Cultural transformation and data initiatives are top carrier priorities
A majority of insurance carriers do not consider themselves to be innovation market leaders, as most are still adjusting to the burden of keeping up with emerging technologies, according to new research from Strategy Meets Action.
SMA’s annual innovation in insurance report finds that nearly half (42%) of the 99 insurers surveyed are not currently investing or even monitoring mature technologies. In addition, only four percent identified themselves as “leaders” in insurtech, down from 13% in 2015. SMA credits the trend to carriers’ focus on creating cultures of innovation within organizations before taking on any large initiatives. Historically, cultural challenges has been identified by respondents as the largest obstacle to digital transformation.
“Insurers are figuring out how to create a culture of innovation,” writes Deb Smallwood, president and CEO of SMA and the author of the study. “Many now realize that innovation is not only a market differentiator and competitive advantage, but also a mandatory requirement for the future.”
To achieve business goals, carriers are intent on launching new data and analytics tools, core products and improving policyholders’ overall digital experience. Each goal is made possible by the industry’s growing emphasis on completing legacy systems replacements, expanding insurtech partnerships and creating new business roles, according to the study.
"Core systems are still high on the list [of insurers' starting points for innovation], indicating that a consistent foundation and a fundamental, modern core system platform and environment on both the business and technology sides is very important," Smallwood writes.
Lack of an innovative culture is the biggest challenge to modernization, according to carriers surveyed. Other hurdles include: lack of funding, legacy systems, and leadership buy-in.
“A growing number of insurers are starting with culture when they begin innovation journeys,” Smallwood concluded. “Cultural change must have leadership buy-in and support. Ground-up changes can be made, but there also needs to be top-down support.”
For P&C insurers further along in the process, C-suite executives continue to take charge in innovation efforts — as cited by 51% of companies. IT involvement is declining as a percentage of overall activity, but the IT department remains the greatest adopter of emerging technologies within organizations, at 33%, according to SMA. This indicates that technologies are still the ones identifying potential winning technologies and bringing them to the business side.
“[Evaluating] emerging technology, to a majority of insurers, is still an IT project,” Smallwood continues. "It will be fascinating to see if this IT trend will eventually be surpassed by business units, too.”
Insurers are looking to solve a number of business problems with digital innovation, SMA notes.
“Not surprisingly, changing customer experience and expectations are the number one triggers for innovation across all lines,” says Smallwood. “A customer expects to have an interaction with their insurer that is different than ever before. How an insurer creates this new interaction can make the difference between a lasting relationship and a fleeting one.”
Carriers are predominantly leading innovation activities within the enterprise, Smallwood says. Only 12% of respondents reported having an off-site innovation lab, though more companies intend on opening one in the near future.
"These are great ways to ideate, separate from the traditional, and grow innovation from within a company," Smallwood concludes.