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July 25 2018 | Karen Pauli

In a recent SMA blog, Karen Furtado, SMA partner, posed this question: “Have you ever found yourself hearing a word so frequently that it begins to lose its meaning?” (In that specific instance, the word she was referring to was “transformation.”) But, I think that everyone who reads that question immediately has a specific word of their own that pops into their heads. For me, it is the word “disruption” or any iteration of it – disrupt, disruptor, disruptive, etc.  And because SMA has such deep knowledge of and interaction with the InsurTech movement, those “disruption” words surface again and again.

whoAt SMA, we love the word “transformation.” It’s this year’s umbrella theme of the annual SMA Summit. We spend a significant amount of time with our insurer customers helping them with transformation strategies. We help our technology customers dig deep into their transformation messaging and outcomes. But, disruption – well, not so much! SMA believes that it is very difficult to truly disrupt the insurance industry (even though there is a tendency among some people to throw the word about with unwarranted abandon). So, you can imagine how surprising it was that, after a long and detailed research initiative earlier this year, we actually hung the “disruptor” tag on Munich Re!

The goal of the research was to analyze annual reports, quarterly analyst statements, magazine articles, and public presentations to gain insight into, and maybe some best practices from, the innovation and transformation journeys of some of the largest insurers – Munich Re among them. SMA’s recent research brief, WHO IS REALLY DISRUPTING THE INSURANCE INDUSTRY? And What You Can Learn from Munich Re’s Journey, reviews the findings. There are many lessons to be learned from their journey, but three things in particular resonate:

  • Munich Re did not let traditional reinsurance roles place rails around their innovation strategies and tactics. For example, they worked with a broker (Marsh) to develop a pandemic product. Neither of the participants are traditional players in the product development process.
  • Munich Re has stayed true to their heritage and traditional competencies of risk knowledge and risk management but approached change through a new lens of innovation and brave technology exuberance. We also saw this with Chubb as they have stayed true to their deep underwriting heritage in their innovation strategies.
  • Business units are focused on specific innovation and emerging technology initiatives. They have not cordoned off these responsibilities within IT or stand-alone innovation organizations. Business is an active force, not simply a recipient of innovation outcomes.

Historically, reinsurers have had their unique and critical place within the insurance industry. Because of this, it makes it a bit more surprising and even inspiring that Munich Re is an industry disruptor. Insurers need to study innovation and transformation activities at all industry levels because the traditional (or hyped) competitors may not be the ones who are changing the industry landscape.

To be clear, Munich Re is not the only reinsurer that is on an innovation and transformation path. Others are as well, most notably Swiss Re. However, early on, Munich Re noted unprecedented external forces emerging and rather than reverting to traditional and frequently successful strategies, they boldly placed new lenses on business challenges. And the results are – and continue to be – disruptive. (There, I said it again!)