Criticizing insurers for their lack of innovation and technical progress has been a sport for at least 3 decades. The most recent focuses on ‘digital transformation’. The reality is that many insurers are very innovative, but not always focused on organizational transformation. As an industry, are we missing the boat, or floating as best we can?
We are our own best critics
Mark Wilson, chief executive of Aviva PLC, was recently quoted in the Wall Street Journal saying, “I think insurance is in the Stone Age while other people are circling Mars.” Wilson noted that insurance customers would buy more products if these were understandable and available on-line.
And Aviva is putting its resources on the table. It is well known for targeted investments in technology world wide. Wilson indicated their current spend is £100 million (C$201 million) per year.
And the results are evident. In the UK, the WSJ reported that there had been “£91 million in annual savings, out of a £225 million target, which it said was ahead of schedule.”
Aviva Canada is widely recognized as a digital leader. Full marks to them.
Scale is scale …
In technology, scale matters. Great ideas are important, but without resources to implement at scale, they are theory, not reality. And some luck helps. Consider:
- Steve Jobs placed a very large bet on the iMac and the ‘Think Different” campaign. It went brilliantly, but there was no guarantee.
- Bill Gates and Microsoft got its start by piggybacking on IBM’s greater interest in hardware than software.
- Not every insurer has the capacity of Aviva to hire resources from Amazon and Google to focus on their vision.
And when scale is lacking….
The Canadian insurance industry has consolidated somewhat, but remains fragmented. In 2014, The top 10 insurers wrote over 60% of the P&C premium in the private sector Canadian Underwriter Statistical Issue).
However, there are a total of 50 insurers writing over $100 million net written premium, half of whom wrote less than $260 million. Many of these are well respected regional and/or specialty writers. who would have a small fraction of the resources available to writers such as Aviva.
What does this do for innovation?
Things get very selective. Sometimes the focus is on customer acquisition, sometimes on service improvement. At the 2015 Insurance-Canada.ca Technology Awards several smaller insurers took home trophies:
- Erie Mutual Insurance Company took a finalist award for turning to data analytics to become more customer-centric, analyzing its customers with the PRIZMC2 segmentation system to better understand market size, policyholders and prospects.
- The Guarantee also took a finalist award for setting up an online incident-reporting tool which allows transportation customers to report a claim, create alerts, add distribution lists, find a contractor, and get access to resources from strategic partners, and
- Industrial Alliance took the People’s Choice Award for deploying a new underwriting, policy administration, billing, claims and customer management platform for auto and homeowners and other personal lines of business for its operations in Quebec, replacing legacy systems.
Of the three organizations, Industrial Alliance was the only one which undertook a corporate level, transformation project. However, all were recognized for innovation which provided better service to customers and improved profitability for the organization.
What do you think?
Does innovation require large risk and large scope to be celebrated? Or should we celebrate small victories which show real improvements?