While the pandemic has caused an array of challenges for insurance companies, it has also highlighted a range of opportunities to improve their efficiency and effectiveness. Winston Churchill famously said, “Never let a good crisis go to waste,” which seems remarkably applicable to the current business climate.
This was a theme discussed in Novarica’s second virtual Innovation Special Interest Group of 2020 on July 30th, where Novarica VP Nancy Casbarro and I were joined by Ja’Nene Kane, the corporate workstream lead for strategic planning and delivery at MassMutual, and Keith Kennedy, the SVP of innovation at Erie Insurance.
Innovation and the use of emerging technologies have faced notable headwinds recently, especially in the conservative culture that has evolved within many insurers. But recent efforts have attempted to move the needle on accepting transformational change as part of the roadmap. The discussion centered on three pillars of these efforts: defining process, vision, and team; navigating company culture; and delivering success and stability.
Process and Vision
Many insurers struggle to define what innovation is and what it will look at their company. Keith described his company’s vision for innovation and the internal support structures put in place. One point he made was that thinking of innovation as being synonymous with emerging technology is limiting. Focusing on solving business problems is critical to outlining an enterprise-wide vision, as are a clear process and well-defined roles. It’s also important to create a logical pathway for productionizing and scaling solutions as they pass beyond a lab environment or proof of concept stage.
Ja’Nene outlined MassMutual’s approach to innovation and how they loop in subject matter experts from different corners of the company to oversee smaller groups working to disrupt the business model. These smaller groups can even be separate entities with their own offices. Looking at an internal “startup” over the fence encouraged the larger company to think “Hey, why can’t IT and business work together over here too?”
Culture
There is no perfect way to succeed with innovation, but organizational culture can be a large obstacle. In order for a company to truly embrace innovation and the transformation that comes with it, cultural elements need to be addressed from the very top of an organization. There are a variety of both enterprise and personal risks inherent in innovation activities; failing to recognize this up front will consign organizations to a form of “innovation theater” at best.
Our panelists concurred that creating a culture of innovation starts at the top. The only way to encourage employees to take risks and be comfortable in a “test-and-learn” model is to make it clear that failing isn’t tantamount to career suicide. Keith mentioned that he doesn’t like to “fail fast,” he likes to “learn fast.” Words matter; taking cues from local context can help avoid setting up pointless battles on small items.
Ja’Nene described innovation as a revolution of continuous learning. These initiatives are not traditional—they should be refined over time. While there may be a very clear starting point, being “done” may be more daunting, since each milestone produces a new set of learnings that can be used as a jumping off point for the next set of opportunities to be explored.
Success
The panel described innovation as an investment portfolio. Some investments are short-term plays with quick payback periods. Others are long-term initiatives meant to reshape a direction for a company (e.g., Amazon discovering that the service it built to support its own business was actually the foundation for AWS). The difficult task of getting business leaders to understand that idea, as well as buy into it, has ended many innovative initiatives. Changing the culture is a laudable goal, but it requires the explicit direction and support of the most senior executives in a company.
Traditional measures of success, such as business cases that strive to calculate ROI metrics, may fail to reflect the impact that innovation activities can create. These activities may represent an R&D effort which can only be properly evaluated by looking at composite portfolio impact. Some insurers secure a portion of their annual budget for innovation in a pool outside of business-as-usual funding. Because the risk/reward calculus may be different than traditional operations, carriers may need to revisit approaches to compensation, particularly if they are competing for talent.
One potentially positive result of the COVID-19 pandemic is that the sudden shift to digital and virtual operations has highlighted some of the manual and partially digitized processes carriers still have. The existential threat this has created for some organizations has shaken up their way of doing things.
We look forward to continuing these discussions throughout 2020 and into the new year. Join us for our next virtual Innovation Special Interest Group on Thursday, October 22nd at 1pm ET. Register for that event here.
This post is adapted from a longer article at Insurance Innovation Reporter.
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