Carrier Management published a great feature on innovation in P & C insurance last month (June 2015). Inside the Minds of Insurance Innovators explores the subject of innovation with a group of 16 leaders from different carriers, reinsurers, brokers, rating agencies, and (for good measure) a modeler, by asking each of them 11 questions. The questions and responses present an overall picture of how a 400+ year-old industry approaches the future at a time when the business and technology is changing faster than ever before, and the speed of change is still accelerating.
There are some definite trends in the responses, and some complete outliers. I'd like to explore what these 16 industry thought leaders are telling us with a two-part series: In today's post I will focus on the consensus. Later in the week I will look at the not-so-universal responses, which are interesting of course because they're different.
Commonality #1: The Value of Answers
There is a universal recognition that insurance needs to continue to expand its usage of huge datasets. Incredible amounts of data need to be collected, organized, accessed and — most importantly — turned into answers with analytics.
Even though Big Data (there, I finally wrote it in this blog!) is almost a cliché these days, there's no denying its powerful potential to shape the future of this industry. More than half the respondents cite data and analytics as “the greatest innovation in the P & C insurance industry,” and almost all identify it as “the innovation outside the P & C industry that is having the greatest impact.”
Where they differ lies in how they interact with and use the data. John Wurzler (One Beacon) focuses on the potential to increase efficiency; or, as he puts it: "The development of telematics and big data models that enable carriers to operate more efficiently." David Lightfoot (Guy Carpenter) focuses on the technological capacity to use such vast stores of data, or: "The increase in computing power and the decrease in the cost of storing data.” Yet Laura Hay (KPMG) provides the best summary of the overall attitude toward Big Data:
"The critical issue has become not the availability of data, but identifying what data to gather, how to analyze it effectively, and how to apply the results to the business."
In other words: Data’s great, but it’s all about the answers pulled from the data.
Commonality #2: Regulation as an Obstacle
When asked, “What is the biggest obstacle to innovation within the insurance industry?”, every response refers to regulation or a hesitancy to embrace the risk inherent in innovation (what delicious irony there).
There is one response, from Anand Rao (PwC) that bears quoting at length:
"The biggest obstacle to innovation within the insurance industry is complacency and the mindset that insurance is a highly regulated industry with very little scope for innovation. PwC’s CEO Survey has consistently shown over the past few years that the insurance industry is one of a handful of industries — in the same group as entertainment, media, and technology — that is facing significant business model disruption. Using regulation as an excuse for inaction will leave the door open for external players to disrupt the insurance industry."
As Mr. Rao identifies the mindset as the inhibitor, almost all the other 15 responses basically confirm his evaluation.
Commonality #3: Innovation is Key
The one question that met with complete consensus is about how each company fosters innovation. All respondents identified innovation as an important part of their organization, and described various schemes to encourage and leverage innovative ideas. Thank goodness, because even companies conducting a business that would be recognizable to its 17th century ancestors need to change. Granted, these 16 companies were probably chosen as known innovators, but it’s reassuring to know that there are leaders within the industry that can proclaim the importance of innovation and embrace new ideas and technology.
This blog tries to add a voice that that chorus.
Check out Part 2 of this series, wherein I take a look at those who swim against the stream to see what insight they might offer us.