Today, more than half of insurers (54%) have adopted ad hoc approaches to innovation. About one-quarter of them have adopted formal innovation processes, and less than one-third (30%) have formal innovation teams. Two-thirds have been focusing on innovation for more than two years and are primarily driven by the healthcare (46%), high tech (45%), telecom (32%), and government (32%) industries.
These statistics, in addition to other innovation insights, were delivered by Strategy Meets Action (SMA) partner and chief digital officer Denise Garth, and partner Karen Furtado, at this year's Guidewire Connections conference held last week in San Francisco.
Outside influencers and competitors are putting pressure on the core elements of insurance, Garth explained. These include customer experience, products and services, infrastructure and business models. Insurers are working to become more customer-centric, create products to meet new expectations, fight for tech talent, and optimize their business structure.
"The customer is at the center of everything. They are in control," said Garth. "It's about creating products that are going to meet new expectations."
Carriers looking for outside inspiration should look to the industries that will have the greatest influence in 2017: automotive, education, pharmaceutical and retail. Their biggest competitors will be leaders in innovation, data management and customer engagement such as Amazon, LinkedIn, eBay, Google, Apple, and Instagram, said Garth.
As customer preferences evolve, so too will insurers' strategies. More people are moving back towards cities, living in smaller homes and adopting more virtual lifestyles, Furtado said. The growth of online shopping and telecommuting will ultimately lead to decline in the need for office and retail space. Next-gen insurers will be driven by mobile maturity, analytics and collaboration expansion to meet their policyholders' needs.
Shifts in consumer behavior and evolving technologies are making waves in auto insurance. Fewer people are purchasing cars in favor of sharing them, and the cars themselves are becoming safer to drive. The evolution of telematics and connected cars has huge implications for the industry. In the next eight to 10 years, the industry could change the way they offer car insurance, said Furtado.
"If you write auto, things are getting very complex," she explained. "Imagine the switch from 'we insure cars' to 'we insure the people that drive cars.' "
The impact of new technologies extends far beyond auto insurance. Businesses outside the insurance industry are rapidly adopting the Internet of Things, artificial intelligence, drones, biometrics, semantic technology, and 3D printing. As insurers continue to embrace new technologies, their external data sources will shift to affect how claims are addressed and prevented.
To illustrate the consequences of ignoring the evolution of technology, Garth pointed to iconic brands such as Kodak, Borders, Blackberry, and JCPenney that refused to adapt to change and faced decline.
"They saw change coming. They knew it was there," she said. "They just chose not to deal with it."
Kelly Sheridan is the Staff Editor at Dark Reading, where she focuses on cybersecurity news and analysis. She is a business technology journalist who previously reported for InformationWeek, where she covered Microsoft, and Insurance & Technology, where she covered financial ... View Full Bio