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THE ULTIMATE GUIDE TO
LIFE INSURANCE INNOVATION

INSURANCE INNOVATION GUIDE
Learn how to accelerate innovation in life insurance

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What Is 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.

A table to show the rankings of concern for global life insurance with innovation being the highest priority

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.

A chart representing the status of innovation planning resulting in nearly two-thirds not having developed an innovation plan

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:

Evolving Customer Expectations

Today’s life insurance customers prefer a more tailored, seamless experience and if not that, at least a faster and simpler one. They want the buying process to mirror their other purchasing journeys.

Consumer Education

The protection gap continues to grow worldwide, providing carriers with opportunities to educate consumers and increase the accessibility, literacy, and knowledge of insurance products.

Big Data

Available data presents a significant opportunity for insurance product innovation, but many insurance companies struggle to unlock the business value of data.

New Technology

The technology behind automated underwriting, digital sales channels, and machine learning reduces the cost of insurance innovation for carriers, insurtechs, and buyers.

Industry Disruption

Startups and innovative insurance carriers showcase new ways of doing business and prompt change in a slow-to-evolve industry.

Digitalization

Digitalization improves health outcomes through transparency for patients, agility and efficiency for providers, and accessibility for rural communities.

Distinct Policy Features

More insurance products offer innovative features, such as streamlined underwriting, premium guarantees, combination benefit coverage types, and wellness incentives for premium discounts.

Wellness

Wellness initiatives motivate healthy lifestyles and help companies reduce claims, provide better treatment of chronic diseases and mental health issues, as well as increase consumer engagement.

Eldercare

Leveraging technology and data provides the opportunity to take action earlier to foster “aging in place,” benefiting all parties involved—the elderly, their caregivers, and payors.

Genetics

Genetic testing enables Precision Medicine: tailored healthcare services to patients using genetic information to optimize the prevention of a disorder or enhance the efficacy and therapeutic benefits of a treatment or wellness regime.

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.

Disrupt, or be disrupted block quote

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.

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Four Ways Technology Enables Digital Transformation in Insurance

Digital transformation in life and health insurance continues to build momentum, propelled by the many benefits that technology and data analytics enable. Specifically, digital transformation enables insurance innovation by replacing burdensome manual processes and outdated technology. New technology bridges connections across carriers, insurtechs, and reinsurers, which drives innovation from within the insurance industry.

Examples of digital transformation solutions in life and health insurance:

Start-to-Finish Innovation Process

A direct-to-consumer life insurance product launches in only seven months
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Insurtech Startup Partnerships

OWL: insurtech partnership with RGAX automates claim monitoring to detect fraud
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Treaty Digitization Technology

TAI Treaty: revolutionizes how life insurers and reinsurers store, manage, and utilize treaty data
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Digital Distribution Experiments

RGAX experiments leverage behavioral science and intuitive design to create frictionless D2C customer journeys

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New technology and data analytics also transform customer service options in ways few could have envisioned previously. For example, the chatbot, a form of artificial intelligence, which features prominently in other types of financial services, can quickly and efficiently manage customer queries in the life insurance industry. 

In addition, as the use of digital distribution grows, it transforms insurance sales channels. While hurdles must be overcome, more insurance companies of all sizes are choosing to make the leap to digital channels to expand their businesses and provide more touchpoints for customers.

How Can I Get Started with Insurance Innovation?

All types of product development are challenging because only when customers' problems are fully understood can an innovation team devise a market-winning product or service to address it. Through Life Design Sprints and other insurance innovation services, RGAX helps carriers and insurtechs:

  • Adopt a customer mindset
  • Source the right mix of expertise
  • Use proven decision-making exercises to capture every individual’s contribution
  • Access expert resources as needed to develop a prototype
  • Test the prototype(s) with real customers
  • Iterate until the solution is ready for the market

Many carriers and startups need help sourcing crucial expertise, from innovation strategy and ideation to validation and prototype creation and from product design iterations to commercialization and scale-up support. Carriers large and small need help accelerating innovation and transforming industry challenges into market-tested solutions. Insurance startups need help scaling faster with funding and access to a full suite of go-to-market mentors.

With the right tools, resources, and team engagement, insurance companies can improve life and health insurance processes, design and market new products, and pursue moonshots while managing risk.

 

What Is Structured Innovation?

In this section, we'll cover wicked problems and problem framing; ways of adopting a customer mindset; who to invite to a design sprint; sprints vs. brainstorming; sprint methodology; best practices for design sprints; and the role of design thinking in open innovation.

An insurance innovation framework employs methodologies that enable corporate teams to understand the needs of consumers and end users, appreciate the nuances of a problem, and quickly develop a matching solution. An innovation framework helps tackle wicked problems, which require innovation to solve.

How Do I Find (and Solve) a Wicked Insurance Problem?

The industry problems called wicked problems are an excellent source of business opportunities for insurers. Even a partial solution to a wicked problem can transform the entire industry. Wicked problems are solved through innovation, unlike other types of problems, which are solved by reaching out to experts for rapid resolution (critical problems) or by following known processes (tame problems). Since wicked problems are so large and complex, no playbook is available to prescribe the answers. That's why an innovation framework, like Life Design Sprints, is needed to solve wicked problems.

Examples of wicked problems in life insurance:

  • Closing the life insurance coverage gap
  • Creating engagement with insurance customers
  • Making health and wellness a priority for consumers
  • Helping the aged population live well
  • Replicating the persuasion of face-to-face insurance sales processes in digital channels

Because critical, tame, and wicked problems are each solved differently, misclassifying problems can result in analysis paralysis and a waste of expensive expertise. The following chart can help identify whether a problem is wicked or not:

A flowchart to diagnose critical, tame, and wicked problems. Do you know how to solve the problem? Does anyone know how to solve it? Wicket problems have never been solved

Figure 3: This flowchart enables the identification of critical, tame, and wicked problems

Many leaders in insurance companies are uncomfortable solving wicked problems. Wicked problems are solved much differently than critical and tame operational problems, which are more common. Strategic leadership, diverse input, and a collaborative approach are required to solve wicked problems. In addition, the right mindset, invitation list, and insight-extracting exercises provide a best-practice formula for insurance innovation—so your group can find and articulate quick wins and long-term solutions to wicked problems efficiently and reliably.

Design thinking and sprint methodology help unlock wicked problems. With these techniques, a group clearly defines a problem to work on and identifies a long-term goal. The team then develops rapid responses, partial solutions, and prototypes. These are tested, yielding productive insights.

RGAX helps our partners solve wicked problems. We travel the world to meet with carriers, distributors, and technologists to explore challenges and opportunities, uncovering the real reasons why consumers don’t buy life insurance.

Our Life Design Sprints, combining design thinking and sprint methodology, enable insurance organizations to develop and test solutions rapidly in a collaborative environment. The Life Design Sprints framework removes the barriers associated with brainstorming and enables a diverse group of people to make good progress toward solving what may have felt like an overwhelming challenge.

Why Should I Frame the Problem Before Innovating?

Recognizing a good problem to solve is more difficult than many people think, but RGAX structures design sprints to make the problem framing step much easier. Depending on the type of organization, the problem, and sprint participants, it can take several hours. We recommend setting aside a day because problem framing positions your group to deliver a viable solution.

TIP: Always start with a problem, not a preconceived solution. Some group members may want to start with an existing solution, but this shortcut rarely pays off. First, the sprint process is designed to help the group refine their ideas to one problem. Second, the design sprint reveals how the group’s participants can apply their expertise to the problem. It is crucial to avoid falling in love with a solution too early. Instead, complete the problem framing step to ensure everyone aligns with the same problem and collectively defines it with clarity.

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INFOGRAPHIC
Step One to Innovation

Identifying the right business problem to solve

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How Can I Adopt a Customer Mindset?

Presuming what customers want is an easy trap to fall into. Instead, it is necessary to step back and determine the root causes of customer behavior. This requires clearly defining what customers need as well as what they don’t need. Too often, actuarial and compliance requirements rather than customer preference drive insurance product development. Customer preferences must also take priority. Only when the policyholder’s problems are fully understood can your team devise a solution.

Focusing on the customer is transformative but difficult. Many insurance companies focus on reducing sales friction and shortening underwriting for digital distribution channels. Undoubtedly, this is important, but customers also care about other things. Carriers and insurtechs focused solely on reducing sales friction continue to see disappointing digital revenue.

The journey of a life or health insurance customer is a deeply emotional experience—from the first time an individual considers purchasing insurance to the moment a policyholder navigates the claims process. Although the insurance industry must ensure risks are properly priced, it is also important to consider the human aspects of product, channel, and process design.

Marketers refer to the purchasing process as a customer journey because it isn’t an instantaneous event. It is a multi-step process full of considerations, distractions, and off-ramps. Insurers must reexamine products and processes from the view of the applicant or claimant to keep customers focused and invested in the buying process.

Tip: Parallels exist between health-related wellness and financial wellness. In both cases, consumers recognize the need to act but may lack the knowledge, confidence, or motivation to do so. RGAX invests in understanding the behavioral science behind insurance purchase decisions (and non-decisions) to help our partners create the right context for consumers to take positive actions.

Who Should I Invite to an Insurance Design Sprint?

Design sprints for insurance companies need to include a mix of participants who bring different thought processes, experiences, and expertise along with leaders who have high-level authority. Because organizational buy-in is crucial, you need decision makers whose opinions hold the most weight within each organization to participate in a design sprint.

Depending on the size of the organization, a design sprint may include:

  • An insurance company CEO or business unit leader
  • Head of relevant product line
  • Head of sales or distribution
  • Head of marketing
  • Head of digital innovation or of the group developing the solution
  • Operational leaders who understand how insurance products are currently delivered

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How Do Design Sprints Differ from Brainstorming?

Chances are that your insurance organization has already used and been disappointed with brainstorming for innovation. All available research points to the failure of brainstorming. In contrast, design sprints produce tangible results.

Drawbacks of Brainstorming

Results in outcomes lower than the sum of its parts

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Benefits of Life Design Sprints

Results in outcomes greater than the sum of its parts

Loudest voices/ Free riding

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Every individual contributes

Focus on accessible topics

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Focus on important topics

Drives convergent thinking

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Drives both convergent and divergent thinking

Regression to the mean

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Everyone gets stretched

Deferment to perceived expertise

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Accelerates output

Inconclusive and incomplete output

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Concrete, re-playable input

The framework or structure of Life Design Sprints ensures that we capture every individual’s contribution through exercises that get around the pitfalls common to brainstorming. 

What Sprint Methodology Is Best for Insurance?

If not brainstorming, then what? Creativity on demand is a big ask, yet design sprints offer just that. The technology industry developed design sprints to reduce the risks involved in bringing new products to market. Design sprints center on customers’ problems by identifying problems in the market and getting the participants to think about how they can apply their expertise to turn these problems into business opportunities.

RGAX’s Life Design Sprints use repeatable, reliable, and efficient processes to help your team deliver innovative insurance solutions. Insurance carriers we work with are using Life Design Sprints to:

  • Solve modern insurance problems
  • Design insurance solutions that consumers and businesses feel compelled to buy
  • Extract more value from existing corporate capabilities

Life Design Sprints Unpacked

Icon of Umbrella on Computer

Life

Focuses exclusively on the life and health insurance industry
Icon of a brain with arrows signifying design

Design

Employs an iterative process of design thinking to develop and test innovative solutions so that there is proven likelihood of the solution succeeding in market
Icon of a man sprinting

Sprints

Utilizes a technique adapted from the tech industry to accelerate and maximize output called a “sprint” (short, time-boxed periods to complete tasks)

In focused sessions, a diverse group of sprint participants collaboratively:

  • Defines and addresses a wicked problem
  • Identifies the solutions most likely to succeed
  • Designs and builds one or more prototypes
  • Market tests one prototype
  • Learns from the test
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How Does Organizational Alignment Increase Insurance Innovation?

After a Life Design Sprint, the team continues to benefit. Life Design Sprints give insurance product development groups momentum through:

  • A shared vision and buy-in at all levels
  • The knowledge that all relevant leaders are aware of the project’s mission and business opportunity
  • A fast-tracked project that faces fewer organizational barriers
  • Resilience to personnel changes en route to market
These results are possible because each Life Design Sprint:
  • Brings together the right decision makers in one setting—virtually or in-person
  • Puts a deep understanding of the customer at the heart of the problem
  • Extracts the individual insight of every person in the sprint

What Are Best Practices for Insurance Design Sprints?

Collaborative innovation methods such as design thinking help solve the toughest insurance innovation challenges, but in some companies they meet organizational resistance. Preparation is the best way to overcome resistance, so we provide a checklist with tips and best practices you can use to help your insurance innovation team prepare for design thinking. This checklist covers how to:

  • Get ready with pre-sprint work
  • Decide whether to undertake a design sprint or not
  • Know who to invite to your sprint
  • Avoid last-minute cancellations
  • Eliminate distractions during the sprint

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Insurance Innovation Checklist

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What Is the Role of Design Thinking in Open Innovation?

Design thinking extends to open innovation in which companies draw on both internal and external sources of ideas to innovate and design solutions, even industrywide solutions. Open innovation can transform an entire industry and create a better future for consumers and businesses that benefit from insurance.

Open innovation involves a wide variety of stakeholders, such as competitors, regulators, sales agents, customers, and others. These stakeholders become the champions of the open innovation solution and, in some cases, its customers.

As in every industry, insurance companies differentiate their brands, products, services, and sales distribution from competitors to win customers and market share. Internally, however, competitors in the insurance industry face similar challenges. They face constraints from legal and regulatory environments as well as dependencies on third-party providers. An industrywide solution can drive monetary and non-monetary value to all stakeholders simultaneously by delivering standardization, improved timeliness, economies of scale, and greater operational efficiency.

Insurance Innovation Guide

In this guide, you'll learn how to identify and move complex problems forward to accelerate innovation in life and health insurance.

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How to Accelerate Innovation in Life Insurance Part 1 Ebook

How Can RGAX Help?

In this section, you learn how RGAX helps carriers and technology companies accelerate insurance industry innovation though innovation services, including Life Design Sprints, as well as how we serve as insurtech mentors.

Your Insurance Innovation Accelerator

We partner with and mentor carriers and startups to fuse industry expertise and outside capabilities with the goal of creating new solutions that help individuals live longer, healthier, and more financially secure lives. Together, we invent and develop new insurance products and services that apply to every stage of the life insurance business and are designed to benefit everyone involved. We help our partners to:

  • Acquire funding
  • Harness the power of data
  • Deepen relationships with consumers
  • Leverage digital distribution (B2B, B2C, B2B2C, and more)
  • Automate insurance operations
  • Build connections between carriers and insurtech startups
  • Empower transformation

Transform Faster with Innovation Services

RGAX is the transformation engine of RGA, the leading global reinsurer for life and health insurance carriers. Together with RGA, RGAX helps insurance carriers, distributors, and technology companies—for instance, insurtech, fintech, and Big Techs—navigate a changing insurance market landscape.

Our mission is to partner with carriers and technology organizations inside and outside the insurance industry to harness change and advance transformational capabilities that help people live longer, healthier, and more financially secure lives.

Through Life Design Sprints, our structured innovation methodology, RGAX collaborates with RGA’s clients globally to hypothesize, validate, and test innovative ideas and bring new products and solutions to market.

We explore how innovation partnerships can help carriers overcome many obstacles, expand the reach of the industry, enhance the value of insurance products, and ultimately allow more consumers to benefit from risk protection.

Solve Big Problems

RGAX helps life- and health-related insurers answer big questions and solve wicked problems, such as:
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How can insurers increase their focus on a problem to enhance the range of solutions?
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Innovate in Five Days or Less in a Life Design Sprint

Although every problem is unique and RGAX tailors the process to every partner, Life Design Sprints offer a standardized framework for insurance innovation. These sprints typically span three to five days of dedicated time, involves a co-located or virtual team of three to five people from the partner’s organization, and delivers complete focus on solving a problem relevant to them.

Each sprint is facilitated by a dedicated sprint master, an unbiased third party who isn’t entrenched in your organization’s culture. The facilitator keeps everyone on track, supports individuals in breaking out of their norms, tells participants (even the CEO) when it’s time to move on from a topic, and enforces the rules of the game that make Life Design Sprints so productive.

During the design sprint, your group will:

  • Discover and clarify the problem they want to solve together
  • Ideate by combining individual work with group collaboration exercises to develop multiple novel thought-out solutions
  • Decide which solutions will move forward as one or two testable prototypes
  • Create prototype(s)
  • Test the prototype(s) with potential customers and obtain timely feedback
Life Design Sprints Framework

Figure 5: Elements of a Life Design Sprint process

Tap into the Deep Global Expertise of RGA

RGA is the only global reinsurance company to focus on life- and health-related reinsurance solutions. These include life reinsurance, living benefits reinsurance, group reinsurance, health reinsurance, financial solutions, facultative underwriting, and product development.

Through its normal course of business, a reinsurer maintains a real-time perspective on nearly all aspects of the insurance environment. Rooted in the life insurance industry with decades of learnings gained from supporting carriers of various sizes, RGA’s subject matter experts and scaled data practice allows us to work with our clients to identify compelling new business models and reach new customers – all while maintaining a proven track-record for robust data security and client confidentiality.

This means you can tap into industry-leading talent, technologies and best practices while developing new solutions and exploring risk-sharing opportunities to go to market.

How to Accelerate Innovation in Life Insurance Part 1 Ebook

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