Are Startups Informing the Next Big Thing in Insurance?

April 28, 2016 Greg Brown

Open any insurance publication and we bet you’ll find an interview with an insurance CEO under a headline saying something like “we need to be more customer centric.” A spot test of this theory using the March edition of the CII Journal did not disappoint – with Covea’s Simon Cooter interviewed under the headline “Putting the Customer First.”

Insurers are investing millions of pounds into innovation in search of new distribution models, new products, new propositions. Insurers are setting up labs, accelerators, venture funds all over the place to provide a suitable environment for finding the NBT – the Next Big Thing.

But would you bet on an insurer finding the NBT?  Perhaps counter-intuitively given the industry’s propensity for self-flagellation, it’s not a straight “no.” UK-based insurer Admiral found the NBT with its price comparison website Confused.com in the early 2000s.

So we’re on the fence on this one – maybe insurers will find the NBT, maybe it’ll be a startup. Nobody knows.

But what we do believe is that insurers should worry less about finding the NBT and worry more about embedding startup techniques into their own processes.  Without these, it’s certain that insurers will not have the environment that will unearth and nurture the NBT.

In this article, we outline a number of these techniques:

1. Future-back thinking

Startups are unconstrained by the status quo – there’s almost no organisational legacy from which to build so they have to identify and serve perceived future market demand. The starting point for thinking is not therefore, “how do we cross-sell to our customers” but, “what do our customers want?”. Corporates are often too focused on short-term incremental revenue, and therefore miss the bigger opportunity. Like startups, corporates must have a clear vision of the future – perhaps through scenario planning – in order to work back to short-term priorities.

2. Be prepared to pivot

Too many corporates see a change of strategy as a failure. Strategies are signed off, project managers assigned to deliver. This can lead to what the author Eric Ries calls “perfect failure” – the perfect implementation of the wrong strategy. Startups avoid perfect failure by continuously analysing the performance of their product and “pivoting” frequently based on their learnings. Sometimes these pivots are material, for example Groupon which moved from being a fundraising site to a group buying business. We believe insurers should re-design the way they design and implement strategy and propositions using this thinking.

3. What is the “Minimum Viable Product”?

How do you know when to pivot? The key is to think in terms of Minimum Viable Products – or MVPs. These are a series of action milestones on your development journey. In other words, each MVP is designed to test the key assumptions in your strategy or product, whether operational – e.g. “will John make progress on this project?” – to the strategic – e.g. “will anyone actually buy this product?”. Corporates often fall foul of this technique in one of two ways: Either they think that having a plan conflicts with being agile so pivot in an unstructured manner, or they think that pivoting is a criticism of the strategy per se – see above.

4. Rethink the hierarchy

Corporates traditionally have a pyramid organisational structure – but the rank and file often have the best insight into customers. On the other hand, startups have much flatter structures – hardly surprising given their relatively small size. But the closeness between the functions is a virtue, not only a necessity. It means that executives and strategists do not run the risk of becoming detached from reality, whether that is setting unrealistic strategies or heroics assumptions about execution. If you want to make things work rather than just be busy, it’s important to give everyone a voice at the right time.

5. Build a vendor ecosystem

Startups don’t think in terms of a single vendor or system. Instead they build their technology stack with a combination of their own technology and third party vendors. The corporate instinct is sometimes to find a single vendor that spans multiple services; the rationale is reduced supplier complexity, better overall functionality. We believe that corporates would be better served by building ecosystems of vendors for different functions. This has two advantages: Firstly, the ability to access market leading capability in any one functional area, and secondly, it ensures that the business is not so intertwined with any one vendor that it creates its own legacy.

Greg Brown is a Founding Partner at Oxbow Partners, previously Head of Propositions and Strategy at Monitise, a fintech business. Greg specialises in helping clients make the transition from traditional approaches to more agile ways of working.