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Innovating insurance

Lessons from the world's leading innovators

Innovation – key to future protection

With high levels of protection through regulation and other factors, insurers have lacked an imperative to innovate to remain competitive. Yet shrinking premiums in a slow economic environment, rapidly changing customer expectations and behaviors, and unprecedented technological advancement are changing the game. Insurers can no longer count on barriers to entry to protect them, as emergent forces of change gnaw away at traditional business models. They need a more systematic approach for driving innovation across their organizations, culture and processes. This executive report highlights key innovation lessons from the world’s most successful organizations and identifies specific strategies that can help insurers innovate and outperform.

The insurance industry is rarely noted for innovation. The traditional insurance business model has been in place for centuries, founded on stability and consistency of customer relationships based on sustained trust. Indeed, in 2007 the Competitive Enterprise Institute concluded that, “Since...1959, the [insurance] industry has not introduced a single entirely new property and casualty insurance product for individual customers.”

The insurance industry has largely escaped major dislocation. Insurers have felt protected by strong barriers to entry: strict regulation, the scale to create a risk portfolio based on the law of large numbers, the time necessary to establish a trust relationship with customers and, last but not least, customer inertia.

Yet, in the past several years, change has been accelerating, threatening the complacent ways of the industry. With new technologies rapidly evolving, consumers now expect insurers to deliver superior, personalized and seamless service across all channels. Customers assume carriers will have deeper insight into their individual preferences, as well as anticipate their wants and needs. In a recent IBM Institute for Business Value study, 41 percent of consumers surveyed told us they switched insurers because their previous carriers could not accommodate their changing needs.

To succeed in this new environment, innovative capabilities, once considered “nice-to-haves,” need to become central to insurance carriers’ everyday business. Innovation enables insurers to streamline operations, transform functions, create efficiencies and develop superior capabilities. For customers, innovation can bring advanced products and services for new and compelling experiences. And innovation can help define new partnering and business models, disrupting traditional insurance industry value chains and enterprise models.

Insurers can embrace these opportunities by emulating leading innovators. The IBM Institute for Business Value collaborated with the Economist Intelligence Unit to survey more than 1,000 C-suite executives or their direct reports from 17 industries worldwide, including 57 from the insurance industry. Our objective was to identify the most valuable innovation lessons that organizations can apply to their own businesses.

We identified three key themes associated with financial outperformance in which insurers lag behind innovation leaders: organizational structures that support innovation, cultural environments to make innovation thrive and processes to convert ideas to innovation.


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Meet the authors

Christian Bieck

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, Global Insurance Leader, IBM Institute for Business Value


Lynn Kesterson-Townes

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, Global Cloud & Quantum Leader, IBM Institute for Business Value, IBM Consulting


Anthony Marshall, Senior Research Director, IBM Institute for Business Value

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Originally published 01 March 2016