Some considerations around innovation

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31 August 2009
Nicolas Michellod
Innovation! What does it really mean to be innovative for an insurer? Does innovation deal mainly with insurance products or does it concern also processes? Are there external elements or factors that contribute to facilitate innovation? According to me, innovation relates to both products and processes: Product innovation: In European life insurance for instance, as the market for asset protection and retirement planning grows, insurers are increasingly adopting an aggressive strategy of product innovation. They plan to maintain control over customer acquisition and distribution by managing the distribution lifecycle. While variable annuities may not be the shining star in the next few years, insurers remain under pressure from consumers and professional intermediaries to continue to innovate.Process innovation: One of the business frustrations has been that IT constrains business agility. Adding new products, new channels, making process changes or responding to new regulation must happen on a critical path determined by the technology assets and infrastructure. In this context process innovation can be an important source of competitive advantage for an insurer.In both cases, product or process innovation, IT is not necessarily a "must have". IT is only an enabler that can help companies give birth to an innovation. But are there other factors to be considered that help innovations succeed or contribute to change the insurance competitive landscape? Past examples in other industries tend to prove that at least two parameters have a direct impact on innovations' success or failure:Timing: to be visionary is very important but to implement a new idea or a concept too early can lead to bad results. Successful innovations are the ones that have an impact on a large mass of people and not only a handful of passionate thinkers. Insurers should carefully consider timing and analyse carefully the readiness of the market when thinking to initiate innovations.Dynamic view: some innovations are self-imposed through changes of market conditions. For instance as Web 2.0 technologies push people behaviour to change, insurance players have to understand that even in their own industry the Schumpeter "creative destruction" theory can apply. Blogs, chats, social networking are currently changing the way insurers interact with their customers and diminishing the importance of face-to-face meetings with agents especially in the general insurance sector.Celent's mission is to keep an eye on how the insurance industry apprehends innovations, analyses and evaluates them as well as how insurers decide to implement them. Our goal is to help insurers identify initiatives that will help them gain competitive advantages in the long run and to do so it is important they understand what the term "innovation" really means and what factors can play a crucial role in making an innovation succeed or fail.


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Asia-Pacific, EMEA, LATAM, North America