Innovation seems to be a concept that haunts insurers. How do you define it? How do you measure it? How do you implement it against a host of challenges?
Those were some of the questions posed by industry professionals at the IT Town Hall session, one of the final meetings at the three-day IASA Educational Conference and Business Show held this week in San Diego. A regular staple of the conference, the hallmark of the IT Town Hall session is that it lets the audience decide on the topics up for panel discussion.
This year’s panel was moderated by Rod Travers, EVP at Robert E. Nolan Co., while Karen Furtado, partner at Strategy Meets Action, Dick Hoye, CIO of Arrowhead Insurance Group, technology consultant Ara Trembly and StoneRiver product manager Tom Knight represented the panel.
“In innovation, [insurers] are called laggards, but we’re not,” said Furtado. “Innovation is relative. The incremental improvements that come from innovation are significant to a company, but the problem is that most are operationally driven, so innovation is hard to spot.”
Furtado offered the example of a visual test that had been administered in another session where attendees were asked to count how many times a ball was tossed between players. “Less than 10 percent of the people watching saw a huge gorilla cross the stage in front of the ball game,” she said. “We miss the obvious—this is a challenge in insurance, because we are operationally driven, so it’s hard to step out and see the obvious. It’s the obvious that can create change in your company.”
Although Trembly and an audience member questioned the directives of the test as setting up viewers to fail [to miss the obvious], the audience agreed that “innovation” is an elusive but key component to competitive advantage.
“The day-to-day tasks that need to be done have innovation right there, you just don’t see it,” Furtado told the audience.
StoneRiver’s Knight told the audience that it’s important to have a member of a working group on task to keep the rest of the group on focus, but you also need people to be watching for other opportunities to innovate.
An audience member asked the panel how insurers can innovate in the face of the industry’s reputation for being risk-averse.
“It goes to the culture of the organization,” answered Hoye. “Risk-averse cultures send the message that whatever you do, don’t make a mistake. In a sports analogy, it means you're playing not to lose. In our company, we believe you have to try something—limit your downside risk to the extent that you can, and if it doesn’t work out, OK. It’s preferred that the same mistakes are not repeated, but go for it. If you never fall, you are not surfing hard enough.”
Hoye related an example of how an employee in Arrowhead’s workers’ comp division applied innovation to create an operational best practice. “On a business flight he came up with the idea to build a prototype of a process that scans directories, creates a PDF, feeds it into our imaging system and trims time off what was a manual process.”
Furtado pointed to the significance of Arrowhead’s employee acting on an idea that “came to him.” “Find these people in your organization who see beyond directives. It’s not good or bad to just follow a directive; it’s who you are. But you are never just doing the task; you have other opportunities along the way. The key is to understand the talent pool. Who are those people who see beyond the task?”
The genesis of innovation isn’t always in relation to a technology or a process win, agreed the panel, it’s in response to a business need that may be constantly evolving.
“We’re not talking about insurers coming up with the next ‘i-device,’” confirmed Furtado. “The outside world forces us to react to innovation.” Furtado offered mobility as an example: “We want an agent to bind business wherever they are. It’s how we look at our strategy and how we bring these strategies into our technology set. We need time beyond just operations, and we need to know how to keep the action of new technology ever available.”
Travers offered a yet different example—the challenge of how other vertical markets arrive and maintain innovation. At a meeting he attended recently, a BP Oil executive recounted how he had been brought in to transform IT. A year into the company’s plan, the Gulf oil spill occurred. “The executive noted that the IT organization became much more innovative because they had to deal with the spill and as a result were able to blow past bureaucracy,” Travers said. Now that the crisis is over, the challenge will be to remain innovative.
Finally, in response to an attendee’s comment on how difficult it is to innovate against a growing regulatory environment, Hoye agreed that the industry is hamstrung by regulation. “The industry has 50 different insurance codes to deal with that may prevent you from being innovative. But to say we are hamstrung by regulation is a cop-out. You still need to come up with creative ideas that have value.”
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