Innovation has become a business im- perative for all organizations partici- pating in today’s super competitive, global economy. Companies slow to
adopt a culture of innovation supported
by flawless project execution quickly find
themselves susceptible to disruption and
competitive challenges. The threat lies
not just in forward-thinking competitors,
but perhaps more importantly from new,
unexpected problem-solvers. As the old
adage goes: “Adapt or die.”
Both insurance organizations and re-
lated risk management service organiza-
tions are challenged by innovation. These
types of organizations have historically
focused on effective data analysis, excel-
ling in their ability to quantify and man-
age risk. However, they now experience
significant hurdles and opportunities in
embracing all aspects of innovation.
As with any established business, insurers
develop a host of orthodoxies in how they
view their market and conduct business.
Orthodoxies reflect legacy thinking, the
process whereby new ideas are filtered out
in favor of existing beliefs, accepted concepts and widely-known generalizations.
This way of thinking can prevent company progress and obstruct innovation.
For example, the need to price insur-
ance products based solely on insurance
claims experience was an orthodoxy
successfully dispelled with the advent of
catastrophe models, homeowners un-
derwriting predictive models, and insur-
ance-based credit models for auto insur-
ance in the 1990s. And the marketing of
insurance through direct channels and
via captive and independent agents now
seems quaint compared to the prevalence
of online sales.
Insurers are challenged to critically
review and uncover other orthodoxies
embedded in their approach to product
development, marketing, technology,
financial management and other opera-
tions. The insurance industry has often
been accused of lagging in investment
and development of cutting-edge tech-
nologies, relying instead on an antiquated
patchwork of systems originally created
for a very different business environment.
This shortcoming makes it difficult to un-
derstand changing customer needs and
results in significant delay for developing
relevant products and services.
Additionally, insurers may be missing
opportunities to take advantage of developments such as big data, data visualization, the Internet of Things, as well as
predictive and prescriptive analytics. Insurers must invest in the necessary tools
to compile and ensure the integrity of
data to support these endeavors.
As a heavily regulated industry, insurance also faces special challenges in embracing innovation. For example, consid-
By Susan Cross, Aaron Halpert and Brad Monterio