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Innovation for innovation's sake can send you down an expensive rabbit hole. Ask yourself: what question are you trying to answer and is the customer at the heart of it?
The insurance industry is enjoying some of the best market conditions it has seen in a while, despite increasingly challenging headwinds. In such an environment it can be tempting to make hay while the sun shines and to forget about the future. But now is precisely the time to be thinking strategically about your digital transformation and asking where you want to be in five years' time.
Here's why: Once we're back in the depths of a soft market or dealing with the next systemic risk, there simply won't be the bandwidth or the capital. And, if you don't do it now, your competitors definitely will.
There is a tendency in the insurance sector to put off innovation, to just benchmark ourselves against our peers and forget why we are doing all of this. We've got to stick our head above the parapet and think not only about the threat of disruption from competitors within the industry but the threat from external players we haven't even thought about.
Widen your lens
I remember meeting up with a former colleague who had become the chairman of a major insurer and I asked him what the difference was between being a full-time CFO and being in his plural career. His answer was that previously he thought he had the broadest possible view. The company was benchmarking itself against its peer group, the market and best practice. But in reality, his view was far too narrow.
"We weren't spending enough time thinking about the 'What ifs' or the threats we didn't even know about because we were so focused on our business, people, mission and strategy, results and our shareholders," he said. "It's only when you step back, and you've got time to pause and think, that you realise there's a lot of other stuff going on."
An example I always used to give was the Finnish Rubber Works, which was established in 1898 to manufacture wellington boots. During presentations, I would go through every stage of the corporate history, then pause and ask the audience, who is the company? It was Nokia, which at the time, was the largest mobile phone company in the world.
We all know what happened next. Nokia's incredible decline in just six years because it was blind to the threat from new technology - notably from the iPod/iPhone - and because it had failed to innovate in time.
Putting the customer first
Don't delay. Now is the time to sacrifice some margin to maintain your competitive position. But be clear on why you are innovating and what questions you are seeking to answer. First on the list has got to be, how do we offer more value to the customer?
We all know that customer expectations are changing. It's no longer just about the product - it's now about the service. Through e-commerce, we are all used to getting what we want in the most efficient way possible.
I went on a road trip to Portugal recently and was scratching my head because each country has different legal requirements on what equipment you are required to carry - everything from a spare set of bulbs through to breathalyser kits. I was sitting at the laptop, put a few search terms into Amazon and viola, up came a page full of comprehensive European travel kits - all reasonably priced and next-day delivery.
The needs of the customer is one of the guiding principles of the LMG Data Council. We need to have the customer in mind with every discussion and decision we make. Ultimately, our aim is to deliver a world-class customer journey with minimal workarounds, single points of data entry and one single version of the truth.
But currently, just 50p in every pound spent on premium is going towards the customer, so there is a long way to go.
Be selective
There is no need to reinvent the wheel - the technology exists and there are some fantastic insurtechs doing creative things. But be selective. Look outside of the confines of the industry and ask yourself, what does your customer want and expect? The innovators are thinking about how they use their resources more effectively and how they enhance them through the smart use of technology.
At Peacce, where I am also an advisor, we are doing some work with clients to generate insights into the prospects who don't buy their products. They went through the journey of getting a quote but didn't buy... why was that? Was it too expensive or did they not feel valued? There's still an awful lot of work to be done around meeting customer expectations.
So the technology to achieve our transformation goals is there already. The next step is harnessing it, selecting the right options and enriching the most useful datasets so you can make better decisions that will ultimately lead to great customer outcomes.
Crucially, don't wait until the next soft market. By then, you will have been left behind. Or to put it slightly more crudely: If you're not the lead dog pulling the dog sled, your view will always be the same.
