(Part two of the two-part series. To read part one, click here.)

What are the benefits to implementing wild, “out there” ideas within a typical insurance organization? For one insurer, it resulted in a successful iPhone application that enables payment deposits. For another, it panned out to successful development of a niche line of ship cargo insurance that provides unique coverage against risk of Somali pirates.

The ultimate benefits of such programs may be palpable, but getting an insurance organization to foster and fund support for such ideas is not necessarily an insurmountable challenge.

Such was consensus last week among insurance executive panel participants at the CIO Insurance Summit in Scottsdale, Ariz.

Lead by Matthew Josefowicz, head of the insurance practice at New York-based Novarica, the three-member panel offered candid insights into their respective organizations’ innovation philosophies and tactics.

Josefowicz asked the panel to describe whether their organizations had a formal innovation program, and if so, how ideas that come from that program help eliminate their companies’ operational redundancies, reduce processing time and cost and deploy the most-efficient use of resources to create a competitive advantage.

Andrew LaGravenese, CIO and head of innovation at Chubb, said his company recognizes two types of innovation: the day-to-day type that may help optimize existing systems, for example, and the “change-the-world” type of innovation.

Creating a formal process for LaGravenese and his staff of four to follow, his team routinely seeks both types of innovation, noting that both types are typically driven by a business need and, therefore, can obtain the appropriate funding.

Panelist Rickey Burks, VP, CTO, USAA, said his company tends to look at its innovation program in a broader way, applying incremental strategies to it. “This includes everything from the day-to-day to breakthrough innovation that borders on science fiction. We hope most of our innovations turn into breakthroughs at some point, so we fund accordingly.”

In a risk-aversive industry, putting funding toward raw innovation takes courage, Josefowicz pointed out. “It’s often tied to measurable results,” he said.

Burks disagreed, stating that he is opposed to conducting a cost-benefit analysis for each and every innovative idea that comes forward. “I believe if you try to do a CBA on each deal, it will be counterproductive, and you’ll leave innovation behind. So we fund on a case-by-case basis.”

At MileMeter, said CEO Chris Gay, innovation carries a lot of weight. “If we don’t innovate, we die,” he said.

MileMeter, which uses the “pay-as-you-drive” model, implemented an innovation program that is tied to venture capital funding. “We need to achieve in certain areas in a certain timeframe, so that pushes us to think creatively—and quickly,” Gay said.

MileMeter’s innovation program gave birth to a new product designed specifically for the state of Texas. “We were under pressure, and we knew the product wasn’t perfect, but we launched it and then within 12 months, we revisited our offering, and extended its coverage and service levels.”

At Chubb, assignments are given to specially picked internal teams. One such assignment: foster ideas for profitable growth.

“Ideas come pouring in from underwriting, claims and everywhere,” LaGravenese said. “This is how we came up with the Somali pirates cover.” Chubb partners with Imaginatik, a company that offers collaboration and innovation management tools.

At USAA, which provides property/casualty insurance to members of the United States military forces, close to 900 ideas came forward in the insurer’s program over a period of about three months.

“This program allows us to identify breakthrough thinkers,” said Burks. “We tend to think college grads have the best ideas, and we are identifying people in the business areas who are leaders in business innovation. During brainstorming sessions, we look for people who might challenge the status quo.”

LaGravenese agreed that millennials tend to bubble up with great ideas, and says his company looks for people who, during a brainstorming session, create an avatar, or upload a picture—this is telling behavior. We found a very high usage of IT among these people.”

Both Gay and LaGravenese concurred: The establishment of a formalized approach that taps functional teams is an effective way to give innovation a boost.

“For us, innovation is how we leverage what we already have,” Gay said. “It’s how our teams approach idea-building, using technology to extend an existing idea to something unique.”

Burks agreed: “This is how we ended up developing an iPhone deposit application,” he said. “We took the ‘deposit services’ that we already offered, and made them available on an iPhone. This took a great idea further—to our seven million members.”

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