How Insurers Can Promote a Culture of Innovation To Better Serve The Small-Business Market

Mar 15, 2023 Carriers

How Insurers Can Promote a Culture of Innovation To Better Serve The Small-Business Market

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Businesses are increasingly looking for more personalized insurance products, accelerating the need for change in an industry not known for fast or even consistent innovation. However, the economic climate, customer demand, and new competitors mean that insurers must make innovation a top priority to maintain current success and achieve future growth.

Insurance companies that achieve and sustain a culture of innovation weave it into the very fabric of their organizations. To profitably meet the often fast-changing demands of their small business customers, insurers must be innovative in how they work and compete.

Change management is never easy or simple. Insurers seeking to upgrade their culture to one that emphasizes innovation often fail to translate upper-management intentions into real changes in business processes.

Enabling High-Performance Innovation

With that in mind, here are five actions insurers can take to create a high-performing culture of innovation, including tips on tracking progress and measuring success.

1.   Shift resources from core tasks to breakthrough initiatives.

Innovation is a process of identifying unmet needs and creatively addressing them. This requires a combination of executive mindshare, human capital, and physical assets.

Capacity is what tends to hold insurers back from innovation. Just keeping existing systems maintained and updating existing products with incremental changes requires a great deal of time and effort.

To create a culture of innovation, insurers should reallocate resources from core tasks to innovative, potentially disruptive initiatives that can move them toward new, highly profitable business models and a world of opportunity.

2.   Develop innovation-friendly product development processes.

Insurers must develop processes specifically to produce and manage innovative products. Unlike more traditional product development processes such as derisking and acceleration, these might include the following:

  • New-product development: Unlike anything the company has offered before; a novel product requiring management assets and procedures.
  • Existing product revamp: Substantive changes to an existing product’s features or pricing structure to create an identifiably different product experience.
  • Current product tweak: Minor updates to existing products, such as repricing or adding certain features from other proven popular products.

By separating these development tracks, insurers can pursue a culture of innovation that creates sufficient capacity for developing new or significantly upgraded products with the potential to expand value or open new markets. At the same time, they can maintain market share for existing products.

3.   Pursue new approaches to customer engagement and distribution.

To deliver a differentiated experience to customers and distribution partners, insurers must integrate customer engagement and distribution/marketing with insurance protection. The changing customer landscape now rewards insurers that deliver a more personalized user experience by:

  • Generating ideas based on differentiated customer needs
  • Developing a detailed customer profile for personalizing product offerings
  • Using the profile to tailor messaging for each customer segment, including smaller ones

4.   Make innovation a continuous process.

To achieve clear metrics for success, innovation teams maintained by insurers with a culture of innovation are integrated into the insurer’s routine business-planning cycle. To use a typical example:

  • Assess: With a 2-3 week sprint, the innovation team identifies key problems to solve for purposes of informing the strategic planning process and determining focus areas for the period. Ideally, this will result in a pipeline that avoids sunk-cost bias by being constantly full, with more ideas waiting in line to replace completed initiatives.
  • Aspire: Based on user testing, the innovation team examines, identifies, and prioritizes before undertaking detailed product design. Growth in premium and profit is incorporated into the overall financial plan, informing the selection of KPIs and incentives needed to achieve the revenue or earnings growth needed from innovation during the period.
  • Design, Build, and Launch: Identified innovation opportunities are brought to market through detailed conceptualization, product design, and go-to-market planning. The innovation team develops a business case for each initiative or product, including proof of concept and go/no-go decision points. Having this clarity into what is needed for the product to succeed helps avoid the waste of resources and expense on initiatives that are not likely to succeed.

5.   Use an accelerator for particularly significant innovations.

Often found in companies with a culture of innovation, an accelerator is a separate entity created to drive product innovation. They are charged with achieving a precise amount of growth to fill gaps in the insurer’s growth strategies, measured through strict KPIs and outcomes. 

Accelerators are connected to areas of strength in the company (product, underwriting, digital distribution, etc.) to take advantage of those capabilities while independently exploring disruptive, higher-risk opportunities.

Final Thoughts

A culture of innovation uses strong leadership, autonomy, curiosity, collaboration, and funding to empower change. In companies with an innovative culture, people engage with customers, respond to their rapidly-changing expectations, and ensure that decision-making reflects a willingness to embrace new ideas. 

By following these five actions, insurers can set the stage to take bold, innovative actions that capitalize on market opportunities and serve their customers better.

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