 2nd Peer Networking Event of the week. Mike Fitzgerald of Celent led the event, where we were joined by representatives of 7 carriers from both life and p&c lines of business. This session was again a little different from the typical Celent Peer Networking Event as we focused on Innovation as a topic and did an abbreviated, public version of Celents Innovation workshop. This workshop helps insurers understand how their current IT project portfolio aligns with their business goals and appetite for innovation, get a sense for the investments they are making by business driver sector and create a common language around innovation for the enterprise. The insurers took away some new ideas around innovation, a new model for discussing and categorizing initiatives and some new organizational ideas about managing the innovation process. This will be an evolutionary process for most insurers as fostering innovation within a corporation may be the hardest task an executive has before them. Key points covered were:
  •  The need to separate emerging technologies from business innovation: Emerging technologies can be great enablers of insurance business innovation but are not in themselves innovative from an insurance business perspective.
  • For best results, differentiate between improvement, innovation and disruption: Most of the people in the session had little problem with differentiating insurance status quo (of which there is a lot) and disruption (of which there is very little). Finding the line between improvement and innovation was much more difficult. The difference is meaningful for insurers to make informed choices about the allocation of their scare resources.
  • Using a portfolio discipline can be challenging: We broke into groups and gave the attendees the opportunity to get hands on experience with the Celent Innovation model. There were a variety of experiences. Some found it harder to break projects down by level of innovation; others struggled with categorizing by driver sector.
  • An insurer presented their structured model for driving innovation using a centralized innovation-funding model. Their model is an outgrowth of their strategic planning process and is still evolving, with a current focus on ensuring the ideas are captured, managed and evaluated against current business need and opportunity. There was a lot of discussion of sources of potentially innovative ideas and how to ensure top down ‘great ideas for innovation’ from senior management don’t drown out other sources of ideas. There was also discussion about decision-ing lifecycles and the need to never discard an idea out of hand, both to ensure a positive environment for fostering new ideas and because some ideas need to wait for the right climate and business environment to be successful.
Overall the PNE attendees found the exercise useful in helping them find a common language to talk about innovation and avoid some of the common traps one falls into when trying to drive innovation.   We hope you will join us for a PNE event. We are always looking for hosts and again  if you would like to sponsor a Peer Networking event please reach out to Chuck Smith csmith@celent.com.  

Microinsurance evolution, a Latin American perspective.

Microinsurance evolution, a Latin American perspective.
Microinsurance is referred to the type of insurance that aims to the base of the pyramid (BoP) population, generally those ignored by mainstream commercial and social insurance schemes. It emphasizes the importance of understanding the needs, preferences and characteristics of this target group: the low-income household, the working poor and the under-served. Microinsurance has the potential to play a very important social and economic role by breaking the vicious circle of poverty and vulnerability that affects the low income segments of the population. It can also help local economies by redirecting funds to be invested into high-return/high risk assets, that otherwise would be allocated in low return investments or even kept without investing. The potential market for Latin America is estimated in 360M of people, and for many insurers it is a huge opportunity to position its brand in a population that eventually will demand more insurance products. When you look into these markets you can distinguish 3 clearly separate phases of evolution of Microinsurance:
  • Phase I: Easy products to administer, such as mandatory life insurance tied to micro-finance products.
  • Phase II: Products get more sophisticated providing more options and benefits, turning into voluntary schemes, usually based on health, life and funeral insurance type of products while adding distribution channels to reach a broader audience.
  • Phase III: More complex products with emphasize in adding value to customers and an extended network of multiple distribution channels.
Currently Microinsurance in Latin America is doing pretty well in Phase I and is walking through Phase II. The major challenge nevertheless resides in including more commercial oriented products which typically are developed in Phase III, such as index-based insurance products. Technology plays an important role in supporting microinsurance strategies as they require an innovative approach in areas such as product, rates, distribution, claims and collection. Agility, scalability and high volume-low cost processing are important features for insurers to consider in their supporting systems. In our experience most of insurers in the region struggle to obtain these features from their current systems and enabling those innovatives approaches, which by the way, are also desirable to serve the upper-income segment. Are your systems up to the task? Feel free to comment!

Creative Disruption: Technology and The Future of Insurance

Creative Disruption: Technology and The Future of Insurance
On 15th of March Celent held our creative disruption event at the Tower of London – no small irony to be discussing the future of insurance surrounded by such rich history. Celent’s Catherine Stagg-Macey opened proceedings with a discussion about how quickly technology is moving and by providing a concrete example of that in the form of 3D printed objects handed out to each of the guests. As she discussed time taken to source the items Catherine observed that agreeing what to print took perhaps longer than getting the items delivered. We moved swiftly to the wake up call session presented by myself, Craig Beattie. This opened with a few provocative thoughts around what might be possible within the next ten years and moved on to how technology is redefining what our customers and staff in the insurance industry perceive as convenient – redefining what just in time means, just enough and how much effort things take. I went on to look at how digital and being connected to computing resources has redefined insurance distribution and observed two key things about digital: First adoption is now measured in months and not years and; Secondly, that digital seems to redefine itself regularly and a redefinition due imminently. We explored how social is changing buying behaviour and generating ever more data, data that is proving to be useful in all manner of models from predicting the stock market to predicting illnesses in large populations. Before long I yielded the floor to the our three insurer case studies. First up was Sebastian Herfurth, CEO and Founder of Friendsurance in Germany. Sebastian took us back to our social roots in insurance in discussing the micromutual operation. As he explained how Friendsurance worked it became clear that classic insurance products enable the operation and that the true innovation was in the area of small claims, where friends covered the losses of those in their group. On innovation, Sebastian advised that the customer guides Friendsurance and they constantly review their customer experience – “we build paths where people choose to walk”. Next to present was Matthew Gledhill, Managing Director of Beagle Street in the UK. Matthew first reflect on some of the most difficult things he had done in his life and noted that none of these were nearly as painful as trying to purchase life insurance. Matthew spoke about how they had reviewed the full value chain and looked at the needs of the customer to deliver a customer experience that made sense. Next steps included looking at new types of customer, a great observation that not all customers are the same. Our final case study presenter was Tsukasa Makino, CIO of Tokio Marine in Japan rounded out our case studies with an amusing and insightful look at their innovative products. Makino-san discussed the cultural changes in Japan and the issues this presented for them as an insurer. He introduced the audience to the term Moteru meaning “to be attractive or popular”. Young people are now much less likely to own a car, this being seen as less attractive, but they still have occasional use for a car and therefore, occasional use for car insurance. Tokio Marine’s one day insurance offering sold via mobile, internet and agents provides just such a product. David Smith, CEO of Global Futures and Foresight followed our break and took us on a whirlwind tour of the future and the major trends affecting the world now. He noted that all enterprises innovated when they started, but arguably have forgotten how to do this as they grow in size. There was so much content here it’s hard to summarise but I’ll leave with a few provocative thoughts from David:
  1. World GDP is set to triple in four decades, how much of this are you targeting?
  2. The disparity in health and aging globally will be a significant and growing issue, what will it mean for the insurance industry?
  3. If you automate all the mundane and routine jobs, how does anyone become an expert?
Jamie Macgregor, Senior Analyst with Celent followed David discussing Celent’s approach to deliberate innovation management, an approach intended to draw out the missed opportunities for innovation and shine a light on what an insurers change portfolio will achieve. Jamie shared some anecdotes from session already executed with insurers globally and discussed the benefit of considering innovation and disruption as facets of your portfolio. The key question or challenge from Jamie, “are you managing out innovation?” The day ended with a panel session with a mix of audience polls as well. Nicolas Michellod led the session, with our case study presenters on the panel. There were some discrepancies in view between the audience and the panel as we discussed how the panellists innovated. We had already heard that the customer had to be at the centre of what you do. Matthew offered the advice that a villain can help with innovation, focussing effort on removing the influence of the villain in the story. When asked if it was important to think outside the box Sebastian noted that he was already outside the box, coming from a very different background into the insurance industry. Further, freedom and reward were also highlighted by the panel as contributors to an innovation culture – along with a performance driven culture. Another area of difference was in drivers and inhibitors of innovation, with the audience voting for skills as a major influence but the panellists highlighting clear responsibility and reward, courage and above all – speed. The event offered me so many points of insight I found it hard to summarise. To that end, I choose to use someone else’s words from a tweet during the conference, “Insurance is changing fast…” For those on Twitter who want to review comments during the day you can find those here and that content we are permitted to share will be available to clients in our library shortly.

Are insurers ready for the milenial and Z generation? A Latin American perspective.

Are insurers ready for the milenial and Z generation? A Latin American perspective.
At corporate level we usually conceive and refer to technology focused on the internal use and how to reach to the outside world to provide better products, have more efficient value chains and improve service.  For example insurance portals or technologies that will improve call center performance. This conception has been very useful to the insurance industry enabling evolution and innovation. Let’s take the UK insurance market for example. The auto industry started mainly as broker based but then evolved into direct insurance. It got somehow more sophisticated with the segmentation of net-worth customers. In this sense, the use of technology has been usually seen as a support to the business, but more and more it is becoming a central part of the business model for many insurers, especially for those new and disruptive players. Following the UK example, the use of telematics and “pay as you drive” and “pay how you drive” type of insurance products has lately enabled disruptive models that also integrate internet, mobile and social media to deliver products and services. These insurers recognize the fact that consumers have incorporated technology into their daily lives and that they expect from insurers the same level of engagement and user experience they have with other players in other industries such as Apple and Amazon just to mention two. Computers are everywhere, in the office, at home, in our appliances, and electronic devices; even phones are now computers, and consumers are using them to interact with people and companies by web access, e-mail or social media. Mobility is a fact that insurers need to recognize as they deploy new technology driven strategies. A usual misconception is that emerging markets are behind most mature markets in terms of internet, social media and mobile usage. You might be surprised to know that Latin America for example:
  • Had 231M internet users in December 2011 (10% of the world internet population);
  • Had 145M Facebook users in April 2012 (18% of worldwide Facebook users), and
  • Had +500M mobile connections as from March 2010 (86% of the Latin American population)
As for smartphones, clearly of more interest for deploying self service capabilities for agents and upper income consumers:
  • Brazil has more smartphone users than France or Germany
  • Brazil and Mexico together have more smartphone users than Australia has inhabitants
  • Argentina smartphone penetration (24%) is better than in Germany
Latin American countries also present above-average usage patterns in many areas:
  • 65% of Mexican smartphone users search on their phones every day, compared to 57% in the U.S.
  • 90% of Argentine smartphone users use their phones to access social networks, compared to 63% in Japan
  • 29% of Brazilian smartphone users have changed their minds about a purchase while in a store due to research conducted on their phone, compared to 15% in Canada
Mobile is changing the way Latin American consumers interact with the world…
  • 57% of Brazilian smartphone users read newspapers or magazines on their phones
  • 73% of Argentine smartphone users check email on their phones every day
  • 81% of Mexican smartphone users watch video on their phones
 …Especially when it comes to shopping
  • 26% of Mexican smartphone users have made a purchase on their mobile
  • 45% Brazilian smartphone users have purchased on their computer after researching on their mobile
  • 82% of Argentinean smartphone users have researched a product/service on their mobile
Usage data and user behavior is indicating that engaging with consumers and stakeholders through the use of internet, mobile and social media makes sense. Though, our research shows that the priorities and investments by Latin American insurers in these areas are very low. There might be some isolated efforts, but no integral approach to embrace these technologies to provide an improved customer experience which could result in growth, retention and efficiency. This seems to be the time to start acting, unless the insurance industry in the region wants to wait and see if a disruptive outsider sets the new standard. Worth the risk?

Mobile insurance as a source of innovation

Mobile insurance as a source of innovation
The use of mobile in insurance is usually related to the self service capabilities insurers can deploy for agents and for upper income groups such as quote, bind, issue, claims and printing, all for which a smartphone is a better device than just a simple mobile. One trend we have recognized is that mobile technology is being used in emerging markets to innovate as a means of distribution and collection, especially to low income consumers through microinsurance products, as there is usually 70 per cent mobile penetration but insurance penetration is below 5 per cent. Mobile operators benefit as well, as they are able to turn ‘pay as you go’ customers into annual subscription contracts. Microinsurance aims to the base of the pyramid (BoP) population and has the potential to play a very important social and economic role by breaking the vicious circle of poverty and vulnerability that affects the low income segments of the population. It can also help local economies by redirecting funds to be invested into high-return/high risk assets, that otherwise would be allocated in low return investments or even kept without investing. For many insurers it is also the opportunity to position its brand in a population that eventually will demand more insurance products. While in 2006 only 78M of risks were covered under microinsurance products in Asia, Africa and Latin America, by 2011 this number was over 500M!  Latin America representing 10% while Asia had near 400M risks covered. The potential market for Latin America is estimated in 360M of people, with Mexico and Brazil concentrating around 55% of this market. A usual misconception is that emerging markets are behind most mature markets in terms of internet and mobile usage. You might be surprised to know that Latin America for example:
  • Had 231M internet users in December 2011 (10% of the world internet population);
  • Had 145M Facebook users in April 2012 (18% of worldwide Facebook users), and
  • Had +500M mobile connections as from March 2010 (86% of the Latin American population)
As for smartphones, clearly of more interest for deploying self service capabilities for agents and upper income consumers:
  • Brazil has more smartphone users than France or Germany
  • Brazil and Mexico together have more smartphone users than Australia has inhabitants
  • Argentina smartphone penetration (24%) is better than in Germany
  • 26% of Mexican smartphone users have made a purchase on their mobile
  • 45% Brazilian smartphone users have purchased on their computer after researching on their mobile
  • 82% of Argentinean smartphone users have researched a product/service on their mobile
The microinsurance market matches almost perfectly with the conditions for innovation as it is an under-served, untapped market that presents fragmentation and it is a high cost to serve market under the present business model for traditional insurance companies. Mobile is just one of the technologies available that could help insurers serve the low income market with a profitable model. Microinsurance strategies require an innovative approach in areas such as product, rates, distribution, claims and collection and it is a shared view among industry leaders that such innovative approach could afterwards be used in their incumbent markets.

Innovation – What can the insurance industry learn from Steve Jobs and Apple?

Innovation – What can the insurance industry learn from Steve Jobs and Apple?
I’m guessing that somewhere in your strategy documentation will be an objective that states that you will succeed as an insurance company through ‘being innovative’. It may be presented up-front as a bold strategic theme or it may be hidden deep down in the depths of a key initiative. I’m also guessing that, for many of you, this objective may not necessarily be backed up by a statement of how you intend to achieve ‘being innovative’ or what ‘being innovative’ really means. So, what does it mean to be innovative in insurance?  Interestingly, when you search for a definition of being ‘innovative’ in insurance using Google, you’ll get back over 24 million hits. For fun, you can also read some of the entries in our competition to define what innovation is for our industry in advance of our Innovation & Insight Day in Boston on 27th February (see our LinkedIn discussion group with circa 115 entries submitted so far).   Finally, let’s not forget, that there is a whole industry of management self-help books out there online and in airport book shops (circa 39 thousand books listed in Amazon for innovation), plus academic research (639 thousand hits on Google Scholar for innovation and insurance) to help. With all of this information available, I guess it should be easy for all of us to know exactly what to do to be innovative and how to use innovation to be successful?  Mmmh. In my experience of running workshops with clients, innovation is rarely a well-articulated or understood concept.  In many instances, it is just another word for ‘new’, which rather than helping a firm to rally around a radical concept or idea, can underplay its significance.     So, when things start to get confusing or complicated, I personally like to learn through doing or by observation.   Over the holiday period, I finally got around to reading Walter Isaacson’s “Steve Jobs: A biography” (one of the many books you’ll find in or near the Management Section of your airport bookstore). Apart from the biographical elements about his personal life (many of which were eye opening to me) and his dysfunctional people management style (this is a slight understatement!), I found myself identifying some of the themes that made Steve Jobs and Apple innovative in my eyes.  Here’s a quick round-up of my take-aways:
  • Adopting a heuristic approach.  Learning by doing, taking risks, accepting mistakes (well, some of them at least) and following instinct.  It would appear from the book that few product launches led by Jobs ever followed a formal plan or typical investment case procedure adopted by many corporates and that I’d recognise.    
  • Maintaining a pure vision. Jobs insisted on perfection.  New to the world products were frequently pulled back from their launch date in order to achieve the ‘insanely great’.
  • Separating out a small team.  Albeit not always by design, Jobs sometimes found himself creating a team outside of the main corporate organisation.  This had the effect of helping to focus minds as well as creating a distinct identity – even when this had the effect of creating a counter-culture to the parent firm.
  • Hiring the ‘A-team’.  Jobs claimed that ‘A-team’ players want to work with ‘A-team’ players, and that ‘B-Team’ players would only drain energy away.  Jobs was pretty ruthless in insisting on the best.  
  • Creating a unique value network.  Rather than making the best use of what’s out there already, Jobs frequently preferred to create a value network from scratch rather than compromise or find himself in a weak position of power.
Although often dysfunctional and extreme in the case of Steve Jobs and Apple, these observations are consistent with much of the formal management research on disruptive innovation and entrepreneurial success.  Being innovative often requires a firm to break away from accepted industry norms and values in order to create something new.   So, in an industry as old as insurance, are we ready to live up to our written strategies and ‘be innovative’? ______________________________________________________________________________________ Our competition for “Innovation in 6 words” is still open.  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 eferguson@celent.com 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.  

Failing is the first step of Innovation

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 eferguson@celent.com 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.