March 15, 2022 James Tribe
The term ‘InsurTech’ is now almost a decade old, and the number of InsurTechs has ballooned to more than 3000. Yet many would argue that little has changed. Many insurers still rely on legacy technology and work-flow styles of engagement with InsurTechs.
We spoke with Pete Roberts Founder of Data-Sandwich, a company that specialises in starting insurance innovation projects, about why this has happened – and what can be done to change it.
For most of us in the insurance industry the word “Innovation” conjures up clear and probably unwelcome images of whiteboards and vague guidance to “think outside the box” or do some ‘blue sky thinking ‘. Unfortunately, this approach is not a good fit for the deeply logical culture of insurance.
When embarking on innovation projects, what tends to happen is that executives or outside consultancies try to engage the underwriters, actuaries, product managers, channel managers, pricing, marketing, IT and so on for creative, ‘right-brained’ ideas. But these individuals are required by their day jobs to be logical, risk-averse and ‘left-brained’. As a result, creative ideas often get diluted early on, to the point they are no longer even an innovation, but just an incremental ‘improvement’. Or from the other side, big ideas from higher up may be met with scepticism by the core teams. The term that usefully sums this up is ‘innovation fatigue’.
Overall, innovation starts in a business’ culture, but the approach to getting people to think innovatively within insurance doesn’t fit the bill. There needs to be a guided, balanced way of accessing both the creative and logical sides of the brain when approaching innovation.
I think this mismatch is reflected in how insurers interact with InsurTechs too. The incumbents are understandably cautious and want to see concrete deliverables, but they also don’t have the best internal mechanisms and buy-in to get innovative ideas for new products over the line. They’re coming to InsurTechs before their own innovative thinking is fully defined and formulated.
Even if there’s a lot of conversation going on around innovation, there needs to be a framework that’s understood by all. Otherwise, preconceived notions that seem like common sense to all can end up being wildly misleading. This is well illustrated by an anecdote by Rory Sutherland in which five senior economists are given the same bottle of fine wine. Despite having the same information and even tasting the wine, they all arrive at different answers about the wine’s value.
This is further exacerbated by the deluge of marketing hype around InsurTech. I think we are reaching a bit of a tipping point where people are getting fatigued by marketing hype that all sounds very similar. It makes it hard to consume and digest information about vendors, so many insurers end up ‘playing safe’ with big names when there are better options out there. The problem is that those options don’t have the voice to get heard over the established players.
What they need to do is reverse this process.
First, they need a corporate approach that engages the creative, right-brained approach to innovation. They need to draw out the ‘cognitive surplus’ which comes from within their own teams, not from outside vendors. It’s the complaints heard by the customer service teams, and those that come up with ideas at the bar, who understand the business pain points best and have the best ideas for change. These need to be allowed to thrive.
From there, we need an approach that connects insurers with a vetted shortlist of vendors who have the specific functionality to make that meaningful innovation happen. To end with an anecdote, I remember working for a systems provider in India. They have 37 million motorcyclists there, and even more helmets! Yet it was an insurance broker who rode a motorcycle who came up with the idea for an insurance product for helmets, beating all of the incumbent insurers to the punch. This is an excellent example of how simple ideas, given space to move through an open but structured process, can reach fruition and create genuine innovation. It comes up from the people “on the ground”. It just needs the right tools and approach:
About Magellan
Magellan™ is the Oxbow Partners insurance technology navigator, helping (re)insurers to accelerate vendor selections, scout projects and landscape assessments. A more efficient way to create shortlists of relevant solutions and validate existing potential.
About Data-Sandwich
Data-Sandwich seeks to be a kick-start for better Insurance Innovation by effectively addressing three simple truths, via a unique Workshop + Prototyping method.
Get market insights straight to your inbox
About the author
James Tribe, Content Manager - Magellan
James manages the content and data for Oxbow Partners’ insurance technology navigator, Magellan. He has previously worked in a similar role building a database of high growth UK start-ups. James has a first class degree in English Literature from the University of Exeter.
Contact James
