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Nathan Golia
Nathan Golia
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Insurers Deserve More Credit for Innovation

It's a familiar refrain that insurance companies lag behind other industries when it comes to embracing new technologies. Here's why that's an inaccurate, outdated concept.

Here's a situation should be familiar to many insurance technologists: While attending a presentation, the presenter finds some way to segue into a point that approximates this statement: "Insurers aren't as good at adapting new technologies as companies in other industries." This stereotype is so popular and accepted so widely that in a presentation Thursday at Celent's "Creative Disruption: Technology and the Future of Insurance," analyst Mike Fitzgerald presented the results of an industry poll that found 64% of respondents agreed with it.

Well, I think it's time that insurers buck up a little, quit deprecating themselves and stop ceding the innovative high ground to other kinds of companies. The truth is, taken as an industry, insurance has more than caught up to other industries in embracing innovation. In many cases, the largest insurers are leading the way in demonstrating the business rewards of an innovative culture.

Our sister publication, InformationWeek, put out this week its annual InformationWeek 500 list, which honors "the most innovative users of business technology," according to VP and editor in chief Rob Preston. Insurance makes a prominent appearance near the top of the list, with Cigna at No. 7 and Allstate at No. 11. No other industry of the dozen or so represented has two companies clustered so close to the top. Fully one-tenth of the top 50 comes from the insurance industry: Cincinnati Financial at No. 27; Progressive, No. 36; and USAA, No. 37. Only the healthcare and medical industry, with eight representatives in the top 50, has more top-ranked companies.

In all, 39 insurers are on the list, plus Prudential and Principal, which were categorized under "banking & financial services." (We'll set the record straight on that for next year). Forty-one total representatives on a list of the most innovative users of business technology doesn't sound like an industry stuck in neutral.

Speaking of Prudential, the company won a Business Innovator award during last year's 500 season for a decidedly insurance-centric project: reducing the amount of paper in the life insurance application process. CUNA Mutual represented the insurance industry this year at those awards, winning one for its mobile capabilities. Initiatives from top-10 company CIGNA and top-50er USAA were featured in the "Great Ideas to Steal" slideshow. This doesn't paint a picture of a stodgy, conservative industry. Rather, it seems like insurance companies' initiatives are water-cooler topics within the broader technologist community.

"Clearly, the industry is putting a new emphasis on innovation," Preston told me in an e-mail after returning from the InformationWeek 500 conference, which accompanies the announcement and was held this week. "I'd put insurance in the same category as healthcare: once sleepy industries when it came to using IT, but now moving to the front of the pack given new market and regulatory realities."

For example, while at the conference, Preston caught up with Suren Gupta, executive VP of technology and operations at Allstate. Gupta, who has made no secret of his attempts to make Allstate a more innovative organization, told him that insurance companies are focusing more on technology innovation to differentiate themselves in what is becoming a commodity market. According to Preston, Gupta reasons that it's better for insurers to attract and retain customers with IT-intensive products (like usage-based insurance) than engage in margin-busting price wars. Preston also discovered at the conference that at Allstate, Gupta sits on an innovation council that also includes top executives from the company's product, claims, financial, operations, investments, and sales departments.

It certainly seems like Allstate has come a long way since industry observers wondered if it was trying to buy innovation in the form of Esurance last year. True, at this year's IASA conference, Allstate representatives told the story of how the company had to work hard to shift to a more innovative culture, which Gupta now stewards effectively.

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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