Disruptive innovation is a hot topic in insurance. It refers to innovation that creates new value in the insurance ecosystem, potentially displacing or fundamentally competing with existing value propositions, products, and alliances. There are two ways to look at disruptive innovation: some view it as a threat, whereas others view it as an opportunity.
Rowan Saunders (pictured), president and CEO of Economical Insurance, has strongly positioned himself in the latter camp. Speaking at the InsurTech North 2019 conference in Toronto, he said: “If you don’t disrupt yourself, someone else will do it for you.” The innovation headwinds are blowing, he added, and it’s up to Canadian insurers to champion that potential for their customers.
As CEO of a major property & casualty (P&C) insurance company, Saunders is not oblivious to the challenges of adopting innovation. Large, incumbent insurers tend to have legacy systems that cannot move as fast as brand new, state-of-the-art technology systems. Many also have legacy management who are sometimes quite risk adverse and slower to accept change.
“There’s a lot of debate around what the prize of innovation really is, and whether there’s an advantage of being a first adopter,” said Saunders. “Traditionally, in a mature market like ours, a fast-follower strategy has worked quite well, and it doesn’t cost companies as much because they don’t have the pain or the cost of learning. The question that today’s management teams are looking at is: ‘Just because that adage was true in the past, is it still going to be true in the new world with the pace that you can now move at?’
“Innovation doesn’t happen easily. You’ve got to be very thoughtful and determined to make it happen. With the innovation headwinds blowing in now, I think insurance companies need a leadership team that’s convinced in the need to innovate and disrupt their own businesses. If you don’t disrupt yourself, someone else will do it for you – and your customer expectations are getting higher and higher. Insurance companies need to champion that, and they’ve got to earmark funds for innovation.”
Economical Insurance made a landmark move on its digital journey when it launched Sonnet in 2016. Sonnet is a 100% online home and auto insurance company, which Saunders claims, to this day, is the only fully digital insurance experience that’s available across Canada. The firm, which many (especially personal lines brokers) would consider disruptive, uses innovative technology, advanced analytics, and simplified policy language to make the process of buying insurance easier for customers.
Through launching Sonnet, Saunders said he learned the importance of “working in an agile environment,” managing staff and operations with an agile outlook, and engaging with innovation in an enterprise-wide fashion rather than in isolation.
“When it comes to innovation, once you’ve released the genie, you can’t put it back in the bottle,” the CEO commented. “I think you need to do a little bit of incubation to get things going but then you’ve got to put it into your business. Some organizations lean innovation on its side because they’re worried about the mother ship becoming a new business, but in doing so they miss out on so much in terms of taking learnings across the business. For example, we’ve now transformed our traditional 147-year-old, broker-based business through the learnings from our digital business, Sonnet.”
