According to the Oxford Dictionary:
Innovation is making changes in something established, especially by introducing new methods, ideas, or products.
Businesses focusing on introducing new methods, ideas, or products internally to improve business growth are innovating. There is no one-solution-fits-all to introduce innovation, so each business will need to leverage their particular wins and experiences to delight customers and create added value.
Different businesses have various ideas about innovation. Some insurers may consider innovation as changing their product offering or introducing a new product. Whereas, others believe that innovation considers the bigger picture, consisting of the product, people, and place. Neither of these views is wrong; it all depends on the specific goals and objectives for each business. Although, the more conclusive the innovation strategy, the better the opportunity for future growth.
Innovation is closely tied to Competitiveness
A recent survey conducted by KPMG determined that 80% of survey respondents agree that their organizations’ future success is closely tied to their ability to innovate ahead of their competitors. The insurance industry has transformed in recent years, with new technology advances, a shift of focus from product-centricity to customer-centricity, and regulatory changes driving innovation. In fact, the biggest opportunities for growth over the next two years, according to the majority of insurers, are technological advancements and improving customer experiences.
Traditional legacy systems and silos of claim information are causing problems for insurers. With four out of five of the world’s largest insurance brokers using cloud technology, technology is playing a pivotal role in organizational competitiveness. Cloud-based claim processing systems offer improved automation and efficiency, with the flexibility and scalability necessary for future growth. System integration is necessary to remove data silos and integrate claim data to pave the way for future technology innovations, including big data analytics and mobile platforms, which require up-to-date claim information.
Focusing on the customer, rather than the product, ensures customers are provided with the best-suited product to fit their needs. Beagle Street, a Life Insurance provider, based in the UK, introduced a customer-centric approach to business, which resulted in 8% growth over three years. Aligning insurance policies to customers needs, simplifying the range of insurance products on offer, and using direct online distribution ensured Beagle Street was offering excellent customer service, justified by their 93% customer satisfaction rating.
Delighting customers and creating value for them will improve retention and encourage customer advocacy.
Developing an Innovation Strategy
To develop an innovative strategy for growth, insurers need to have a clear understanding of their current business processes, infrastructure, talent, capital, and capabilities. It is essential to have a formal strategy in place with clear governance, goals, and objectives outlined for growth. KPMG offers guidance for constructing this strategy in their “A New World of Opportunity: The Insurance Innovation Imperative” document.
Once a strategy is in place, businesses need to position themselves as either a First Mover or a Fast Follower. The industry is continually changing, and insurers need to keep on top of industry trends and changes. Deciding on whether to be a first mover or a fast follower is a strategic decision that should be based on the strategy developed for growth. Even though insurers make the link between innovation and growth, only 32% of respondents are interested in being a first mover, while 40% are happy to be a fast follower. First movers will have the competitive edge, but fast followers are happy to hold back and follow trends when they prove to be successful in the market.
According to the KPMG survey, less than half of respondents have an existing enterprise-wide innovation strategy, suggesting that the majority of insurers don’t appear to see innovation as a tool to drive growth as of yet – Do you?