Who is Leading Innovation within Insurance Carriers?
Deb Smallwood | November 09, 2015
What a difference a year makes. Our latest research, compared to last year, shows a clear trend toward more insurers developing innovation areas and allowing these groups to lead change. There is clearly a shift away from ad hoc innovation, which is a positive trend for insurance.
In our 2015 research on innovation and emerging trends, we asked the basic question: Which groups are leading innovation and change within organizations? And then we compared the data to our 2014 data.
In 2014, when we asked insurers, “Who’s leading…” 60 percent said no single area of the organization was leading. “Strategy or R&D” had the next largest segment with 20 percent, “leadership or business” was at 12 percent, and a specific “innovation area” accounted for only 8 percent. But, it was in the last year that we saw innovation begin to put down some roots across organizations, and ad-hoc innovation started sprouting up here and there.
This year, we asked the same question, and now we see a significant difference. In just a year, we have seen a clear delineation between innovation leaders. First, we see a larger segment of “innovation areas” (15 percent) that are built specifically to lead innovation.
A dedicated innovation area is important, since it can provide overarching vision across the organization. It can also combine business and IT interests to enact change and transformation. “Strategy/R&D” segment shrunk and was replaced by “business operations units.” This is an interesting shift, because it signals, like the innovation-specific areas, that innovation is becoming more of an integrated part of organizations.
We also are seeing the clear emergence of IT as a leader in innovation (29 percent as an average of P&C and L&A lines in 2015). The good news is that in just one year, innovation is being shaped by specific areas of the organization, indicating a strategic approach to making change is taking the place of the majority of innovation coming from ad hoc areas, as 60 percent did in 2014.
We know that innovation needs an organized, strategic, and directed structure and approach in order to succeed across organizations. So it is promising that the research shows that specific segments are taking ownership of innovation. Our research also shows that 67 percent of insurers are accepting the need for innovation, which marks a significant increase, up from 40 percent last year.
When we examined IT response further by looking at P&C and L&A individually, we found that for P&C, nearly 38 percent of innovation was being led by IT. The risk with IT leading single-handedly is that sometimes business leaders assume that innovation involves only technology advances and this couldn’t be further from the truth.
As IT continues to increase its share of innovation leadership across organizations, business can’t allow IT alone to drive change. IT needs business to be involved with the innovation process so that business can weigh in on specific investments, their potential impacts, and their relevance. Innovation needs to come from the redesign, reimagining, and rethinking of a variety of areas: customer engagement, new product and services, and changes in business models.
In 2016 we hope to see a continued increase in the percentage of insurers allowing innovation areas to lead. And it would also be great to see business and IT combine—to lead together—versus having business and IT lead separately.
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The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
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