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August 16, 2018

What Is Really Disrupting Insurance?

Summary:

A long and detailed research initiative earlier this year found disruption very hard to pull off -- but saw that Munich Re was succeeding.

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In a recent SMA blog, Karen Furtado, SMA partner, posed this question: “Have you ever found yourself hearing a word so frequently that it begins to lose its meaning?” The word she was referring to was “transformation,” but I think that everyone who reads that question immediately has a specific word of their own that pops into their heads. For me, it is the word “disruption” or any iteration of it – disrupt, disruptor, disruptive, etc. In the insurtech movement, those “disruption” words surface again and again.

At SMA, we love the word “transformation.” It’s this year’s umbrella theme of the annual SMA Summit. We spend a significant amount of time with our insurer customers helping them with transformation strategies. We help our technology customers dig deep into their transformation messaging and outcomes. But disruption – well, not so much! SMA believes that it is very difficult to truly disrupt the insurance industry (even though there is a tendency among some people to throw the word about with unwarranted abandon). So, you can imagine how surprising it was that, after a long and detailed research initiative earlier this year, we actually hung the “disruptor” tag on Munich Re!

See also: How Analytics Can Disrupt Work Comp  

The goal of the research was to analyze annual reports, quarterly analyst statements, magazine articles and public presentations to gain insight into, and maybe some best practices from, the innovation and transformation journeys of some of the largest insurers – Munich Re among them. SMA’s recent research brief, Who Is Really Disrupting the Insurance Industry? And What You Can Learn from Munich Re’s Journey, reviews the findings. There are many lessons to be learned from their journey, but three things in particular resonate:

  • Munich Re did not let traditional reinsurance roles place rails around their innovation strategies and tactics. For example, they worked with a broker (Marsh) to develop a pandemic product. Neither of the participants is a traditional player in the product development process.
  • Munich Re has stayed true to its heritage and traditional competencies of risk knowledge and risk management but approached change through a new lens of innovation and brave technology exuberance. We also saw this with Chubb as it has stayed true to its deep underwriting heritage in its innovation strategies.
  • Business units are focused on specific innovation and emerging technology initiatives. They have not cordoned off these responsibilities within IT or stand-alone innovation organizations. Business is an active force, not simply a recipient of innovation outcomes.

It’s a bit surprising and even inspiring that a reinsurer is an industry disruptor. Insurers need to study innovation and transformation activities at all industry levels because the traditional (or hyped) competitors may not be the ones that are changing the industry landscape.

See also: Innovation: ‘Where Do We Start?’

To be clear, Munich Re is not the only reinsurer that is on an innovation and transformation path. Others are, as well, most notably Swiss Re. However, early on, Munich Re noted unprecedented external forces emerging and, rather than reverting to traditional and frequently successful strategies, the company boldly placed new lenses on business challenges. And the results are – and continue to be – disruptive. (There, I said that word again!)

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About the Author

Karen Pauli, principal at SMA, has comprehensive knowledge about how technology can drive improved results, innovation and transformation. She has worked with insurers and technology providers to reimagine processes and procedures to change business outcomes and support evolving business models.

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