On September 29th, Aite-Novarica Group’s Insurance practice facilitated a Special Interest Group meeting focused on innovation and emerging technology. Our Special Interest Groups are confidential knowledge-sharing meetings where our team shares recent research and participants discuss industry trends, challenges, and opportunities.
This session began with a focus on some key takeaways from InsureTech Connect 2022 in Las Vegas, which took place the previous week. I, along with Jeff Goldberg (Aite-Novarica Group’s Head of Insurance) and John Keddy (an Aite-Novarica Group Senior Principal), shared insights from the trade show as well as on the state of innovation and technology in the insurance industry today.
Below are some key themes that emerged during the discussion.
- Insurers don’t always have a path from innovation to product.
Many startups that become involved in innovation projects with insurance carriers complain that the insurers do not have a path from innovation to productization. During Aite-Novarica Group’s Silicon Valley Innovation Tour this year, one startup said that it can take 18 months to strike a deal with a life insurer.
One challenge is that carriers can be their own worst enemies when dealing with startups, and organizations with better governance models find these partnerships to be more effective with shorter turnaround times. Carriers will need to make changes to their funding and operating models to connect effectively with startups. See our recent report Why Insurance Innovation Is so Easy for more discussion about structural and cultural barriers to innovation in insurance.
- The industry is balancing industry experience and technical skill sets in hiring.
Some participants mentioned that their organizations may be shifting away from hiring based on industry experience and knowledge and prioritizing candidates’ technical skills. As one IT leader put it, “I came from a different industry, and I think we over complicate [the insurance] industry. Smart folks who can understand it is all you need. As an industry, maybe we are too insular and can use some outside perspective.”
Hiring someone without industry expertise or experience can cause problems, however. The insurance industry is highly regulated, and a person unfamiliar with those regulations could create some faux pas. Folks with technical skills that don’t have insurance backgrounds may be accustomed to an Agile methodology that is not appropriate at an insurance carrier—for example, requirements have to be met exactly during the first rollout, and there’s no room for mistakes.
Ultimately, carriers will need to decide whether they want to prioritize insurance knowledge or technical skill sets in their new hires. If they want both, they will need to expend more to find, cultivate, and retain those resources.
- Innovation can happen in small steps.
Insurance carriers have so much investment in their core systems, which are a major percentage of their IT budgets and roadmaps, that sometimes talking about innovation can feel tiring. Rather than trying to use innovation to tackle all problems at once, successful best practices suggest thinking about innovation in smaller steps that provide concrete value to the organization—and that consumers in the business can see. In 2020, IT organizations in every company implemented tools such as Teams chats and remote desktops that allowed employees to work remotely, and CIOs were heroes for that even though these were somewhat small implementations.
Time to value is an increasingly important metric. Innovation that is incremental and visible to business partners is generally better than big change that is not visible for an extended period. Thinking about how IT organizations can cultivate an environment that supports tactical and routine “wins” in the current economic climate can reduce organizational resistance to change and create support for extended funding the reflects a collaborative experience.
The pace of change in many aspects of the insurance industry is accelerating, and innovation and emerging technology will be at the forefront of our discussions for the foreseeable future. As our recent Special Interest Group session highlighted, there are great opportunities, and challenges, ahead. If you’d like to discuss this, or future, Insurance practice events in more detail, please reach out to me at [email protected].