Few insurers attempt to measure the return on investment from their formal innovation programs, according to the Managing Innovation in Insurance study released this week by Novarica.
The study, authored by SVP Rob McIsaac and based on a survey of 91 insurers, found that more than 40% of large insurers are launching or expanding their innovation programs this year. But at the same time, a significant portion of large P&C companies expressed skepticism about the value of their innovation programs.
McIsaac writes that this could be due to a perception that insurers are taking part in “innovation theater,” where innovation efforts aren’t sufficiently separated from the day-to-day work to be effective.
“There are very real actions companies can take to make innovation real, but it is not something that typically happens when the tasked resources are doing it as an adjunct to their day jobs,” he says. “Innovation in the truest sense of the word requires a top of the organization commitment to fund and nurture it ... and to battle corporate cultures which can act as an enterprise immune system that functions to snuff out things which are perceived to be threats to the status quo.”
In addition to innovation groups, another avenue insurers are taking to speed up innovation in their company is the development of internal venture capital funds or other startup partnership programs. While up to 65% of larger companies in Novarica’s survey already have an initiative like this, less than 10% of smaller companies are able to do so because of the stress it puts on financial resources. However, there are plenty of options when it comes to spurring real innovation at insurers, McIsaac says.
“There are a variety of steps carriers can take, including the creation of dedicated units, the establishment of groups that will be outside of traditional home office environments – and by extension, potentially located in key ecosystem environments where they can flourish such as Silicon Valley,” McIsaac says. “They can also make sure they align dedicated funding to support multi-year initiatives that demonstrate both a commitment to a journey and an embracing of a key concept for innovation: a willingness to fail fast.”