The insurance industry’s InsurTech autoimmune disorder

man sitting in front of a laptop with a pensive look

The warning signs and five steps to avoid the condition

In my experience, large, highly successful companies tend to do three basic things extremely well: They protect the core business, manage risk and avoid big mistakes. Over time, these capabilities act much like corporate antibodies, protecting the business from various risks. When we think about the centuries-old insurance industry, which specializes in identifying, quantifying and mitigating risk, it should come as no surprise that rapid innovation via InsurTech presents risks that can be misread as threats to the system. This has triggered the business equivalent of an autoimmune disorder which, left unchecked, will ultimately threaten companies’ health and impede their ability to adapt.

Recognizing the condition

An important first step in developing a healthier approach to innovation is for insurers to understand their own internal barriers, but avoid the temptation to simply tear them down. Eradicating them is neither practical nor helpful. Some barriers play important roles as organizational checks and balances against impulsive or poor decisions. Instead, thoughtful workarounds are needed.

Five key steps can help insurers manage the InsurTech autoimmune problem and cultivate innovation

1. Sponsorship. Sponsorship starts at the top. Establishing sustainable innovation as a core competency requires sponsorship from the CEO and board of directors and a clear vision. But innovation should not be just a top-down exercise. Messaging should be inclusive with a clearly stated value proposition for operational teams to help mitigate the risk of antibody rejection at a later point.

The messaging and updates on programs and progress need to be regularly shared with the board, investors and employees. That includes defining–and, crucially, re-defining–goals, success and failure. When proofs of concept or pilots fall short of their original goals (and they will), feeding lessons learned into the next project as a foundation for subsequent success is critical. Being clear about “what we learned,” not “what failed” may seem nuanced, but it’s important to avoid stimulating established corporate antibodies.

2. Sight. Interacting with the InsurTech ecosystem is a key component of innovation. Getting this step right may be the most important of the five elements discussed here. It’s also frequently where a lot of companies lose momentum and direction.

In the current whirl of emerging companies and new technologies, insurance companies typically don’t have an obvious compass to navigate in the InsurTech community. Establishing a corporate venture capital function can help but doesn’t ensure successful commercialization.

The proliferation of sophisticated technology accelerator platforms like Plug and Play and Y Combinator is providing one alternative path. Although they’re admittedly great aggregators of early stage companies, they come with individual characteristics: each has its own business models and financial interests. Understanding the accelerators’ platforms is key to ensuring alignment with commercial interests. This is the face of innovation and capitalism; it’s messy. It’s also highly energized, and at times overwhelming.

Consequently, insurers may find it valuable to work with an experienced partner that has run the gauntlet to help build strong, consistent filtering processes, as well as pursuing other independent channels for engagement with venture capitalists, academic institutions and entrepreneurs as part of an omnichannel strategy.

3. Separation. Intentionally creating separation may seem counterintuitive when the objective is to embed innovation and new technology. But some separation allows the early stages of innovation to run without interference from the corporate immune system. Most new technology will need some place to be tested, iterated and modified. Doing this inside the machine of the operating business simply won’t work. Newer, smaller, and perhaps more fragile operations will be crushed by bureaucracy, processes and metrics, so it’s imperative to create separation until the new technology is ready for commercialization and scaling.

4. Speed. The well-used “fail fast” technology axiom should also include “learn fast.” Speed is important as there is plenty of data to show getting there first with a solid, new opportunity is highly valuable. But most large corporations manage risk by dampening the ability to make quick impulsive decisions that could backfire. Smart and necessary, but slow.

Operating with speed is closely related to creating separation. Providing a safe environment where quick but limited-scale decisions can be made not only fosters innovation, but also protects the core business from initiatives that don’t go as planned.

5. Stealth. The hollow success of press-release innovation is all too prevalent, but truly valuable innovation requires an element of stealth and timing. Really good ideas and technology need time to marinate before a major launch. Moving a great idea out too early into the operating business or the public domain is a recipe for disaster. If there’s a setback, competitors and the corporate antibodies will marshal their forces to kill the project before it’s had time to recover. Delaying the impulse to show everyone how far ahead of the curve you are or how quickly you’re catching competitors requires discipline and focus on the end game.

The risk in being a little too stealthy or a little slow in getting significant exposure is minor when compared to a premature stumble. That sort of error could not only kill a project, but also cast a shadow on the entire innovation process. Remember Quikster? Neither does anyone else.

Fit for action

Corporate immune systems are powerful things and corporate antibodies come in all shapes and sizes. So it takes some thoughtful planning, discipline, focus and sound processes to help adapt them. Sustainable innovation in the insurance industry is not only possible, but can and should thrive. It will require changes in thinking, new partners and approaches as more insurers attempt to incorporate sustainable innovation into their DNA.

Kevin Gregson Global Leader for Commercial and Client Development in Willis Towers Watson’s Insurance Consulting and Technology businessKevin Gregson is the Global Leader for Commercial and Client Development in Willis Towers Watson’s Insurance Consulting and Technology business.

Categories: Insurance and Risk Management, Risk Culture | Tags: , , , , ,

One Response to The insurance industry’s InsurTech autoimmune disorder

  1. brian says:

    well chosen metaphor! and good roadmap for how to overcome our traditional insurance antibodies.

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