THE ULTIMATE GUIDE TO
LIFE INSURANCE INNOVATION

In this section, we'll cover insurance industry trends that affect innovation; challenges to insurance innovation; disruption in the insurance industry; technology that enables digital transformation in insurance; and ways to get started with insurance innovation.

Insurance innovation is the future of the insurance industry. Life and health insurance carriers place a high priority on innovation—so much that insurance innovation is ranked higher than all other issues, even higher than a global pandemic and cybersecurity. This recognition of insurance innovation as an imperative holds true for insurers across Asia–Pacific, Europe, the Middle East, and Africa as well as the Americas.

Figure 1: Shows the rankings of issues by highest priority
Source: International Insurance Society’s 2020 Global Concerns Survey

However, innovation is challenging for insurance carriers. While insurance technology companies (insurtechs) often have the edge on innovation, they find it difficult to scale up and penetrate markets. Both types of insurance companies need a plan and methodologies for innovation, yet only 35 percent of respondents to the International Insurance Society’s 2020 Global Concerns Survey had such a plan. The lack of an innovation plan puts these insurance businesses at risk.

Figure 2: Presents the status of innovation planning
Source: International Insurance Society’s 2020 Global Concerns Survey

Embracing innovation will help life and health insurers survive the next decade and beyond. We recommend a commitment to focusing on insurance consumers as the best way to get started.

What Trends Affect Product Innovation in Insurance?

Innovative insurance solutions need to fit a particular market, but insurance markets keep changing, as the following top trends demonstrate:

Challenges to Insurance Industry Innovation

Several common operational and business challenges affect the ability of insurance companies worldwide to respond to market trends. These challenges include:

• The high cost of new product introductions (NPI), especially failures
• Customer acquisition costs that are 75% more than keeping and upselling an existing customer
• Outdated and legacy IT systems
• Resource and staffing constraints paired with fluctuating needs
• Complex processes, including manual and paper-intensive processes, implemented inefficiently
• A lack of trust in new technology
• Corporate risk aversion—necessary in underwriting but hinders innovation in other areas
• Regulations and compliance costs

What to Expect from Insurance Industry Disruption

Innovation and disruption in the life insurance industry create new value for customers, carriers, insurtechs, reinsurers, and society. You may have heard that established companies “must disrupt or be disrupted.” It is true, and the good news is that your organization’s leadership can be at the forefront of change and in control of your company’s destiny.

Positive disruption occurs when people ask, “What problem should we solve?” Several problems and opportunities across the global insurance industry remain unsolved, such as:

• Insurance products that are low touch and lack engagement
• Data flows that only serve the business and do not add value to customers
• Insurance products that require a salesperson to complete the transaction

Big problems like these may be reduced or solved through:

• Customer journeys that better engage potential customers
• Automated and outsourced underwriting that delivers faster decision-making
• New insurance products that deliver more value to customers
• Digital distribution methods that are more persuasive and engaging

How Does Design Thinking Enable Positive Disruption?

The life insurance industry recognizes that successful execution requires a radically different corporate setup, which many carriers and insurtechs have already adopted. It can include dedicated innovation teams, partnerships with startups, and corporate venture capital, to name a few. But these efforts alone don’t always produce the expected results. They can often get stalled or put on the back burner due to competing priorities.

Few people know how to innovate, although they are often asked to do so. Design thinking, a repeatable structured approach to innovative thinking, allows insurers to access their people’s creativity and help them keep up with changing customer expectations. Design thinking, a technique we use with Life Design Sprints, helps organizations across the insurance and technology industries collaborate to solve problems and more rapidly identify market-winning solutions.

What Is Co-Creation and Why Do Insurers Need It?

While it is almost impossible to tackle big problems and find groundbreaking innovation within the four walls of a single organization, open innovation is a great source of new ideas and information that harnesses the insight and energy of diverse contributors from different companies. Through open innovation, diverse stakeholders create cooperatively, which is called co-creation.

Design thinking constructs a methodology for people in and across multiple companies—even across an entire industry—to co-create real-world solutions. Through this type of innovation framework, insurance companies, their competitors, experts in other domains, insurance regulators, and the broader community can work together to drive positive disruption in the insurance industry.