I am back from the whirlwind of insurance technology trade shows and vendors meetings that happen this time every year, sitting in my office after getting re-acquainted with family and pets. Every year at these shows there is a key word or phrase that rises above the noise and this year I heard “Innovation”. There were great discussions around Big Data, Social Media, Mobile and Location-based technology and of course Customer Experience, but the common denominator was insurers using these capabilities to be more innovative. I spoke with many consulting and system integration firms that have created frameworks, methodologies, benchmarks, ideation processes and case studies to help insurers become innovative. The focus was almost always on marshaling the capabilities mentioned above to create a sea change within their business and market. (Full disclosure: Celent has an insurance innovation offering designed to align IT projects and emerging technologies with insurers innovation goals.) It would seem innovation should be easy for insurers with all of these great capabilities, processes and good advice, but as seen in our recent CIO survey (2013 North America Insurance CIO Survey: Pressures, Priorities—and Innovation
), insurers are struggling with an effective approach to innovation. It truly seems like a long road, cold road to insurance innovation. I believe the problem lies with that great oxymoron, Common Wisdom. Here are three of examples of Common Wisdom from the shows that stand out as blocking innovation.
- “Life insurance is still bought, not sold and needs an agent”
- “Big data can wait. I need to get internal data fixed first”
- "Life and annuity insurers don't need a mobile platform. Transaction volumes are too low."
Each statement seems reasonable. Each statement has plenty of industry insiders nodding in agreement. Each statement is wrong. Here's why: 1) “Life insurance is still bought, not sold and needs an agent”
Life insurance is a natural part of any person's financial planning process. As Millennials (the segment insurers need to capture) become more focused on financial planning and retirement, life insurance will fill that gap younger people always have at the beginning of their investment life-cycle. In financial services like other product categories, Consumers are becoming more inclined to do research and buy direct in many product categories as long as transparency and simplicity are part of the buying experience. For insurance and wealth management it's about end life goals, not the details of the insurance product. Personal lines P&C figured this out long ago, it's not about the insurance, it's about buying the car/house/boat. Insurers need to increasingly position their products as part of the consumer experience, not the product experience, invest in simplification in depth to ease the buying process, and life insurance will be bought as part of the package. 2) “Big data can wait. I need to get internal data fixed first”
If getting internal data fixed is the gating factor to doing a Big Data project, don't bother to order those petabytes of storage, ever. Insurers have been doing data management and cleansing projects for decades and the state of industry data has gotten better but is far from "fixed". In insurance, Big Data will include external data which in many cases will have better veracity and accuracy then internal data, actually creating a more accurate picture of the customer. Even social data, which naturally has inconsistency and veracity issues often has a more timely view of the customer and insurance ecosystem than internal data. Remember the more data you are processing, the greater potential for cross reference and use of statistical tools to actually increase overall accuracy. No reason not to start now except inertia and Common Wisdom as an excuse. 3) "Life and annuity insurers don't need a mobile platform. Transaction volumes are too low."
While it is true that most people will not stop on the street corner in Manhattan to make a beneficiary change (maybe if you just avoided a mugging?), it is critically important for life insurers to participate in the mobile experience. Most life insurers consider themselves an important part of the wealth management industry and the wealth management industry is focusing more and more on having a mobile presence. This was recently documented in the Limra study "DC Plan Providers Go Mobile"
where defined contribution players are very focused on a mobile platform not because there was a need for great “street corner transaction” management but because they recognize that that's where their customer base was doing a lot of their life management including financial planning. As sales of traditional computers sag and smart-phones and tablets continue to grow as the primary electronic interaction point, insurers who don't play in the mobile space will suffer huge brand risk. In some ways, forcing a consumer to a computer based browser to do life management work today is like forcing a bank customer to come into the branch for standard transactions. Bottom Line: I specifically picked these three examples because in each case,(online buying of life insurance without an agent SELLING, Big Data in insurance, and leveraging mobility and local context) the technology capability is available today. Insurers need to move past Common Wisdom, be willing to accept some creative disruption in their world and actually use these capabilities to create some innovative business advantage. And the sleigh ride continues... Thanks to Robert Frost "Stopping By Woods On A Snowy Evening"