5 ways for insurers to prioritize innovation, adaptability
The Covid-19 pandemic was the catalyst for many businesses across industries to quickly pivot their operations to an online or hybrid model to stay in business. It also opened opportunities to provide new products and services to customers. Though insurers are traditionally stable, mature, and relatively slow-paced, they faced the same challenges as other industries and have untraditionally pivoted to meet demand and seize new opportunities.
Technology was largely responsible for the enablement of insurers that showed great agility and speed in making this shift. However, those slower to adopting technology have found themselves on a burning platform accelerating the need to change. The urgency to become more adaptable is clear according to a recent report from Deloitte Center for Financial Services, which found insurers should expect to be increasingly judged by stakeholders on their response to broad sustainability priorities such as climate risk, diversity and inclusion, social equity, and transparent governance – all of which could become competitive differentiators in the battle for talent, investors, and market share. To ensure both relevancy and profitability in an ever evolving and ambiguous environment, insurers will need to shift focus from risk reduction to risk-taking that enables innovation and is rooted in digital.
The rush to implement change in times of crisis engages what Kotter refers to as the “survive” channel of the human brain. While it is well-suited for dealing with short-term crises, this more fear-based motivator is not designed to support longer-term, transformational change. Once the threat is removed, we will revert to operating the way we did beforehand because that’s what we’re comfortable with. It takes a lot more to transform and to sustain the transformation. Organizations that want to transform need to tap into the “thrive” channel. That’s where creativity and innovation live.
In the face of this, insurers need to find new ways to grow their business while mitigating risk of burnout. The pandemic shifted how customers purchase goods and services, driving the need to deliver differently. To help maintain internal momentum and prevent loss for their customers, insurers can now leverage the IoT to help customers avoid adverse events (e.g., identifying when equipment needs maintenance) and tap a broader ecosystem of partnerships with other businesses to extend their reach and facilitate insurance coverage at various points of sale. One example of this can be seen in embedded insurance, where there is a prompt to purchase coverage at popular points of sale, such as ticket reimbursement for performances if the buyer is unable to attend.
Some insurers have also benefitted from their proactive pursuit of agility that began years ago. For example, in 2012 when Hurricane Sandy impacted operations, Guardian Life began to make significant investments in technology and workforce innovation. The experience of that major shift in thinking and approach drives their ongoing commitment to stay ahead of the curve in responsiveness. When the pandemic hit, the CEO’s proactive approach to risk mitigation had long been empowering and preparing Guardian’s workforce to identify new risks or areas of opportunity. One innovative employee recognized that there were large groups of customers who could not access benefits through employers, such as freelancers, part-timers, or entrepreneurs – all of which were largely impacted by the pandemic. That idea led to the creation of a direct-to-consumer business, which led to the growth of that business line.
Insurers that are looking to instill the organizational agility that served them well during the pandemic will still need to weigh which practices from their traditional ways of working need to be retained to ensure a well-managed enterprise and where those practices over-index on control and risk avoidance to the detriment of innovation and growth. They will need to balance those practices with those of more adaptable, digitally-enabled organizations.
While it can be easy to fall back into pre-pandemic operating models, insurers can and should be intentional about creating a more adaptable organization. To do this well, it’s important to:
Understand the external environment – What are the needs and expectations of your key external stakeholders and how is your business uniquely suited to meet those needs? Look at both the opportunities behind the challenges and the constraints you will need to navigate. Engage people at all levels and across all functions in the organization in developing and understanding the opportunities that exist. Thinking expansively helps to counteract tunnel vision that can be brought about by working in silos.
Take account of your strengths – What unique capabilities exist in your organization that can be leveraged to increase the probability of realizing results you care about? Can you connect the expertise and passion of people across silos to generate new solutions? What capabilities exist that can be unleashed to deliver new insurance products and services? What internal barriers may be getting in the way and are those barriers the result of how it’s always been done, but may no longer be relevant and can be removed to provide more agency for people to understand and respond to stakeholder needs?
Assess and prioritize innovation opportunities – Use a test, learn, pivot approach to quickly bring new offerings to market or to improve internal processes.
Begin with the results – Define success measures at the outset so that you can quickly assess when you are off track and will need to pivot and when there are demonstrated wins to celebrate and share. By making lessons learned visible, more people benefit from the lesson. By communicating wins, more people see proof that the changes being made are bearing fruit.
Stick with it – It takes time to embed new ways of working to the point where people can’t imagine going back to how they operated in the past.
