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April 14 2014 | Denise Garth

Innovation is a crucial strategic mandate that is defining a new era of winners and losers. From retail to entertainment and everything in between, decades of business traditions and assumptions are toppling due to change – change that runs the gamut from customer behaviors and expectations to the use of new technologies. This level of change and disruption is unprecedented in the history of the insurance industry and so is its pace. And the pace of change that is coming at us is so swift. It just doesn’t slow down: new technologies, the mash-up of technologies, new uses for these technologies, new competition, new customer behaviors, needs, and expectations. These changes are demanding a new and responsive insurance industry.   

At the same time, the impact of outside and inside industry influencers is escalating, and the explosion of data, the lifeblood of insurance, is creating new challenges as well as opportunities. This growing blitz of changes and influencers are challenging and disrupting long-held and sacred business and operational models and assumptions, requiring new thinking, experimentation, the adoption of new technologies, and yes … innovation. Many insurers, large and small, are grappling with getting their heads around a broad view and a full knowledge of the impact that these changes and influencers will have on the business of insurance in the next 3 to 5 years. 

While looking to the future has long been a part of our imaginings and our very culture, our ability to envision the future for insurance companies is often stymied by the priorities and challenges of today. However, if we want a future, we must rethink how we respond to and embrace innovation as the core of a new culture and the bedrock of a new future as a Next-Gen Insurer. 

In the newly published SMA Insight research report, The Next-Gen Insurer: Fueled by Innovation, the framework of a Next-Gen Insurer is outlined, highlighting it as a reimagination and redefinition of the core components of insurance – the business models, products and services, infrastructures, and customers – all needing to be underpinned by a culture that embraces collaboration, transformation, and innovation. Forward-thinking insurers are creating a clear vision of their definition of a Next-Gen Insurer – defining what they will look like 3, 5, and 10 years from now, and planning how they will respond to influencers within and outside the industry, the path they will take to get there, and the relationships that will fuel the journey. 

Many insurers are on the journey, but they are going at different speeds and focusing on the different priorities that will uniquely differentiate and position them as market leaders. Some are rethinking, reinventing, and reimagining the fundamentals of insurance, while others are retooling products, services, distribution, and processes. Regardless of the approach, becoming a Next-Gen Insurer is a long-term, enterprise-wide endeavor. It’s important to think big even though actions may start small.

So how to begin?

First, recognize that the innovation journey has started, with or without you. The longer you wait – the more difficult it becomes and the more likely it is to be detrimental to your long-term business. Insurers must define their unique vision for how they will evolve into a Next-Gen Insurer. This process requires examining and reimagining the fundamentals of the insurance business and determining how new levels of agility, flexibility, creativity, and competitiveness can be created. There are four critical business components that insurers must reshape and redefine in their Next-Gen Insurer model, the including the customer, products and services, infrastructure, and business model.

At the same time, identify, track, assess, and define how you will respond to or leverage key industry influencers and trends, both inside and outside the industry. Prioritize them, developing scenarios and plans of action, experimenting, and collaborating to gain competitive advantage. This is paramount, not just for competitive advantage, but for long-term survival. The coming years promise unparalleled opportunity for insurers to increase their value to their customers. Those that best capitalize on the key influencers will realize the most in rewards. In contrast, those that do not prepare for the future will find themselves falling behind, losing both competitive position and financial stability.

Equally critical is recognizing that no business, regardless of size, can go it alone and expect to lay hold of all the possibilities and reap all of the benefits. Most insurers lack the time, expertise, and resources to track all of the influencers unless they engage outside industry resources. Insurers must identify partners who can mobilize an ecosystem of both internal and external relationships and resources to capture potential, change legacy cultures, enable the ideas and technologies to be uniquely operationalized within their companies, and in doing so, create their Next-Gen Insurer.

But most importantly, create, nurture, and inspire a culture of innovation that starts at the top and is visibly seen, heard, and acted upon each and every day. Begin by identifying those within your organization who are the outside-the-box thinkers: those renegades, dreamers, and visionaries who can be advocates on the journey. 

The innovation journey toward reinventing, reimagining, and rethinking the business of insurance has started. Don’t delay. The compelling truth behind this powerful insight from an insurer at the 2013 SMA Summit sums it up: “What is innovative today will be expected tomorrow.” See where the new winners and leaders in the industry are in their innovation journey by attending the 2014 SMA Summit in Boston September 15, 2014, and begin your journey today – to ensure that you have a tomorrow. 

 

Contact me at dgarth@strategymeetsaction.com  if you’d like to learn how SMA can help you better understand the journey toward becoming a Next-Gen Insurer and get you started on yours. Click here to learn more about SMA’s research.  


For more information, please contact Deb Smallwood at dsmallwood@stratetgymeetsaction.com