ITC Highlights Importance of Leadership and Culture on Innovation

Last week’s InsureTech Connect conference in Las Vegas provided a fascinating overview into the technology advances which are becoming available to impact a wide array of insurance lines of business. Not all the startups or new ideas are winners, of course, but this annual event highlights the art of the possible in new and interesting ways that provide opportunities for carriers to consider applicability for solving current, or future, business problems.

Identifying the “right” problems to solve, of course, is part of the broader challenge facing carriers today. The environment they are facing with 2020 little more than a quarter away is characterized by a wide array of challenges and opportunities. Generational change is upon us, with Millennials poised to represent 75% of the US labor force by 2025, even as younger Baby Boomers move closer to retirement eligibility. Customer preferences are changing, with an array of saving vehicles available to address different life milestones and some lines of business (e.g., personal lines P&C) have effectively become “direct to consumer” business, a pattern that is likely to be followed by others. On top of this, a persistent low interest rate environment is part of a broader investment return reality that creates added urgency to address expense issues that some carriers have been able to avoid confronting in the past. Carrier CIO’s are clearly living in interesting times!

As part of ITC, we hosted an Innovation Workshop that focused on both the rapidly changing technology environment and the ways in which carriers can apply their finite IT resources to achieve desired outcomes. As a practical matter, there are Three Levers of Value. that carriers have when it comes to the use of technology dollars: they can sell more, they can manage risks better, and they can cost less to operate. Our keynote presentation highlighted these elements with practical examples of companies making moves in the market, before we turned to a panel of CIO’s representing carriers in the both the L&A and P&C spaces.

While the carriers represented both a broad array of business lines and histories, the recurring theme was that executive leadership was a critical element in allowing companies to move forward with making significant changes to how they approach markets, develop products or consider capabilities that alter competitive positioning. They all recognized the importance of their own IT organizations in delivering the capabilities needed by their business partners but also highlighted the importance of knowing that they support, but don’t “own” the broader concept of innovation. Different business opportunities create different responses, of course, but interesting to note that three of the five carrier participants created innovation lab environments, in the form of separate tracking brands which allow them to test and learn with efforts, and fail fast, in ways that would be difficult if not impossible within their broader parent brands. This type of commitment doesn’t come without the clear allocation of resources and attention at the very top of the C-suite. Other companies have clearly been successful with employing innovation into their business models without going as far as creating an alternative brand for experimentation purposes, but it still requires the same type of “top of the house” guidance in order to make meaningful changes in how organizations operate.

This highlights the critical importance of culture in determining what carriers can, and can’t, do in their efforts to prepare for a fascinating but uncertain future. The bureaucracies that allow large organizations to operate effectively and efficiently are designed to protect the broader company from things that are outside of whatever defines the existing “normal”. Changing this requires a willingness to force change on the culture in order to open things to a true “new normal”; without this the corporate immune system will be both swift and effective at eradicating things that are perceived to be threats to the status quo. Changing the arc of culture is also something that requires CEO engagement since they alone have the ability to immunize the teams charged with making meaningful changes become a reality.

Irrespective of organizational structure or innovation model, one of the things that the CIO panel also highlighted was the criticality of being willing to take personal risk in order to move an effort forward. With the clarity of mission in hand, successful CIOs talked about the importance of being willing to drive toward clearly articulated goals, irrespective of the organizational resistance that can result. Innovation is both hard work and does not carry any notion of guarantees of success, so outcomes can be uncertain at best. That flies in the very face of many organizations that are highly risk averse and are wired to focus on high probability, if not certain, outcomes.

From the broader breakout group discussions that were also part of the workshop, innovation can impact many different aspects of the insurance value chain: claims, underwriting, products and distribution.

While it may be true that there is a certain “frothiness” to what may be an InsureTech world today, the reality is that changes happening quickly. Successful carriers will want to be mindful of this as they plan their future state strategies. Which brings us right back to the three levers of value. Technology for insurance is about selling more, managing risk better, and operating at a lower cost structure. The only things certain about the future is that the pace of change will accelerate, and the useful life of technology will shorten. That dynamic alone makes insurance an exciting place to be.

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