Building an architectural framework for insurance innovation
This summer, Ninety has published the Insurance Innovation Blueprint report in which we discuss how innovation in insurance can be most effective. In this article, we share a preview of some of the key areas we have examined.
The “what” and the “how” of insurance innovation
In the rapidly evolving world of the 21st century, innovation is something that’s constantly discussed across every sector. What’s really going on, though?
In our Insurance Idea Pulse 2020 report, we looked at the question of what insurers are innovating. In our next report, the focus will be on the how: how they organize themselves to innovate, whether that is effective, what difficulties they face, and the all-important question of whether innovations are really going to scale.
Our aim is to publish an architectural framework for insurance innovation: a formula or blueprint that helps insurers to design and run better, more effective innovation operating models.
“Building Blocks” for innovation
During the course of our research, we identified 14 key tools that can be used in insurance innovation. These can be considered “Building Blocks” that combine to create an insurance innovation operating model. We won’t run through all 14 right now, but here are a few examples:
- Staff hackathons
- Community of innovators
- Seed funding
- Venture build
- Green field NewCo
Some of these are a little obvious; others are more exotic. The important point to understand here is that it is not a case of simply throwing all 14 Building Blocks into the mix.
We performed detailed analysis on the top 250 insurance providers in the world to discover which of these Building Blocks they use, and spoke to many of them to understand which tools are more (or less) effective, given certain conditions.
Getting the right mix
Spoiler alert: there is no single formula, no one blueprint, no silver bullet that works in every situation.
Different insurance providers have different needs, ambitions, customer profiles and perspectives. For our present purposes, however, we can identify three core factors that are in play:
1) Entrepreneurial ambition. How bold is the senior leadership? To single out one example, Chinese insurance company Ping An is highly entrepreneurial. Other more established names are far more conservative.
2) Organizational structure. How is the organization set up, and where do responsibilities lie? A multinational group will have a very different profile to a single country-based insurer. Likewise, the management style, for example, centralized or federated, is an important factor.
3) Strategy and stage of business. What is the direction of the business, and how has it evolved to date? As is the case in any industry, the insurance sector has players varying widely in terms of their stage of evolution and their broad strategic outlook. These range from young, pseudo-startup players that are focused on aggressive growth, through to established businesses that have been around for hundreds of years and whose emphasis is optimizing and protecting the current state
Which archetype are you?
These three core factors come together to provide a list of “archetypes”: common combinations of these core factors.
In much the same way as you find when creating customer personas, you’ll quickly be able to recognize which archetype is closest to your own business. We will save an in-depth look at these archetypes for the full report, but here are a subset of examples to illustrate:
- The Specialist: typically mid-sized, mono-line, single market insurers
- The Young Gun: typically tech-led, digital-first, young insurers with disruptor ambitions
- The Golden Oldie: typically 100+ year old, global, composite insurance groups
For each archetype, we can craft a particular architectural blueprint for innovation using the right blend of the 14 Building Blocks. So for example, in a Young Gun archetype, the combination of characteristics mean that a “moonshots” or “horizon 3” lab is something that will almost certainly be put to good effect. By contrast, in a Specialist archetype, such a lab is significantly more likely to fail.
By setting out different archetypes, and examining the architectural blueprints that the data shows to be most effective for each archetype, we aim to help insurers get their innovation operating model design off to the best possible start.
Of course, it is important to remember that archetypes only get you so far. No two businesses are the same, so the final strategic mix must be subtly tailored to each insurer.
Find out more
If you are reading this as an insurer, and would like to contribute to the research exercise, we’d love to hear your thoughts and experiences relating to insurance innovation. What is more or less effective in your area of the sector? Please don’t hesitate to get in touch; it would be great to hear from you.