Innovation in Insurance

As in other parts of the Financial Services Industry, innovation is an important theme in Insurance Industry. As insurance players are trying to modernize their operating models and system infrastructures, embedding innovation into their core operations, ranging from product development to underwriting to IT management, remains an important topic. Changes in the industry and increased competition necessitate to make innovation a part of the operating model.

Looking at the industry, it is possible to see that players are focusing on using innovation in different areas. In some cases, the focus is on product development, in some others it is customer management. In some companies, the focus mainly revolves around policy management, underwriting and claims management activities. As all these areas are critical components for the success of the overall value chain, there are some points, which are crucial for the success in implementing innovation capabilities and creating innovative products and services.

• Focus on customer life-cycle: Whether it is life or non-life insurance business, focusing on the life-cycle of the customer and understanding where the customer is on that life-cycle are important in terms of defining innovative solutions. Capturing and responding to important life events for retail customers or responding to developments in commercial customers are important application areas for innovation. As modernization and digitalization are important agenda items for many players in the industry, it is important to keep this perspective to avoid inside-out innovation mind-set.
• End-to-end view: In developing innovative approaches, the focus should be on the entire value chain. Making improvements in different parts of the value chain is important but customers judge their experience based on the journey covering the entire value chain. If an innovation is designed and implemented for the product development area, it is important to make sure that the new feature and its corresponding parts coming with that innovation will execute flawlessly in other parts of the operating model as well.
• Insurtech collaboration: In today's world, it is not possible to be an expert in every area. As digitalization brings many changes to existing paradigms, it is important to find sources from which to draw expertise and capabilities. In this regard, defining the right collaboration approach with Insurtech players will be important in developing innovation capabilities.
• Manage the innovation portfolio: Innovation is not a one-off activity. Identifying potential innovation areas, developing and implementing initiatives require an active portfolio management mind-set. As some of the initiatives will not bring results, companies should be fast in tracking initiatives and managing allocation of resources. It will be important for insurance players to develop their muscles in this area.
• Right metrics: Innovation requires investment and as in other investment-related topics, the return on investment should be tracked with the right metrics. As the pace of change is fast and the rate of commoditization is even faster, it is important to make sure that the resources are used for the right innovation activities.

Innovation is potentially a game changer tool. Developing the right perspective can bring considerable competitive advantages for insurance companies.

The views expressed in this article are the views of the author only. This article provides general information and point of view, and should not be considered as professional advice.