The insurance sector is undergoing rapid change, as established players scrabble to respond to the insurtech revolution disrupting a once staid industry. But to the untrained eye what’s currently going on can seem like a frantic, chaotic affair. We don’t think so. That’s why we created a virtual model, which provides a useful way to understand this fast-evolving space.
All together for innovation
There are essentially four different types of insurance innovation models. Let’s start with Model A: the All Together Innovator. These are the businesses which commit at an executive level to fostering a culture of innovation — to becoming a company full of entrepreneurs. All Together Innovators may have an innovation team, or Head of Innovation, but the aspiration is to let all employees innovate. Ultimately, it is hoped, the business will evolve into one in which great ideas naturally bubble up and are spontaneously taken through Lean Startup-like processes towards eventual pilot and scale.
We love Model A businesses. In fact, every insurer should aspire to this model and most do. The problem is that they find it hard to turn this aspiration into reality. In the end, the monolithic corporate culture becomes a block on risk-taking, fail-fast innovation, with such projects often viewed as expensive distractions from the core business. Typical symptoms of a Model A business struggling to make it stick are ill-sponsored “innovation challenges”, dusty suggestions boxes, and a failing internal innovation lab.
A plan B
However, all is not lost: for struggling Model A businesses, there’s a Model B. We call this the Arm’s Length Innovator. In this model, the business decides that in order to innovate it needs to free its innovation function from the red tape and legacy culture and give it some “green-field space” in which to operate. In a great show of gusto, new office space is rented in a high-creativity, insurtech-rich, startup-buzzy part of the world, a slew of millennials in jeans are recruited, and a set of fantastic new tools, techniques and methods are deployed. It’s the world of Trello, Slack and WhatsApp; the world of insurtech and customer collaboration; the world of sprints, story points and backlogs.
We also love Model B businesses. Their sheer creativity is enormous. The ideas are big. The innovators are unfettered. And the results are initially impressive: powerful new prototypes, clickable InVision demonstrators that anticipate a different future, and the ubiquitous Alexa skill. Frustratingly, though, the “old school” main organisation remains “full of dinosaurs” who “don’t get it”, and ultimately fails to seize the awesome new ideas and take them to scale. The innovators in the Arm’s Length Innovator labs bang their heads against walls, but can’t get their ideas to market. To a significant degree, this is the natural consequence of their unwillingness to hand off proven ideas to the scaled organisation to take to scale. It’s also a symptom of the “them ‘n’ us” clash and antagonism that almost invariably grows in Model B. At some point, the CFO comes knocking, looking for return on investment, and fails to find it. That, combined with the cultural angst brings to an end most Arm’s Length Innovators after 2-3 years on average.
The Armchair Innovator
For organisations that fail to innovate “All Together” or at “Arm’s Length” there’s another model: the Armchair Innovator, our Model C business. This is effectively a venturing arm model, whereby a chest is set aside and spent through a scouting and investment function on a series of innovative insurtech start-ups. Often associated with various insurtech accelerators, Armchair Innovators spend their money not on innovating for themselves, but on accessing the innovators.
While we also love these Model C businesses, there is a hint of clinging on to the coat-tails of those better able to innovate. Ultimately this model doesn’t change the underlying insurance business in the way in which it needs to.
So what’s the answer? We’d advocate blending Model C with Model A, which is entirely feasible, though hard. Model C businesses who realise that they need to do more have a great opportunity to cycle back to Model A.
The Angsty Innovator
If they don’t, they could fall-out to Model D: the Angsty Innovator. This is our tongue-in-cheek term for those key individuals who have tried to push their insurance businesses to learn to innovate. They’ve normally been involved at the forefront of trying to make Model A work. Then they’ve spearheaded the move to Model B, and personally led those Arm’s Length labs. Ultimately, they’ve found themselves constrained to finding interesting start-ups to invest in and mentor. On occasion, these Angsty Innovators get so frustrated at being pulled back to the mothership that they leave their incumbent business and go and do it for themselves.
This is sometimes a highly successful move — just look at the founders of companies like Slice, Neos and Wrisk. There’s certainly much to be celebrated about these excellent new Model D businesses, forged in the frustration of the founders’ experience in established insurance businesses.
We applaud these innovators loudly. And yet to “leave behind” those scaled insurance businesses trying to be All Together Innovators — giving them up for lost — doesn’t quite sit right. After all, it’s these large-scale organisations that in many ways have a crucial role to play in underpinning the stability of society as a whole: our government, our private lives, our commerce — our entire way of life. That’s why it’s our responsibility as a sector to help turn all insurance value-chain participants into successful All Together innovators.
This article was first published on the Insurance Post: https://www.postonline.co.uk/commercial/3744611/blog-the-four-stages-of-insurance-innovation-a-model-to-make-sense-of-the-market