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Insurers – avoid the insurtech autoimmune disorder

Insurers – avoid the insurtech autoimmune disorder | Insurance Business

Insurers – avoid the insurtech autoimmune disorder

As experienced corporate executives know, highly successful, large companies tend to do three basic things extremely well. They protect the core business, manage risk and avoid big mistakes. Over time, they build strong internal forces that are extremely capable in these three critical functions, acting much like corporate antibodies.

While great for the core business, these antibodies can stifle innovation. The same corporate immune system that protects the core business can be detrimental if it misidentifies something as a threat. This is even more pronounced in the insurance industry. Why? Because when the core operation of a successful, centuries-old enterprise is the identification, quantification and mitigation of risk, rapid innovation represents risks that can be misread as threats to the system.

Today’s rapid proliferation of insurtech has triggered the business equivalent of an autoimmune disorder in the insurance industry. Left untreated, it will ultimately threaten the industry’s health and impede its ability to adapt in a rapidly changing environment.

Recognising the condition
An important first phase in developing a healthier approach to innovation is for insurers to understand the barriers inside their own organisations. An initial instinct of many

management teams is simply to tear down barriers, a plan that is neither practical nor helpful. Some barriers actually play important roles as organisational checks and balances against impulsive or poor decisions. Instead, thoughtful workarounds are needed.

New business processes, partnerships and organisational structures can work in parallel to the core business and allow sustainable innovation to occur. In particular, five key attributes can, in my view, help insurers manage the autoimmune problem and cultivate innovation.

Sponsorship starts at the top. Establishing sustainable innovation as a core competency requires executive sponsorship from the CEO and the board. That sponsorship needs to come with commitment, conviction and a clear vision. But innovation should not be just a top-down exercise. Messaging should be inclusive and holistic. It needs to draw elements of the operating business into the process as partners with a clear value proposition.

Sight or direct line of sight into the insurtech ecosystem is a key component of innovation. Getting this step right may be the most important of the five attributes because it’s a critical inflection point. It’s also frequently where a lot of companies lose momentum and direction.

Insurers must identify and understand any potential misalignments with accelerators to optimise their use in achieving business objectives. They will find some platforms unfamiliar in an atmosphere that can be highly energised. While the turbulence of innovation and capitalism may seem overwhelming, it’s vital for insurers to understand their available paths to innovation in the changing technology landscape.

To embed innovation and new technology successfully into their business, companies intentionally create separation from the status quo to allow the early stages of innovation to run without interference from the corporate immune system. New technology must be tested, iterated, course corrected and modified. Doing this inside the business simply won’t work and is better suited for more mature functions. Newer, smaller and perhaps more fragile operations will be slowed or withered by bureaucracy, processes and metrics they cannot cope with or sustain.

The well-used “fail fast” technology axiom should also include “learn fast.” Speed is important in testing, iterating and making decisions around new technology. Empirical data shows that getting there first with a solid new opportunity is highly valuable. But most large corporations operate with intentionally complex and difficult decision trees as an internal control to manage risk by discouraging quick, impulsive decisions that could endanger the broader enterprise — in short, smart and necessary, but slow.

There is a close tie between operating with requisite speed and creating separation. It’s very important to provide a safe environment where quick but limited-scale decisions can be made by empowered teams. Separation protects both innovation and the core business from efforts or actions that might not go as planned. So, the right environment to fail fast, learn fast and move on is as important as moving quickly itself.

Good ideas need adequate testing before a major launch. Moving a great idea out too early into the operating business or the public domain can end badly. If there is a stumble or setback, competitors and the corporate antibodies will marshal their forces quickly and in large numbers to kill the project before it recovers. It takes discipline and focus to delay an announcement rather than giving in to the urge to show everyone how far ahead of the curve you are or how quickly you’re catching up with competitors.

The above was an opinion piece written by Dave Ovenden (pictured), global pricing and underwriting leader at Willis Towers Watson. The views expressed within the article are not necessarily reflective of those of Insurance Business.