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Where Are the Insurance Innovators?

Denise Garth | January 20, 2015

As 2015 begins with the promise and unparalleled potential of opportunities as a Next-Gen Insurer, achieving and then retaining market leadership will become increasingly difficult and challenging due to the intensification of change and disruption from emerging technologies, new competitors, market trends, customer demands, and much more.

These elements of change and disruption have spawned new companies and transformed existing ones in other industries, powering them forward as some of the most innovative companies. Forbes, Fast Company, and others look at companies across all industries to identify innovation leaders that have a product or service that is disrupting and redefining industries, changing customer expectations and habits, redefining economic assumptions, or leveraging new technologies that create new offerings and experiences that others must live up to, to mention just a few of the possibilities. 

In all of the “top” lists for 2014 are the companies we expect to see—Google, Apple, Amazon, Twitter, and Facebook. We see transformed established companies like Netflix, Proctor & Gamble, Ford, 3M, Salesforce, GE, Cisco, Samsung, Phillips, and Nike. And we see new start-ups like Airbnb, Uber, Fitbit, and Tesla. Together, these examples represent a wide array of industries including high tech, manufacturing, retail, entertainment, software, hardware, automotive, and others. But what is most striking is what we don’t see. Insurance companies are conspicuously absent. 

For the industry and for each insurance company, this should be of great concern. Why? Because the digital revolution that is well underway is reshaping, shifting, and eliminating the long-held, traditional boundaries for industries and creating a new competitive landscape that is undergirded by changing customer demands, expectations, and experiences. But all is not lost. We see encouraging signs of hope and opportunity. But to leverage these opportunities, insurers must embrace innovation and outside-in insights and rise to the challenge in order to leapfrog to the top of market leader lists. 

Open Innovation, Collaboration Transforms

In SMA’s recent Innovation in Insurance: Expanding Focus and Growing Momentum research report, we confirm that insurers continue to focus on innovation, with over a third investing in and adopting technology to position themselves as movers (28 percent) or market leaders (9 percent). This is supported in SMA’s Emerging Technologies: Reshaping the Next-Gen Insurer research report, which finds that five of nine emerging technologies are projected to reach an adoption tipping point in three years and all nine technologies in five years.

Together, these highlight encouraging signs for the insurance industry. However, given the pace of disruption and change from new technologies, the pace of adoption by industries outside of insurance, new economic models from the shared economy, new competitive threats from outside the industry, and most importantly, the changing demands and expectations of customers, the insurance industry must pick up the pace of transformation through innovation and collaboration to compete in this new digital world. 

Early in 2014, the blog, Embrace the Power of Open Innovation and an Ecosystem to Re-Imagine Insurance, noted that the combination of open innovation and an ecosystem empowers the collaboration and the sharing of knowledge, information, and ideas that are helping to reimagine industries and companies. In the Innovation in Insurance research (mentioned above), 26 percent of insurers are using open innovation, primarily with agents, and 35 percent are developing an ecosystem of relationships, primarily with existing partners. While these are great first steps, they are not bold enough to bring in the outside views that are critical to success in today’s digital world, where industry boundaries are fading and being reshaped by more innovative companies. Insurance is in dire need of some boundary reshaping.  


Disruptive Power of Emerging Technologies and Trends

Just consider the disruptive potential of the Internet of Things (IoT). As noted in the SMA research brief, The Internet of Things: Creating a Connected World, the IoT is rapidly being adopted by the very industries that insurance companies have as their customers. From automotive, retail, home, manufacturing, energy, transportation, agriculture, and much more, the IoT is radically transforming stand-alone products into “smart, connected products” that provide more worth through new, innovative, and valuable services. As a result, new companies are emerging, business and revenue models are being redefined, and customer loyalty is shifting to those who provide the most valuable services.  

Look at the disruptive potential of the connected car. The technology will make vehicles safer by helping avoid or even eliminate accidents. The obvious result will be decreased premiums due to decreased risk. Less obvious is that due to the technology, automakers may include insurance as part of the sales price of the car because the technology will make it more of a product liability issue than a personal driving issue.

Add to this the potential that the IoT will make vehicles a greater part of making everyday life easier, more productive, and more enjoyable. From recommending restaurants to assisting with scheduling auto service, paying an insurance bill, helping to manage daily tasks such as grocery shopping, and more, these connected services will change customer relationships and loyalty.

With this level of customer engagement, automotive companies are readying themselves to own the customer, from sales through service, including insurance and repair needs. Don’t believe this is real? All of these scenarios are already in experimentation and pilot, allowing them to be rapidly deployed to gain market share and customer momentum. The impact? P&C insurance will be significantly disrupted unlike anything we have experienced before. 

Emerging technologies like gamification, biotechnology, wearables, drones, and others along with emerging trends like the shared economy, the digital wallet, and personal digital data lockers owned by customers are influencers and levers of change that are placing an unprecedented pressure on insurers to reimagine their businesses as a Next-Gen Insurer. These levers of change, primarily coming from outside the insurance industry, are affecting all the touch points and redefining the entire insurance value chain. Together they are transformational and highly disruptive.

Embrace the Opportunity

Insurers have an unparalleled opportunity to unlock a revitalization of competitiveness and customer value, reinvigorating the creativity and innovation that made them successful in the first place. To awaken, enlighten, and inspire the possible and the impossible, forward-thinking insurers are looking at how they can replicate what the most innovative companies are doing. Consistently, a culture that is powered by open innovation and an outside-in ecosystem that connects people and organizations with diversity of thought, information, and expertise can be tasked to break down legacy assumptions by understanding the comprehensive number of influencers and trends, both within and outside the insurance industry, and their impact on the industry.

Developing business scenarios based on the implications—including how to respond over the next three to five years—is mandatory for growth and success. The top innovative companies like Google, Apple, Ford, Proctor & Gamble, and GE have embraced open innovation and an ecosystem with game-changing, market-leading results. 

This is why open innovation and an ecosystem are crucial for insurers to embrace in order to remain relevant and competitive in this fast-changing digital economy: both of these can be formidable for companies in positioning, retaining, or more importantly, leapfrogging market leadership status and why SMA has embraced open innovation and an ecosystem through our Next-Gen Innovation, to help lead the way for insurers.

Following the release of the The Next-Gen Insurer: Fueled by Innovation report in April, 2014 that identified eight major influencers (inside and outside the industry), the explosion of data, and the need for an innovation culture, we have

  • Researched and published well over 30 reports, articles, and blogs that provide more in-depth information, insights, and calls to action for insurers to consider as they define their vision as a Next-Gen insurer; 
  • Established an innovation community to share and discuss topics and information that are influencing, impacting, and reshaping the industry; and
  • Provided access to an ecosystem of futurists, academia, tech start-ups, technologists, venture capital firms, thought leaders, outside industry leaders, and others to participate in our innovation communities and selected research and provide their outside-in perspective. 

Combining the power of our innovation communities with our growing ecosystem, Next-Gen Innovation is empowering insurers with collective intelligence and ideas that can accelerate innovation within their companies and the industry. SMA is dedicated to transforming the insurance industry, inspiring insurers to aspire to a new vision as a Next-Gen Insurer. Next-Gen Innovation has become an extension for insurers’ innovation, strategy, and R&D efforts, inspiring and activating the changes necessary for becoming future market leaders.   

Step toward the future. Embrace the disruption and change. Engage others outside your company and outside the industry. Leverage an ecosystem offering information, collaboration, knowledge, and insights. And in the process, be inspired. Be creative and collaborative and bold. Become a Next-Gen market leader. Be one of the Top 50 most innovative companies.

Contact Denise Garth at if you’d like to learn how SMA can help you on the innovation journey and discover new opportunities for the insurance industry. Click here to learn more about SMA’s research.  


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