Tag Archives: Maria Ferrante-Schepis

A Closer Look at the Future of Insurance

There is a growing energy around trying to predict the future of the insurance industry. Much of that energy is aimed at the use of technology and seeing what’s possible when we apply new stuff to our current approach to handling risk.

I’m more interested in the future of handling risk, as that topic gets to the purpose of our industry.

When you look at many of the startup companies attempting to disrupt or reinvent insurance, at the end of the “ultimate” experience, we are still delivering a policy … a hunk of money to replace the financial loss from a seemingly random event.

So what might that future look like? Here are a few possible frames for that answer:

Finding new, emerging risks

Risks are both great and small. Loss of life, health and home are financially catastrophic to most people, and the insurance industry has been keenly focused on these risks for decades or centuries. Smaller risks, like the loss or theft of a phone or credit card, interrupt the continuity of one’s lifestyle but are perhaps not a catastrophe; however, they are a nuisance that insurance can ease. And then there are new, emerging risks that the industry is and should be serving, such as cybersecurity and “overliving” one’s assets.

See also: Shaping the Future of Insurance

Prediction and prevention of risk

There is also a school of thought that suggests the insurance industry should enter the space of prediction and thereby prevention of certain risks. Data is critical to the underwriting of all kinds of insurance and is traditionally used to set rates. This includes weather patterns, health statistics and lifestyle information. Why not turn this data outward and offer products and services that let consumers in on the patterns, perhaps helping them to avoid risk in the first place? This is smart; however, I am not sure the insurance industry is wired to provide services vs. products.

What about power?

Where does the power from the current insurance model come from? While we have many experts who know a lot about the numbers, stats and so forth, the power really comes from the raw material that makes insurance: people and their money.

While the thought of people being the raw material for insurance may conjure up science fiction scenes akin to the classic film “Soylent Green,” it’s actually true. Getting people to pool their money together for common good is a powerful thing. It gives people with few resources the ability to financially hedge against risk even though they are not wealthy enough to replace their own losses.

Where else does similar power exist? One example is utilities. We love to hate our energy companies, water providers, phone service companies and internet providers. But, really, they are doing the same thing — pooling people’s money together to create access to something we couldn’t do individually. You can say the same thing about toll roads, trains and other services we share with strangers every day.

We tend to see these commonly shared amenities as basic human entitlements — civilization, the thing that separates us from the wild.

So in that frame, what is the next “basic” human entitlement going to be relative to risk?

Here’s an idea: We know technology is proliferating at an accelerated pace, and  there will be new ways to extend and improve our lives in the future that we can’t conceive of yet.

What if the cure for cancer or Alzheimer’s disease or the ability to control the weather is owned by a private company? Will average people have any right of access? The recent story about the EpiPen made my blood boil. Mylan, the company that owns the EpiPen, has recently increased its prices more than 400%, shifting the burden to insurers, which then need to push the cost on the consumer — because Mylan can.

See also: The Future of Insurance Is Insurtech  

An August 2016 Forbes article said: “The coup de grâce … [is] that … [this] … will divide the ‘have intervention for anaphylaxis’ from the ‘have nots’ and might die as a result.”

Can insurance companies use their inherent superpower of pooling to create a product that acts like a futures option to access technologies that have not been invented yet? Perhaps to place bets on the right companies that are working hard to figure them out, and designing an investment product that gives them research funding now, for the right to access it at a fair price in the future?

This, I believe, should be the real future of insurance.

Lessons From 3 Undisrupted Brands

Disrupters and the disrupted get all the attention these days.

But do you know who never seems to make big headlines? Brands that have been around for 100-plus years. Such businesses definitely could have been disrupted, yet they are still growing and innovating and, most importantly, remain highly respected.

This notion struck me during the winter holidays at a moment when I found myself simultaneously gift shopping (online), watching TV and brushing my teeth. Yes, I know that sounds weird, but here are the three brands that may consciously or unconsciously have mastered the art of disruption avoidance:

  1. Hallmark
  2. National Geographic
  3. Arm & Hammer

I dropped into my local Hallmark store shortly thereafter to buy some greeting cards and peruse the gift selection. If you step back and look at what the stores sell, it may seem like a hodgepodge. In addition to greeting cards, these shops tend to stock kitschy mugs, eye-catching jewelry, stylish scarves and home goods and lots of knickknacks.

See also: Insurance Disruption? Evolution Is Better  

But when I took a closer look, I found myself tearing up at nearly every turn. Why? These “products” were actually vehicles for messages that hit people in the heart.

On the surface, the company appears to be in the greeting card and gift business, though that is not how the company defines its “why.” The company defines it as: “Making the world a more caring place by helping each other laugh, love, heal, say thanks and make meaningful connections with others.”

Now that’s an enduring mission!

Back home, despite many TV channel choices, I have a hard time finding programs that are appealing. Nevertheless, one evening my husband and I stumbled upon a fascinating show about Mars. It was not only informative but gripped us and made us feel as though we were actually visiting the Red Planet.

I was curious about who produced the program. Then I saw the little yellow rectangle and knew it was National Geographic.

I remember collecting that magazine as a kid. I had hundreds of them. Today, viewed the company through the eyes of someone who examines business innovation and disruption, it would seem that the magazine might have become obsolete, as people now get their information in various other ways. Many magazines have gone out of business or have been bought and sold because of this trend. But National Geographic is still on newsstands.

If print media is so much less relevant today than, say, 50 years ago, how has National Geographic survived since 1888?

Let’s consider one last brand. As I was shopping for toothpaste recently, I realized that the Arm & Hammer logo is virtually unchanged from when I was a kid. Back then, like now, I hated the taste of baking soda but knew that it was something that made everything smell clean. There are plenty of other brands of baking soda, and even generic brands that are no different in terms of ingredients. Yet Arm & Hammer is clearly the most recognized brand, and it’s been the cornerstone of manufacturer Church & Dwight’s success since the mid-1800s.

Over the years, that company has figured out how to use baking soda in everything from laundry detergent to kitty litter. But it’s not really about the baking soda; it’s about the lasting brand and unchanged mission to further cleanliness and hygiene.

There are four shared traits among these brands:

  • They are all more than 100 years old and still growing.
  • They are products that continually attract new entrants while worrying competitors.
  • Their logos have not really changed at all over the years.
  • Their original product is still thriving in its original form.

See also: How to Be Disruptive in Emerging Markets  

What can we learn from this? Old, growing companies that don’t make headlines and don’t get disrupted are excellent at defining their purpose as something much deeper than just the product they originally sold. What’s more, there is no other company in the space better known for that unique purpose.

How many companies can we say that about in the insurance and finance industries?

5 Questions to Ask on Capabilities

Innovation insight: Competency eats culture for lunch.

If you answer no to any of these five questions, then it may be time to hire or outsource talent to fill capability gaps before doing anything with the optics of innovation.

If your 2017 objectives include creating a more innovative culture in your organization, I invite you to learn from seven years of experience working with Goliath, who is gazing enviously at David and wondering how he would look with that hairdo.

Over and over again, we’ve heard and experienced stories of companies declaring innovation and then focusing on the optics as a pathway to innovation culture. By optics, I mean the external aspects of disruptive entrepreneurs. Here are some examples:

  1. Cool-looking office space with modular desks
  2. Casual dress and flex hours
  3. Open source idea generation software
  4. Hackathons
  5. The presence of millennials
  6. Frequent use of the words blockchain, IoT and drones
  7. A beer fridge

While all of the above are nice to have, with innovation, this is the equivalent of “fake it till you make it.” And unfortunately, Goliath never makes it unless he recognizes that the most innovative and successful cultures don’t focus on their culture; they focus on their competencies. In fact, they are not even aware of their culture or even that much impressed by it.

Design strategy is the skill set of how to put your challenge into the right frame and describe it in a new context. This capability is different from business strategy. (Photo: Thinkstock)

See also: The Questions That Aren’t Being Asked  

Five Competencies You Need

I must confess that when our firm went back across all the lessons learned over the last several years and connected the dots, it was like a Eureka moment for me. So what are those competencies?

  1. Design Strategy
  2. Research
  3. Co-creation
  4. Experience Design
  5. Communication/Storytelling

While some of these may sound like common business capabilities, there are some important distinctions that can make or break your innovation mojo.

Design strategy is the skillset of how to put your challenge into the right frame and describe it in a new context. This capability is different from business strategy.

It’s not about understanding your current business, your market or your competition. It’s about the human-centered trends that are the most important for you to focus on. Typical business strategists don’t have this skill — anthropologists, behaviorists and futurists do.

Research is the capability to get at the heart of what the key players in your value chain really think and feel. Innovation research is different from market research in that it seeks to infuse the future trends into the learning so that you can actually identify and quantify a new target group of people and their unmet needs and design around them. Typical research analysts do not have this skill. This capability is part art, part science.

Co-creation is the capability to design productive work sessions that generate useful and valuable output. When companies bring people together at a meeting table, oftentimes problems don’t get solved in the room; they are just talked about. Effective co-creation not only cuts through power struggles, it also builds in the support for execution of new ideas. People support what they create.

Experience design is how you make new ideas real. It requires identifying what consumers value most and focusing on it to test, learn, then build. Insurance companies try to build every aspect of an experience to perfection before bringing them to market. In our experience, few insurance companies know how to prototype and test effectively and efficiently.

Communication/storytelling is about inspiring internal constituents and consumers around your new idea. This is not your garden variety marketing and advertising.

See also: Where Will Real Innovation Start?  

Typical insurance company marketing departments are wired to focus on outputs (i.e., collateral, etc.), not outcomes. If the new product, service or business model isn’t communicated authentically and in keeping with the original intent, the campaign will fall on deaf ears.

If you ask 10 people in the organization where your innovation opportunity space is, would they all give you the same answer? (Photo: Thinkstock)

Five Questions To Ask Yourself

If you are not sure how your organization stacks up against these five capabilities, ask yourself these questions:

  1. If you ask 10 people in the organization where your innovation opportunity space is, would they all give you the same answer?
  2. Does your organization agree on what consumer needs you should solve?
  3. Do you successfully generate new, disruptive ideas?
  4. Have you brought any disruptive ideas to market?
  5. Are you getting new income streams from them?

If you answer no to any of the above five questions, then it may be time to hire or outsource talent to fill capability gaps before doing anything with the optics of innovation.Goliath needs a lesson from his mother: It’s what’s inside that counts.

Let’s Keep ‘Digital’ in Perspective

Call me old-fashioned, but I believe we have forgotten that technology is not a “what,” it’s a “how.” Technology is intoxicating, because it comes complete with millennial attraction, new vernacular, hip-looking office space and sometimes a lot of money. However, keep in mind that the cool new app, acronym or buzz phrase is only as valuable as your vision.

Innovation has so rapidly become the most urgent skill set to develop that many new innovation leaders are skipping over the basics and are thrust straight into the “tech” side of their industry. They are left thirsting for and examining every new technology and looking for a place to apply it. In fintech and insurtech, particularly, this list of technologies is long, as many startups jump on the bandwagon of opportunity. For the untrained eye, this can result in a lot of time and money spent on the wrong things.

Let’s get back to the how versus the what. “What” means the offering and experience you want to deliver. “How” enables that experience. When you are crystal clear about the what, it is much easier to find the technologies you need, and, more importantly, deploy them effectively.

See also: Do You Really Have a Digital Strategy?  

Becoming crystal clear on the “what” takes careful examination of the current offering, consumer feedback and trends shaping the future. These insights can be quantified so that you know which ones are the most important to focus on.

In insurance, for example, some might be focused on price comparison as the consumer need. While this was a strong need years ago, the market is now flooded with comparison sites. This is the reason why even the great and mighty Google couldn’t scale its first attempt.

Less obvious — but emerging — in our industry are the ways to make insurance more transparent. This can include everything from the decision process to approve an insurance application, all the way to rate-making and even company profitability. Insurance startup Lemonade has interesting approaches to satisfy this need, and the area of transparency is rich with opportunity. After all, it is the flip side of trust, and we know that the insurance industry is not trusted.

However, just because others are going in a specific direction does not mean it’s right for your company. It’s important to spend time thinking about your own true core competencies and then match them to unmet needs and emerging trends.

After six years working in innovation, I have seen that more companies need to spend time choosing the strongest insights that are a match for their power. Then they should hunt for startups and partners based on those insights. While on the surface this approach may appear to narrow the field of choice, it actually widens it because it will help to uncover the non-obvious companies that don’t list themselves as serving a particular industry, and are more clearly just about the “how” that you are looking for.

So, back to digital as a “how.” Yes, digital experience, digital interface, digital platform, digital communication, but no, not just plain digital.

If you need to kick that habit, imagine yourself managing dinosaurs in Fred Flintstone’s town of Bedrock. What would you do? You wouldn’t just focus on how cool dinosaurs are; you would  find the right dinosaurs that could work very hard behind the scenes to create the “what” that the customer expects.

See also: 5 Accelerating Trends in Digital Marketing  

Watching that show as a kid, I remember some small dinosaurs fit nicely under Wilma’s sink, eating scraps like a garbage disposal. Others were large, and used their mouths to haul rocks like a crane. Some flew with chairs tied to their backs to get people from place to place.

We just need to replace those dinosaurs with the modern digital technology, or whatever is next after that, keeping in mind what the consumer demands now and, more importantly, what they will be demanding in the future.

Why Customer Focus Isn’t Enough

It’s supremely intuitive that customer focus is the key to business success. It is also something that industries that have typically focused on products or distribution are now aware they need to change. Bravo!

However, how many leaders are really harnessing the full power of customer focus? If after reading that question you immediately thought “big data,” please stop, put your smartphone down and back away from the table. This is not the kind of power I am talking about.

The type of customer focus that I am talking about is better referred to as customer care — not just caring for customers, but caring about them. Maybe a good way to describe this would be customer indebtedness. These are companies that truly live, breathe and feel grateful for their customers, and put them above all else. Very few companies actually do this. They may say it, but being it is completely different.

See also: How to Bottle Great Customer Experience  

I was inspired while attending a recent LIMRA conference in Barcelona. One of the speakers, Artemis Pantelidou, general manager from EuroLife, owned by the Bank of Cyprus, humbly told the story of how her company was on the brink of collapse during the economic crisis in 2013 when Cyprus faced an EU and IMF bailout.

EuroLife was damaged by these market conditions. People were panicked. They wanted (and oftentimes needed) their money, and the company faced the risk of losing a significant amount of its customers, thereby jeopardizing its financial position for those who stayed.

However, it weathered the storm by staying focused on the customer and doing everything it could to make sure its customers were taken care of. It was in constant, open, honest dialogue with its customers, employees, agents and regulators. The company asked for all constituents to stay focused on customers and find new and different ways to satisfy as many as it possibly could. While some suggested it shut down to prevent a “run,” the way banks and stock markets do, Pantelidou insisted that EuroLife stay open for business and deal with each situation one customer at a time. After all, an insurance company is there to help with risk, not run away from it. Once customers understood the situation and how it could hurt so many people, they were even more grateful the company did so much to help them. And the storm passed.

When it was time for the Q&A segment of the presentation and attendees were looking for the magic bullet that helped EuroLife persevere, Pantelidou repeated that there was no more to success than doing what’s right for the customer — each customer. She gave credit to her leadership team and to everyone who worked together, but that was it. Without saying these words specifically, the sentiment was that the company owed a debt of gratitude to its customers, whether they stayed or didn’t stay.

They emerged stronger than ever, with advantages in the following areas:

  1. Leadership team’s trust and respect for each other
  2. Employee respect for leadership
  3. Customer loyalty
  4. Confidence in team’s abilities to handle volatility and uncertainty
  5. Regulators’ trust
  6. Public image
  7. Ability to innovate solutions

While nobody wishes to have an experience like EuroLife’s to achieve a competitive advantage, what lesson can be learned in the chaos of the everyday?

See also: How to Get Broader View of Customers  

If your company seems to be wrestling with any of the seven issues above, running around frustrated with leadership alignment, uncertainty or business barriers to innovation, perhaps adopting an attitude of customer indebtedness now could help your culture overcome those issues sooner rather than later. If you are longing for the everyday chaos to calm down before you can adopt this attitude, you’ll need a real crisis to break the cycle. Why wait?