We're going to try something new this week. Our CTO, Joe Estes, has built some exceptional chat capabilities into our Innovator's Edge platform, and I'd like to see if we can't use them to jointly make progress on a crucial topic: How do we measure our progress toward innovation? How do we kill bad ideas as quickly (and inexpensively) as possible while making sure the good ideas get identified and nurtured and produce the biggest possible wins for the company? 

Our mantra at ITL is, "Nobody is as smart as everybody," so we'd like to get everybody involved in the discussion, which will be guided by a powerhouse group of experts on the topic and which will last for at least the next week. To join us, if you aren't already a registered user of IE, just click here and enroll. (It's quick and free.) Then click here to go directly to the group, called "KPIs: How to Use Analytics to Measure and Drive Innovation." Click join group and join the conversation.

Please let me know at paul@insurancethoughtleadership.com if you have any problems or questions.

We'll be joined by:

--Michael Schrage, a researcher at the MIT Media Lab and a prolific author on innovation.

--Amy Radin, who has a distinguished career at several financial services firms, including as CMO at AXA, and who is the author of the forthcoming "The Change Maker's Playbook: How to Seek, Seed and Scale Innovation in Any Company."

--Guy Fraker, ITL's chief innovation officer, whose decades in the insurance industry include some of the most successful innovation programs yet produced.

Much more detail on our guides, plus materials that are the basis for the discussion, are available inside IE.

I think this will be a great discussion. I hope you'll join us.

Paul Carroll
Editor-in-Chief

Geographic information systems (GIS) may conjure up images among insurers of an old technology that tends to be used by a few passionate specialists at their company. It is true that the technologies for mapping and visualization have been around for decades. (I first saw a demo of GIS for insurance in 1989, and the potential blew me away). It is also true that usage in insurance is often limited to a few high-value areas of the business. Although GIS can hardly be called an emerging technology – much like AI, which has also been around for many years – it could be considered a resurging technology. This is a new era for GIS. The core GIS technology platforms have been extended to enable solutions for what many now call location intelligence. There are some good reasons why insurers should be considering an enterprise location strategy as an important element of their overall business strategy.

• Ease of Use: This might seem counterintuitive because the use of GIS systems traditionally required individuals with deep skills in data, geography, demography and other sciences. But today, the user interfaces have been modernized, templates and apps abound and business users are able to leverage the technology without difficulty.
• Open Platforms: The sharing of maps, apps and data related to GIS solutions is extensive. Collaboration among government agencies, businesses and individuals is in high gear, especially because location intelligence-based solutions are often leveraged to address important societal issues. A prime example of this is the collaboration that occurs during natural disasters.
• New Data and Maps: The spread of connected sensors and devices across the planet has produced many new data sources, enabled the creation of new mapping layers and dramatically increased precision. A connected device might be indoors or outdoors, stationary or moving, urban or rural and able to collect highly accurate data about objects and what is happening to and around them.
• New Spatial Technologies: The technologies for indoor mapping, 3D, temporal analysis and many other aspects of spatial technology continue to advance rapidly. In addition, the scale and speed of real-time processing open up opportunities to capitalize on the technologies.

“When my mom passed away, I was aware she had a small life insurance policy. When I started the claims process, I had to keep resubmitting documents and kept getting asked to complete more documents. Finally, after four months of going back and forth, when the money was about to be reimbursed, I wanted the money transferred to my account as direct deposit, but my only option was a check. I’m lucky I didn’t need the money right away for expenses, or I wouldn’t know what would happen.” Will you consider purchasing life insurance policy from the insurer, I asked? “Hell no,” was the answer. I was giving a presentation a few nights ago on Benekiva and heard that story from someone in the audience. Throughout my journey with Benekiva, I have been intrigued by all the stories I've heard about the nightmares that beneficiaries have faced. As a new parent and owner of a life insurance policy, I know that ensuring the well-being of our family is critical. The thought of my daughter having to go through a hellish experience to get the money makes me furious and want to act now to fix the problems. After several years of researching and analyzing the life insurance claims processes, there are four main problems our Benekiva team has identified that have prevented life insurance companies from embracing digital transformation in their claims processes: Outdated Processes: The life insurance industry is a 258-year-old industry, and, though claims may make it in the top 10 list of issues for the CIO, the focus for the company as a whole tends to be on generating revenue. The claims staff works overtime to come up with various duct-tape systems filled with Excel spreadsheets, Access databases or various systems to balance the needs of regulators, old processes (this is how we have always done things) and beneficiaries. Beneficiaries wind up supplying the same information in multiple documents, sending the same documentation multiple times and chasing down faxes/mails for next steps. See also: How IOT Will Change Claims Process   Legacy Systems: On average, the claims staff touches four to 10 systems to process one claim. The claims module is most likely attached to policy administration systems in which modules don’t get updated often. To innovate claims processes gives CIOs headaches because they have to rip apart the monolithic and old systems that run the entire business. The mentality – “If it ain’t broke, don’t fix it” -- creeps in. Unclaimed Claims: There is more than $14 billion of unclaimed life insurance policies, and the number keeps growing $1 billion a year. Why is that? Ask yourself one simple question: How many times have you been asked to update your beneficiaries? Ask yourself another simple question: Have you informed your beneficiaries about policies you have for them? One of our co-founders could have been another drop in the bucket for unclaimed claims. He was at his father’s funeral, and one of his father’s co-workers came to give Jason his condolences. The co-worker said, “If you need help with paperwork, please let me know.” Jason said, “What paperwork?” He learned that his dad had a life insurance policy. Laws Changing: Each state and country has its own governing laws that need to be abided with when processing claims. One state may require a death certificate while another state may ask for additional documentation. How might claims departments innovate in the face of outdated processes, legacy systems, data that needs clean-up and changing regulation? There are three key recommendations: Keep Learning – Insurtech is HOT! Books are being written, conferences are popping up and fresh faces (like me) are appearing. Keep reading, attending and talking to learn what is happening in the space and how to navigate change. Keep Seeking – Insurtech is HOT! Which means, there are startups that are popping up to help solve complex problems. Benekiva is my startup with three other founders, and we are on a mission to help bridge the gap between life insurance companies and the intended beneficiaries, through beneficiary management and claims automation. What is cool about us – we can work with legacy systems, so you don’t have to pour millions into the work. There are other insurtech startups that are solving other pain points. What’s great about startups – they are small, nimble and hungry, which equates to: They will do whatever you need them to do…to a certain extent. Partnering with startups can leapfrog your innovation efforts and their startup mentality may rub-off on your staff. Keep Trying – You eat an elephant one bite at a time. I see claims processes as a big elephant, and the only way to improve is by “bitsizing.” What is one area of claims that can be improved? Identify that and try to find or partner up on a solution. Remember: Insurtech is HOT! I’ve seen organizations want to tackle the “elephant,” and unfortunately, those projects can take two years and longer and your strong talent is burned out at the end. What you get at the end is an “old” system – two years is a long time in tech. See also: Making Life Insurance Personal   To innovate in claims, the C-suite needs to make claims a priority and see it as a customer-experience issue. My five-year vision is to have the following experience when giving presentations about Benekiva: “Bobbie, I just submitted a claim, and I instantly received notification that money is available in the account. I also received a text message from an adviser whom my dad was using and who is going to help me plan for my future.”

The notion of paying out an annual stream of income can be traced back to the Romans. It’s a simple notion and one of the earliest forms of wealth management. Today, the simplicity of that notion has been replaced by the complexity of the annuity product. Rooted in a time way before the iPhone, the conventional annuity looks tired in the digital world. It’s an old world approach long overdue for a refresh and reinvention. To explore this further, Rick Huckstep spoke with Matt Carey, CEO and co-founder of Blueprint Income. It’s a different world now  The baby boomers are retiring. When they made their plans for the future, the world was analog. Individual advice was based on human judgment, the personal touch and “trusted, expert” relationships. This was how the world of wealth management worked pre-internet. However, today, for many U.S. boomers, the prospect of actually giving up work is still some way off. This recent U.S. study by the Insured Retirement Institute reported that as many as two in five of American baby boomers have nothing saved for their retirement. Increased longevity and the massive decline in employer pensions in the 21^st century are major factors behind the prediction that as many as half of Americans will not be able to maintain their current lifestyle. The point is that the baby boomer generation, and Gen X for that matter, have shifted from creating retirement wealth through a lifetime of work to protecting what they have for now. Which means that the wealth management target client has changed. It’s no longer a baby boomer market, or a Gen X market for that matter. Now it’s the millennials who are the core client (target) base for wealth management. With 40% of the global adult population under the age of 35 years old, this is a generation who has only known a digital world in adult life. Rise of the affluent millennial But it is more than a digital divide that separates the generations. Millennials’ attitudes and behaviors to creating their own wealth are different, too. These differences are shaped by factors such as: debt-funded education, greater levels of social conscience and engagement, a broader world view and higher levels of self-employment. Which is a challenge for the wealth management industry as it adapts to a different customer profile. Building a wealth management proposition for the millennial generation has to reflect the different demographics compared with baby boomers and Gen X. See also: How Insurance Fits in Financial Management There’s tons of research out there that reports how attitudes and behaviors have changed over the generations, even back to the silent generation. In this 2015 survey of more than 9,000 millennials across 10 countries by LinkedIn and IPSOS, they found;

• millennials expect to be financially able to travel and see the world,
• 60% expected to be wealthy (even though they earn about 20% less than the baby boomers,
• they do not rely solely on wages for their income (trader by day, Uber by night),
• and are more likely to carry debt than Gen X (repaying student debt has replaced saving for retirement),
• nine out of 10 millennials use social networks for input on financial planning,
• as well as being more likely to take advice from family members,
• and are heavily influenced by their peers,
• millennials are half as likely to be married compared with baby boomers at the same age,
• they are seven times more likely to share their personal information with brands they trust.

The financial literacy problem There is another dynamic that is important to consider when looking at how the wealth management industry serves the millennial generation. Financial literacy, or the lack of it! The millennial generation may be more informed than their predecessors, but not necessarily in everything. They are more likely to know who Kim Kardashian is than to understand the impact of inflation on their savings over time. In itself, there’s nothing new in this, but the fact is that the level of financial literacy in the U.S. has been dropping for years. According to survey results by U.S. regulator FINRA, the level of personal finance literacy has fallen every three years since 2009. They found that 76% of millennials lack basic financial knowledge. Which is hardly surprising when only 14% of U.S. students are required to take a personal finance class in school. See also: Raising the Bar on User Experience   The FINRA survey also reported a massive gap between the level of financial understanding and the desire to have one. The survey found that 70% of adults aged between 18 and 39 years old “know they will need to be more financially secure, they just don’t know how to get there.” What is clear from the survey is that this lack of financial literacy is causing stress and anxiety among millennials (who, remember, now account for 40% of the adult population). For the rest of the article, click here.

On Sept. 29, 2017, the Insurance Authority of Hong Kong launched the new insurtech Sandbox, with the objective to test insurtech applications by authorized insurers in a controlled regulatory environment. The infographic summarizes the main features of the initiative and provides insight on the potential benefits as well as the anticipated challenges for the players interacting in the Sandbox.

The compliance and ethics functions within insurance organizations face continued regulatory pressure. But, nowadays, they must also deal with new threat vectors that are shaping a higher-stakes global compliance environment. More and more, investigative journalists are analyzing big data to spot fraud as well as compliance violations. Third-party agencies are increasingly using technology to identify incidents and monitor corporate behavior. Enforcement agency whistleblower programs are motivating employees to speak out about perceived violations. And, rapidly escalating grassroots campaigns, such as the #metoo movement, are making strong corporate culture and rapid-response capabilities even more critical. When these watchdogs form the genesis of a complaint, social media channels and the round-the-clock news cycle can rapidly increase awareness of the incident – in some cases even before the company itself is aware. Compliance functions need the agility to adjust to business changes and to the inevitable surprises inherent in a dynamic business climate. But, without a strong technological underpinning to help them operate efficiently in real time, it will be challenging, if not impossible, to get ahead of new threat sources and changing business dynamics. From dashboards for improved decision-making, to sophisticated tools for monitoring employee compliance, to training informed with data from compliance monitoring, technology-based capabilities are now cornerstones of effective compliance management. By using the best available tools and information to protect their organizations and to scan the horizon for new requirements, trends and risks, compliance functions can keep pace with their organizations’ changing compliance needs. But as a group, insurance sector compliance functions have some work to do on the technology front. According to the PwC 2018 State of Compliance study, only 41% of insurance organizations use policy management technology within the compliance department (compared with 44% across industries and 54% in banking, for example). Just 47% use technology to monitor employees’ compliance with ethics and compliance-related policies and procedures (compared with 50% across industries and 52% in banking). While progress is being made, it lags that of certain other industries. See also: How to Collaborate With Insurtechs   However, our study identified 17% of insurance survey respondents as “Leaders,” where executives were very satisfied with the effectiveness of their organization’s compliance program. This is on par with other industries in the study. The study’s overall Leader group shares a common denominator: Leaders take a more comprehensive and current approach to compliance risk management as enabled by technology. Leaders differ substantially from their peers in many of the operational aspects of compliance risk management, including executing differently in four key ways. Leaders invest in tech-enabled infrastructure to support a modern, data-driven compliance function. Technology helps organizations manage compliance in a dynamic and expansive risk universe. Leaders more often use data analytics tools, dashboards and continuous monitoring than their peers. More than half (54%) of Leaders in the study use data analysis tools, and nearly half have dashboards (49%) and engage in continuous compliance monitoring (48%). The effective use of cloud infrastructure, machine learning, advanced analytics and natural-language processors help organizations quickly analyze vast amounts of data and gain insights into business and customer behaviors, assess potential compliance issues and cost-effectively meet risk and regulatory challenges. Leaders increase compliance-monitoring effectiveness through the use of technology and analytics. Analytics, together with automation technologies, make the continuous monitoring of employee compliance across many areas of the business far more feasible. Two-thirds (66%) of Leaders use technology to monitor employees’ compliance with ethics- and compliance-related policies and procedures. And they more often use technology to monitor specific risk categories, such as fraud, gifts and entertainment, privacy, social media and trade compliance. Leaders are also gleaning more benefits from technology use in monitoring efforts - compared with their less effective peers, they are more responsive and even proactive in mitigating compliance issues. Leaders streamline policy management to increase responsiveness and boost policy and procedure effectiveness. Leaders take several steps to strengthen their policy management. They more often keep their codes of conduct, policies and procedures current and make them easily accessible across the organization. They also more often enable this streamlining through policy management technology, such as GRC tools, and measure the effectiveness of policies and procedures more comprehensively. Nearly two-thirds use technology to facilitate the policy management process. Leaders take advantage of information and technology to provide targeted, engaging and up-to-date compliance training. Leaders’ compliance training and communications are more comprehensive and current. They are often using multiple sources of information to inform and target their training and are thinking creatively about new ways to digitally engage employees in training activities. Leaders' approaches to training positively affect their organizations’ overall risk profile as they aim to minimize activities that potentially place the organization at higher risk. See also: Guide for Insurtech Work With Carriers   Effective compliance risk management must be grounded in strategy and business engagement. Establishing the right tone at the top, assessing compliance and ethics risks and building governance structures that provide high levels of confidence in regulatory matters are all critical to effective compliance leadership. But operational aspects of compliance are where the rubber meets the road. With multiple new, highly motivated watchdogs now providing their own forms of oversight, the case for strengthening compliance risk management through technology is strong. Technology is more critical than ever in building programs that boost compliance program value, better manage risks and drive cost-effective compliance.

Excerpted from MSA's Q1-2018 Outlook Report (June 2018) The insurance industry has been compared to the proverbial frog in the pot of ever hotter water. While things appear on the surface comparable to what they were like 10 years ago, perhaps with some nuanced variations, there appears to be little in the way of differences. Yes, mergers continue happening at the carrier level, and direct insurers are slowly gaining market share, but the band plays on. Industry associations continue holding conventions, insurers, reinsurers and brokers continue their traditions and year-end pilgrimages to London, Monte Carlo, Baden-Baden, NICC and the Aon Rendezvous, and the various other stations still welcome a familiar crowd. But signs that fundamental changes are afoot are becoming ever harder to ignore. In Ernest Hemingway’s 1926 novel, "The Sun Also Rises," there’s a snippet of dialogue that seems apropos: How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.” The primary driver of the change is technology. The less noticeable catalyst, but no less important, is changes in regulatory mindsets. Let’s tackle both. The two most influential market conduct regulators in Canada are readying themselves for technological disruption of the industries they oversee. Quebec’s regulator, the AMF, has publicly expressed that it is "open for business" in terms of insurtech/ fintech under CEO Louis Morisset and Superintendent of Solvency Patrick Déry. FSCO has recently moved to be more flexible within the tight bounds of its mandate, and its successor, FSRA, will be a modern independent agency purposely built for adaptability; it emerges from its cocoon under the guidance of a professional board and the stewardship of its CEO, Mark White, in April 2019. FSRA and the AMF are positioning themselves to allow experimentation via regulatory sandboxes, whereby players can test initiatives in the field. This sandbox methodology is modeled after the Ontario Security Commission’s LaunchPad initiative. See also: Global Trend Map No. 19: N. America (Part 1)   You may not have noticed it, but the regulatory ground in two of Canada’s largest provinces has shifted, and the stage is being set for ever-faster innovation in the Canadian insurtech space. In fact, in conversations with Guy Fraker, chief innovation officer at California-based Insurance Thought Leadership and emcee for the InsurTech North Conference in Gatineau in October, he advises that Canada is being looked at as a regulatory innovation hub by the global insurtech community. Even under the old FSCO regime, Canada’s largest insurer, Intact, pulled off what might be a master stroke in July 2016 when it issued a fleet policy to Uber, providing coverage to tens of thousands of Uber drivers when engaged in Uber activities. So, in one fell swoop, a single insurer swept up tens of thousands of drivers. Intact pulled another coup by partnering with Turo in Canada. Turo is a peer-to-peer car-sharing marketplace that is busy disrupting the sleepy and sloppy car rental industry. This again gives Intact access to thousands of drivers with the stroke of a pen. Further, Intact may be able to leverage the access it has to those drivers to provide full auto coverage and even residential coverages. When these risks are gone, they’re lost to the rest of the market. Striking deals with the likes of Uber and Turo changes the game. In the U.S., Turo partners with Liberty Mutual, and with Allianz in Germany. Uber partners with Allstate, Farmers, James River and Progressive in the U.S. Aviva has pulled off a similar deal in Canada with Uber’s nemesis, Lyft. Further afield, B3i, the industry blockchain initiative has been established with the support of 15 large insurers/reinsurers. It is just starting up, but its mission is to remove friction from insurer/reinsurer transactions and risk transfer. When friction goes, so will costs. It is starting out slowly, but things may change suddenly – reshaping whole segments of the market. In addition to the original 15, the initiative has been joined by 23 industry testers. In the U.S., The Institutes (the educational body behind the CPCU designation) launched a similar blockchain consortium called RiskBlock, which currently counts 18 members:

• American Agricultural Insurance
• American Family Insurance
• Chubb
• Erie Insurance
• Farmers Insurance
• The Hanover Insurance Group
• Horace Mann Educators
• Liberty Mutual Insurance
• Marsh
• Munich Reinsurance America
• Nationwide Insurance
• Ohio Mutual Insurance Group
• Penn National Insurance
• RCM&D
• RenaissanceRe
• State Automobile Mutual Insurance
• United Educators
• USAA

There is talk of establishing a Canadian insurance blockchain consortium, as well. You can hear from leaders of B3i, RiskBlock and parties involved in the Canadian initiative at the NICC in October. Even further afield, if one was to look for an industry that makes the insurance sector look futuristic, one need not look further than the global supply chain shipping industry, with antiquated bills of lading, layers of intermediation and massive administrative overheads. Well, that industry is getting a serious wakeup call thanks to determination and drive of the world’s largest shipping company, Maersk. The company is taking its industry by the scruff of the neck and pulling it into the future whether it likes it or not – long-standing tradition, relationships and methods notwithstanding. First, in March 2017, Maersk teamed up with IBM to utilize blockchain technology for cross-border supply chain management. Using blockchain to work with a network of shippers, freight forwarders, ocean carriers, ports and customs authorities, the intent is to digitize (read automate/disintermediate) global trade. More recently (May 28, 2018) and closer to home, Maersk announced that it has deployed the first blockchain platform for marine insurance called insurwave in a joint venture between Guardtime, a software security provider, and EY. The platform is being used by Willis Towers Watson, MS Amlin and XL Catlin (got your attention?). Microsoft Azure is providing the blockchain technology using ACORD standards. Inefficiencies, beware! Microsoft and Guardtime intend to extend insurwave to the global logistics, marine cargo, energy and aviation sectors. See also: How Insurance and Blockchain Fit   Insurers that find themselves locked out of these types of large-scale initiatives will be left out in the cold. We’re witnessing "SUDDENLY," and we’d better get used to it.

The National Safety Council reported a 14% increase in fatal auto accidents between 2014 and 2016, reaching the highest total since 2007. More accidents lead to more insurance claims, and thereby more payouts from insurers. As a result, insurers are striving to more accurately measure and stratify the risk associated with their customer base to help lower claims and increase profits. Unfortunately, it’s difficult to accurately assess risk, and many insurers are stuck using traditional methods to determine rating policies. For years, insurers have used factors like credit score, age, gender and location to set rates, but these traditional factors are not adequate alone to accurately stratify the customer base by risk. When insurers began to use credit score, they were pleased because drivers classified in the riskiest decile based on credit cost two times more to insure than those in the lowest risk decile. Although a 2x lift may seem significant, it pales in comparison to what can be achieved using modern technology to directly measure driving behavior. In particular, data shows that, by using smartphones to measure distraction, at-risk speeding, harsh braking and other factors, smartphone telematics can provide a 17x lift from lowest to highest deciles in terms of crash risk. See also: Distracted Driving — an Infographic   Using smartphone sensor data – and thereby leveraging technology their customer base already possesses – insurers can more accurately measure and analyze driving behavior, and use this information to stratify risk and set pricing based on driving performance. This also aligns with what consumers want. A recent survey revealed that only 20% of respondents had full clarity on how their insurance providers set prices, which seems out of touch given consumers’ overall push for transparency across industries. What’s more, 73% of drivers surveyed want insurance rates based on how they drive, not traditional factors such as gender, age or income level. Despite the significant benefits of adopting a smartphone telematics program, some insurers have been hesitant due to concerns about customer adoption, user satisfaction and ease of implementation. For example, survey respondents indicated that only 22% had ever been offered such a program by their insurer. Considering that 75% of drivers said getting a discount from an insurance provider would motivate them to be a better driver, it is time for insurers to put their concerns aside and try offering a smartphone telematics program. See also: It’s Rush Hour in Telematics Market   Not only can these programs help insurers assess risk, but they can help build a loyal customer base dedicated to safer driving, because smartphone telematics apps offer a way to engage with customers through gamification features and real-time feedback. These features have been shown to help change driver behavior for the better: One insurer saw 74% of their drivers improve. Among these drivers, there were 47% fewer claims and 48% less-severe claims. By extracting behavioral risk factors from smartphones – a modern, ubiquitous technology - and combining them with traditional assessment factors, insurers can achieve better risk stratification, set more accurate rates, reduce the quantity and severity of claims and improve loss ratios. Also, by implementing a comprehensive smartphone telematics program, insurers obtain a direct channel to their customers, where they can engage to improve driving habits and increase loyalty to the insurers’ brand.

I’ve just returned from the ISPIM conference in Stockholm, where around 500 people spent several days kicking around the big questions of how to work successfully at the innovation frontier. A great feature of the conference is that it brings together researchers and academics, practitioners and policy makers, consultants and coaches – and there’s a willingness to share ideas, insights and concerns. It was also a conference taking place against a footballing background – and there were plenty of detours to local cafes to catch games of the World Cup. Watching footballers take the field for their tournament matches reminds you very quickly that these are not simply a group of 11 men tumbling out of the pub or roused from their Sunday afternoon armchairs. They are a trained and rehearsed squad, their performance the result of hours of strenuous effort. All that hard work doesn’t guarantee them success on the pitch, but it certainly helps. It’s also interesting to watch the surprising contenders – small countries like Switzerland or Belgium taking on their much bigger rivals. Success in a competition like this is about being agile, flexible, creative – and remembering that what worked in the past may not be enough to succeed in the future. Winning depends on the capacity for innovation – and for innovating our approaches to that challenge. In many ways, the drama being played out on the pitches in Russia was the same as that being discussed in the conference sessions. Innovation matters to any organization trying to deal with an uncertain and increasingly turbulent environment. And the evidence is clear – success isn’t an accident but rather the product of well-rehearsed and embedded behaviors. As with athletes training for the big event, success depends on a regime of practice and reinforcement to the point where these things become automatic.   Psychologists call these routines, and they define "the way we do things around here"; they become the culture of the organization. There’s no shortage of conferences like ISPIM at which companies share experiences to try to distill recipes for success. And there’s plenty more inspiration to take from a wide range of reports from consultancies mapping trends and identifying key innovation management practices. The dates and locations might change, some of the specific challenges might appear new, but the underlying message is surprisingly constant. And it’s backed by a wealth of research studies that have been trying to explore and unpack the DNA of successful long-running innovators. See also: 3 Myths That Inhibit Innovation (Part 2)   So what does it look like – what is "innovation fitness"? It’s not a single magic ingredient but rather attention paid to a set of principles and the behaviors that help the organization act on them. Anyone might get lucky once, but to sustain innovative performance requires something much deeper, and seven core principles stand out as being important:

• Innovation is not a magic moment – it’s not like the cartoon in which a bubble appears containing a bright idea. It takes place over time, and smart organizations map and manage the journey from idea to successful capture of value from that idea.
  • This doesn’t happen by accident; it’s a journey, and there are different stations on the way, different activities requiring different approaches
  • Smart organizations have a map for their journeys, create structures and policies, use tools and methods to help manage risk and uncertainty as projects proceed
  • They use this process to enable them to repeat the trick and build into it the capacity to stop or pivot projects as well as start them

• Innovation is not a slogan or a fashion accessory; it’s a strategic imperative
  • Innovation needs a road map for the future, spelling out clearly where and how change will take us forward
  • It depends on strategic leadership, providing a stretching vision and encouraging and empowering people to contribute their ideas and efforts toward realizing it
  • It requires commitment, not just words – strategic innovation leadership is about putting resources into play
  • People only buy in to strategy when they understand it, so it also requires mechanisms to communicate and engage them
  • Innovation is about scarce resources and risk, so it’s essential that it is monitored and measured, a key part of the organization’s high-level dashboard
• Innovation is all about change – smart organizations recognize that strategic advantage can come from change along multiple dimensions.
  • Change in what we offer the world – products or service innovation
  • Change in how we create and deliver that offering – process innovation
  • Change in the markets we address and our relationship to them
  • Change in the underlying mental model – business model innovation
  • Smart organizations explore all the innovation space available to them and build a balanced portfolio across these different types
• Innovation involves a portfolio of risk:
  • It involves a great deal of "do better" incremental innovation, exploiting what we already know – improving on what’s already there, tightening up processes, improving customer service, enhancing product offerings, etc.
  • But it also involves radical innovation, exploring new and unmapped space. This kind of "do radical" innovation is about step changes along the trajectories we work with, bigger bets around new technologies, entering new markets, shifting our approach, etc.
  • And from time to time it requires "do different" – reframing the game, looking with an entrepreneur’s eye on how to change the rules of the game or start a new one – disruptive innovation, co-evolving in an emerging new world
  • Organizations need different capabilities in each, allowing for experimentation, failure and above all learning and accumulation of experience for next time
  • And they need "ambidexterity" – being able to do all of this under the same roof, taking advantage of the leverage their resource base can offer. They find ways of integrating the learning around renewing the organization while balancing the tensions and internal challenges that different forms of innovation can set up.
• Innovation is a multi-player game – it’s an ecosystem of different actors who can become part of an innovation network
  • This has always been the case, innovation is about networks of knowledge. But in today’s knowledge-rich environment the challenge of open innovation begins with recognizing that not all the smart guys work for you
  • Smart innovating organizations spend a lot of time developing and managing their networks – seeking out and building new nodes, strengthening existing ones and pruning redundant ones
  • They recognize that users are a powerful source of knowledge, and work to engage lead users and user-innovators in processes of co-creation
  • They explore beyond the boundaries of the normal business frame, looking to develop peripheral vision to pick up on weak signals and emerging opportunities far from their core

See also: How ‘Not Invented Here’ Limits Innovation  

• Innovation is about people and smart organizations working to develop an active innovation culture.
  • Innovation not just as the province of specialists, so everyone can contribute to the innovation story
  • Needs enabling structures and tools, like collaboration platforms
  • Needs to tap into the natural creativity and entrepreneurship but also channel it
  • Needs to train and develop it – understanding innovation and acquiring and honing the skills to be innovative
  • Needs to recognize and reward it
  • Needs to tolerate ambiguity and failure
  • Needs to give people space, time, permission to play
• Innovation is a dynamic capability – organizations need the capability not only to adapt to a changing world but also the second-order capability to step back and reset their approaches. They need innovation model innovation.
  • Need for double-loop learning, adding and modifying and pruning the innovation routines – the behaviors embedded in structures, processes and policies.
  • Three key questions need to be regularly asked. Of the routines we use:
    • Which should we do more of, reinforce?
    • Which should we do less of, even stop doing?
    • Which new ones do we need to cope with new challenges?
  • Need for a core team to help with this, monitoring and reviewing, catalyzing and experimenting – an innovation management capacity
  The challenge, of course, is not just recognizing the need for these capabilities but actually acquiring them. And unfortunately there’s no substitute for the hard work and commitment to building them to the point where they become the way we do things around here. It’s about learning and practice – simply taking out a gym membership doesn’t build up the kind of high-performance athlete able to compete at world-class levels. So why put in the hard work? Because research evidence, reinforced by consulting reports and conference presentations, also shows that success does follow. Actively managing innovation makes a difference. Innovation isn’t a matter of luck, it’s a capability that can be built. Innovators are made, not born.

In a 2011 article in Insurance and Technology, Kathy Burger enumerated several big technological changes in the insurance industry since 2001, including the rise of big data, the ubiquitous nature of cell phones and social media and an increased emphasis on data security and privacy. Seven years later, these once-big innovations are par for the course. P&C insurers and insurtech companies are now positioned to use these tools — which scarcely existed in 2001 and which were only beginning to be broadly embraced in 2011 — as the foundation for the next wave of major changes in the insurance industry. Now, let’s look at some of the biggest rising insurtech trends today to get an idea of where they’re likely to take us 10 years from now. Auto Insurance In July 2015, Jayleen R. Heft published an article at PropertyCasualty360 with the provocative title, “Will the auto insurance industry be obsolete in 20 years?” Heft cited the work of Deutsche Bank research analyst Joshua Shanker, who argued that by 2030 self-driving cars and ride-sharing services would occupy so much of the automotive market that setting rates based on driving data would no longer be necessary. Instead, the companies behind these vehicles and services would simply “insure their cars like any other product,” Heft said. While self-driving cars and ride-sharing services like Uber and Lyft are already shaking up the auto industry, predicting the demise of auto insurance by 2030 — or by 2028, even — may be premature. Pay-per-mile auto insurance is gaining popularity. Spearheaded by companies like Metromile and Esurance, the pay-per-mile model charges a base rate, plus a specified rate for each mile driven. “Each mile usually costs a few cents,” Craig Casazza explains in an article for ValuePenguin. “So if you drive 200 miles per month at a rate of five cents per mile, you would be charged $10.” In addition, Metromile only charges drivers for the first 250 miles driven in any given day in most states. Tracking Mileage With Telemetrics Both Metromile and Esurance use telemetrics to track miles driven to calculate each month’s rate. Metromile calls its program the “Metromile Pulse,” and it uses the car’s OBD-II port to track mileage. Other insurance companies have experimented with telemetrics for a number of years but haven’t connected rates directly to miles driven. Instead, they use the vehicle’s data to adjust rates in a more complex, less transparent manner, Casazza says. See also: Future of P&C Tech Comes Into Focus   The pay-per-mile model is increasingly popular with younger drivers, who often have the option to abandon their cars entirely for the convenience of Uber or public transportation, but who are happy to keep the freedom of their own vehicle when they feel they can more directly control its costs. For these drivers, who include a growing number of those currently under age 40, auto insurance may survive into the 2030s — although it may operate in a very different way. Shanker’s prediction that auto insurance will fade into product liability insurance over the next decade, however, may be prescient. In an October 2017 article in Business Insider, Danielle Muoio explored Tesla’s partnership with Liberty Mutual to sell insurance as part of the purchase price of the company’s vehicles. The plan, called InsureMyTesla, factors in the car’s autopilot feature while setting rates and comes up with a lower cost than other insurance plans as a result, Muoio reports. Insuring Shared Rides Similarly, while ride-sharing company Uber currently requires drivers to carry their own auto insurance coverage while also providing supplementary insurance, the company may switch to providing all insurance coverage on its cars as it continues to move into the self-driving vehicle market. Given Uber’s bumpy ride in producing self-driving vehicles, however, the company’s total abandonment of conventional auto insurance expectations for human drivers may be more than 10 years out, Tech Radar’s Leif Johnson and Michelle Fitzsimmons said in May 2018. Adding Value and Processing Claims “Digital technology destroys value,” warned a March 2017 article by Tanguy Catlin, Johannes-Tobias Lorenz, Christopher Morrison, and Holger Wilms at McKinsey & Co. According to the authors, “although digital technology propels some companies to become clear market winners, for many more its impact depletes corporate earnings and the overall value of an industry. Consumers, not companies, are often the ultimate winners.” To stay relevant, the authors said, insurance companies must “meet customers’ expectations, which have been transformed by digital technology.” In 2018, insurance companies seeking to stay ahead of the curve often accomplish this task by breaking down their own silos and presenting a quick, clean digital interface that makes it easy for customers to interact with the company and for staff to understand customers’ needs and provide clear, consistent answers. Bridging Human and Automated Workflows By 2028, companies are likely to have struck a balance between automation and human intervention — a balance that many insurers are currently struggling to find, Rick Huckstep writes in an article in The Digital Insurer. Automation offers both the opportunity to improve claims response and the challenge of providing the “human touch” that customers also demand, as Roger Peverelli and Reggy De Feniks put it in a December 2017 piece for Insurance Thought Leadership. The goal will be to use automation in a way that doesn’t feel automated. As AI technology continues to develop, this goal may be fully realized within 10 years. The automation of many of the current day-to-day tasks faced by insurance agents will, in turn, change agents’ jobs. Some commentators are already predicting that today’s field agents will be obsolete by 2023, replaced by “bionic agents” who have fully integrated digital tools, including AI and machine learning, into their work. How Automation Influences Customer Expectations Customers are already demanding the knowledge and flexibility a bionic agent exemplifies. As Jason Walker writes at PropertyCasualty360, “Consumers today want the ability to conduct insurance business anytime, anywhere for simple transactions, while at the same time be able to have a relationship with a professional to discuss complex policy questions or walk them through the claims process.” As this option becomes ever more normalized for customers, the demand for the same experience in insurance will rise. as well. The result? By 2028, “digital natives” won’t only be insurance customers — they’ll also be insurance agents who leverage technology not only to serve customers but to demonstrate real value in the insurance process. See also: Key Strategic Initiatives in P&C   Automation and Claims Processing Field agents aren’t the only insurance industry professionals who will see their work change dramatically by 2028. The ways insurance companies process claims will change, as well, driven in large part by customer expectations. For instance, Ben Rossi writes at Information Age that about a fifth of young adult customers (ages 18–24) expect insurance companies to use drone technology to survey property damage and gather information for claims. This idea “would have been unthinkable as recently as a couple of years ago,” Rossi says. Ten years from now, sending a drone to a damaged building or factory site may be as commonplace as sending a human adjuster has been for the past 10 years. For many of us, 2008 feels like it was yesterday. In 2028, our memories of 2018 will feel the same — yet the insurance industry is poised to be eons ahead of where it currently stands, and insurtech will lead the way.