and, more recently, demand for cyber
coverage has increased. Innovation is
currently being harnessed by insurers to
deal with the introduction of smart technology in automobiles and the advent of
driverless cars. While there are not extensive data sets to support traditional
actuarial analyses around these emerging risks, insurers are well positioned to
bring the right blend of talent together to
innovatively address them.
Extensive experience with financial
risk has also enabled forward-thinking
insurers and reinsurers to take advantage
of alternative forms of capital, such as
insurance-linked securities. This additional capital, coupled with several years
of low catastrophe activity, has strengthened the financial position of insurers.
Benign claims inflation has also contributed to relatively strong balance sheets
across the industry, which in turn provides a solid foundation for adding new
risks that further diversify existing portfolios. Building diversified underwriting
portfolios is one of the core strategies
that insurers can leverage to manage the
changing risk landscape.
Finally, insurers have the infrastruc-
ture and experience to service the risk
transfer process. With the ability to
navigate the regulatory framework, the
network to adjust claims, and the rela-
tionships with insureds through exist-
ing product offerings, insurers are able
to provide the service that is required by
many risk transfer products.
The industry does need to be careful
not to fall into the false belief that this
level of service will always be required
for every risk transfer product, but there
is no doubt that the knowledge amassed
by the industry in understanding risk and
translating that into tangible risk mitigation advice for insureds will continue to
be of value.
For an organization to incorporate a culture of innovation throughout its operations, supply chains, networks and ecosystems, it must begin by anchoring that
concept deeply within the top levels of
organizational leadership — the C-suite
and the board of directors. If innovation
does not have the commitment and full
support of the organization’s leadership, it
cannot possibly flourish.
Successful leaders understand the im-
portance of culture and setting the right
tone for an organization. Innovation, when
truly part of that culture, should be seen as
a seamless and impactful contributor to
the business, not an afterthought. Stake-
holders such as investors, analysts, media,
customers, and supply chain partners are
perceptive and will see through insincere
efforts, so innovation must permeate thor-
oughly in order to be most effective.
Integrating innovation into the intangibles of the organization’s culture can be
difficult. It’s far easier to build an innovation process and structure into more
tangible areas like research & development, product development, and even
marketing and sales. It is far more difficult to strategically bind it to the organization’s belief system, its core values and
reason for being.
“For innovation to become fully em-
braced and strategically applied, it must
become a part of the organization’s cul-
ture and supported by leadership,” said
Kevin Bingham, co-chair of the Casualty
Actuarial Society’s Innovation Counsel.
“Everyone must believe and engage in
the cause to apply innovative thinking to
In fact, given the complexities of con-
ducting insurance business globally to-
day, the pressures to differentiate and
get ahead of the chaotic intersection of
technological, regulatory, demographic,
economic, societal and competitive forc-
es to be a sector leader are tremendous.
A culture of innovation is a powerful
tool to help organizations become lead-
ers in their fields. In fact, Apple’s Steve
Jobs once said, “Innovation distinguishes
between a leader and a follower.” It’s the
strategic approach that helps set organi-
Operationalizing innovation — moving it from theory to practice — is replete
with challenges. After all, it’s one thing to
talk about how innovation may help the
organization; it’s something else to actually live it and reap the rewards.
Innovation is a structured process that
works best when teams of people, drawing upon their multiple experiences, collaborate to solve challenges and find new
solutions. Traditional silo models with
functional divisions that do not share
information, ideas or resources to solve
problems still plague insurance and other
businesses today. Without a collaborative
culture, an organization cannot effectively build an infrastructure around the pro-
Challenges to insurance innovation
➊ Critically review and uncover orthodoxies that are embedded in
their approach to product development, marketing, technology,
financial management and other operations.
➋ Invest in the tools necessary to optimally compile data and
information needed to support cutting-edge analytical approaches.
➌ Be open to new ways to define, underwrite and price risks.
➍ Educate regulators while you innovate.
➊ Integrate innovation into the organization’s culture.
➋ Innovation is a structured process, working best with diverse teams
brought together to solve challenges and find new solutions.
➌ An innovation laboratory can support and drive innovation and
ideas along a development life cycle.
➍ Disruption is not a requirement for innovation to work, particularly
if that innovation is benefitting internal process and operations.