The first event that Celent ever ran on the topic disruptive innovation in insurance was at the start of 2012. It’s almost hard to believe that just four years ago there seemed to be very little debate across the industry on the topic. Today, in stark contrast, whenever we ask a panel of insurers to rate the importance of innovating in the next three to five years, typically around 85% note it as critically important to achievement of their strategy. Clearly, things have moved on…
What I also find interesting is the move by some insurers to explore the potential for innovation outside of their own organisations. A colleague of mine drew my attention recently to the “The Startup owner’s manual: the step-by-step guide for building a great company” where its authors, Steve Blank and Bob Dorf, make a great provocative call to action: “There are no facts inside your building, so get outside.”
For many, switching focus towards to an external perspective requires quite a difficult cultural change to take place first, especially when it comes to thinking about innovation and funding it and engaging the wider ecosystem.
The external innovation ecosystem is broad and complex. It is made up of a wide range of actors such as partnerships, accelerators, incubators or innovation labs. The opportunities for unique and different ways to innovate are both bountiful and confusing.
Figure 1: The Insurance Innovation Ecosystem
Source: Celent. InsurTech has arrived: A primer
One route that’s receiving a lot of attention currently is direct engagement and investment in the start-up community focused on “InsurTech”. According to our own fairly simple informal records, we are aware of at least 25 venture units set-up today by insurers globally to focus on investing in technology start-ups that could disrupt or radically change the way that the insurance industry operates. So far, these firms have made at least 110 public investments (that anyone can find out about with just a few hours of focused ‘googling’ accompanied by a fresh pot of coffee). In its regular blog, CBInsights provides great insight in tracking the investments being made across the industry and are recently projected a further 72 deals this year alone. An incredible number.
However, it is important to note that that investment alone is not a great proxy for health of an ecosystem. The dotcom chapter of history is a sharp reminder of that. That said, investment figures offer one perspective on the level of interest in leveraging innovation outside of the walls of the insurer.
Plus, direct investment isn’t the only way to engage the external eco-system. Accelerators, incubators, university tie-ups and ‘good old-fashioned’ partnerships are equally valid routes
Knowing where and how to engage is often a tricky challenge – especially if you’re new to it. So, practically, here are a few grounded considerations prior to jumping in and making a decision:
- Develop and innovation strategy to line up with the business strategy. Let this inform and guide the pathways into the innovation ecosystem. Let it also be the guiding mechanism for assessing value and measuring success.
- Acknowledge the adaptation of culture required to truly leverage what is available. Openness and collaboration are key, as is an understanding the cultural divide that may exist between a start-up (whose decision making time-scales are immediate) and a traditional insurer (who has an existing business to protect and therefore requires more careful consideration).
- And last but not least, investment in digital transformation needs to continue. Experimenting with point-solutions is one thing; embedding innovation in an existing business is something else.
To my knowledge, there is no one right way to approach getting involved with the wider insurance innovation eco-system. Some may choose to “fire on all fronts” whereas others may adopt a more selective approach to engaging the external eco-system. At a minimum, if you haven’t yet started, attending a conference such as the Digital Insurance Agenda is a great and economic way to explore the options, learn and network.
This vision article is authored by Jamie Macgregor, Senior Vice President Global Insurance at Celent and keynote speaker at DIA Barcelona.