Access to advanced technology concepts in A.I., the ‘Internet of Things’, open APIs, and “App”-less modes of interaction are changing the way we think about customer engagement and delivering value.
With very little capital, if I was motivated to do so, I could leverage libraries from Google, Facebook, Microsoft and additional open-source assets today to do some quite incredible smart things. Through the public cloud, I could host a scalable application in a secure environment and benefit from the massive compute power available to me without having to physically plug in anything more than a Chromebook, Surface or Macbook.
Put simply, the cost and speed of experimentation for us all has reduced incredibly in such a short period of time, and with it market access. The traditional technology barriers to entry crudely no longer apply in the same way they once did. Yet, many insurers still struggle engage and experiment with the opportunities that these new technologies and concepts present.
So, how much of this risk is real to a struggling incumbent? Will they be usurped by a technological upstart?
In an insurer survey of digital leads and innovators earlier this year, we set out to discover just how much activity was being channeled into searching the market for ideas, experimenting with them, and then looking to integrate & scale them up into their existing business.
Using a framework guided by the work of David J Teece’s on ‘Dynamic Capabilities’ (a theory that assumes that a firm can adapt to changing environments if it maintains strategic flexibility), we broke innovation activity down into: (1) ‘sensing’ (monitoring the external environment for opportunities); (2) ‘seizing’ (experimenting to test concepts and technological ideas); and (3) ‘transforming’ (integrating and scaling up concepts into the existing business).
I guess that the overall results will come as no big surprise in that those insurers who describe themselves as ‘digital innovators’ claim that they are much better at all three skills than those who describe themselves as fast followers or patient observers.
However, from a relative positioning perspective, there is one area that stands out as requiring immediate attention regardless of where you sit in the race for survival. All three types of firm struggle with ‘transforming’ their business. Scanning the market and experimentation come easier and are cheap compared to scaling an experiment to deliver real shareholder value.
In some respects, it could be argued that the challenge for many an incumbent insurer today is not a lack of imagination or a willingness to experiment, but instead a lack capability to turn an opportunity into something of real business value. New insurtech technological upstarts often don’t have this issue and start from a better place, albeit that they suffer from other challenges around brand value, experience and financial security
However, if this picture is going to change for incumbents, then it not only requires close attention being paid to the legacy product and technology landscape (often cited as one of the main barriers to change), but also a commitment to the change legacy mindset behind their willingness to take tough decisions at pace and champion the change.
As with all forms of strategy, it is the quality of execution that becomes a key factor in determining long-term success or failure. With innovation in this digital age, there is simply no difference. Now, clearly, some insurers are stepping up to the plate. However, will the others follow? We’ll have to wait and see.
Senior Vice President | Global Insurance