Stay Curious And Consider Insurance Innovation As An Infinite Game
The winning insurance firms of the future will be those that leverage the most innovative technologies to accelerate their digital strategy – is one of our firm beliefs. However, to be able to do that companies ánd their leaders should never think of innovation as something with an end station. Learning is something you should do continuously, to be able to stay ahead of the game. And who are better aware of that than the people whose job it is to learn new things; the academics?
Alexander Braun is Director at the Institute of Insurance Economics of the University of St. Gallen (HSG) in Switzerland, where he also holds the Associate Professorship in Insurance and Capital Markets. Overall, he looks back on more than 12 years of combined scholarly and practical experience in risk management, insurance, and the financial markets. He serves a referee for over 30 different scholarly journals, has been awarded for his research and teaching activities and is often been invited as a keynote speaker at industry events.
We sat down with Alexander to discuss insurance innovation, how insurers can stay ahead of the game, what companies can do to learn (from others) to develop futureproof business models and what, in his view, the most important insurance trends are at this point.
Roger: In cooperation with Swiss Re, you published the book ‘The Current Insurtech Landscape: Business Models and Disruptive Potential’ , where you answered questions such as ‘How can we distinguish between technology-oriented competitors, enablers that promote the digitization of the insurance industry, and genuine disrupters that may fundamentally change the traditional insurance ecosystem?’. What has happened in the industry’s landscape since then?
“One of the key findings in that study was that the majority of insurtech firms did not adopt a business model that competes with the insurance incumbents. Instead, their goal was to help incumbents successfully master the process of digital transformation, both by offering solutions for the digitization of the existing value chain, but also for the creation of new business models.
Accordingly, in the following years, we observed a lot of promising collaborations between insurtechs and incumbents. Moreover, some of the startups with a competitive approach secured large funding rounds, managed to grow substantially and are now constantly luring away talent from the traditional players. Those firms are certainly on the radar screen of insurance executives for the years to come.”
Roger: Clearly, the insurance industry is going through a metamorphosis. How can insurance companies stay ahead? How can they gain new perspectives to re-asses their current strategy – and to set the right priorities?
“I believe that we need to stop thinking in the traditional ways of our industry, which is a great challenge. Innovation leaders manage to part with classical industry wisdom and think outside the box. That, however, does not mean you have to reinvent the wheel in order to come to new ideas. There is a lot to learn from other industries that already underwent a major transformation process or that spearhead digital innovation. Connecting with veterans from those industries as well as insurance and insurtech leaders, can spark inspiration for revolutionary innovation projects. Innovation can be accelerated by learning from others – who are rarely shy about sharing their success’ stories!”
Roger: Your ambition is that more insurance carriers seize the opportunities offered by new technologies in the insurance and insurtech industry. Can you give an example of how insurers can turn all these new competences into new value; not just for themselves, but also for their clients?
“A good example are data-driven programs in the health sector. Beyond the classical financial protection, health insurers can offer their clients advice for nutrition, exercise, stress reduction and disease prevention that helps them to maintain a healthy lifestyle. Such services can add substantially more value for customers, if they are based on sensor data from phones or wearable devices such as wristbands and smart clothing.
At the same time, insurance companies may be able to reap direct benefits from new revenue streams and indirect benefits through a healthier risk pool.”
Roger: If you had to name one thing, what is (in your view) the key success factor for companies to stay relevant and tackle innovation challenges?
“By staying curious and considering innovation as an endless game rather than a goal that will be completed at a certain point in time. Innovation never stops, so if you want to stay ahead of the curve you should always try to challenge your business model and your way of working and thinking. Ask yourself: what can we do to become better, faster and more customer-centric? In my opinion, those questions cannot be answered without embracing the most important driver for innovation and value in insurance, which is data.”
Roger: Let’s zoom in on that (the single most important force for innovation and value in insurance is data). What trends are driving the growing importance of data?
“There are at least three major factors that underpin the importance of data for innovation in and outside of the insurance sector. First of all, the amount of data available from real time and non-real time sources is growing exponentially. We are already deep into the era of zettabytes, a unit that is estimated to correspond to around 200 times all data created since the beginning of humanity. In addition, we now have the required hardware and advanced analytics (artificial intelligence) that allow us to separate information from noise. Finally, customers are increasingly looking for a new generation of products and services that are tailored to their individual needs and expectations. To deliver those, we need to develop a better understanding of the customer, using data.”
Roger: Regarding that third trend, how important is customer experience in developing a real game-changing, innovative, business model?
“More important than ever; especially as the pandemic has created changes in customer perceptions, behaviour and consequently, expectations. It is much more about advanced personalisation and improving the frequency and quality of customer contact throughout the customer journey. To achieve that, businesses should focus on customer centric innovation to keep customers engaged.”
Roger: A final question, in relation to The University of St.Gallen. As we know it is the #1 business school in the field of insurance and received the highly value Triple Crown accreditation, only held by 1% of all business schools in the world, for high international quality standards. I can only imagine that this accreditation comes from the University’s promise to the outside world: ‘From insight to impact’. How is that message reflected in the Institute of Insurance Economics (I.VW-HSG)?
“At the Institute of Insurance Economics (I.VW-HSG), we strive to produce practically relevant research results and turn those into valuable insights for the industry. An important instrument to achieve this goal is executive education. We offer executive courses through which we inspire leaders of the industry to successfully manage their business.
The latest example of such a course is ‘Next Level Insurance Innovation in the Age of Data’ that we set up with Digital Insurance Agenda. The combination of St.Gallen and DIA poses a unique opportunity to present the best teachers; both from the academic as well as the business field. We have built in elements to push interaction with those experts in insurance and innovation, so that we enforce learning through active participation. That way, we make it possible to deliver insight to impact in just a short time investment.”
Alexander Braun, Professor in Insurance and Capital Markets and Director at the St.Gallen University Institute of Insurance Economics
Are you interested to join The Executive Education Course ‘Next Level Insurance Innovation in the Age of Data’? Quickly navigate to our course education page.