1 November 2017Insurance

Keep your discipline when innovating

Insurers must not get wrapped up in the hype around technology and must instead ensure they innovate and invest in technology in a disciplined way, as Paul Mang, Aon’s global CEO of analytics, explains to SIRC Today.

Insurers in Asia are likely to be more willing to collaborate when it comes to technological advances and other forms of innovation, which will give them an advantage as the industry becomes ever more technology-orientated, according to Paul Mang, Aon’s global CEO of analytics.

Reflecting on some of the findings of the Global Insurance Market Opportunities Report, published by Aon in September, Mang argues that insurers need to find a new model for innovation and to realise that technology companies are less of a threat to the incumbent players than they think.

He references the possibility of using ‘open architecture innovation’—described as collaborating in a framework that has standards that enable scalable solutions for clients, as well as the flexibility that encourages entrepreneurial innovation—to solve some of the most complex risks facing the industry. He admits that the notion of working with direct competitors in this way will be alien to some insurers. But he says new forms of partnerships can benefit the companies that embrace it—and companies in Asia are more open to this notion.

“Many companies in Asia will be more comfortable with innovating in this way,” Mang says. “They are more flexible when it comes to innovation, and the idea of creating platforms to share ideas and technology comes more naturally in many of the economies that are developing quickly with technology advancements driving the change.”

He stresses that insurtech is only part of the innovation ecosystem. Mang gives the example of the B3i initiative to support the industry’s efforts around leveraging this technology for document management that has been launched as a consortium involving many of the industry’s biggest players, including Swiss Re, Munich Re, Allianz and Zurich.

“Leveraging blockchain technology is a good example of a fundamentally complex issue that one entity on its own would struggle to address fully,” he says. “By collaborating in this way, we are exploring together how this technology might be of use to our industry and ultimately bring value to our clients. Leveraging pools of expertise and bolting on skillsets can be a good way of tackling some of the challenges our sector faces.”

Many insurers have also invested in innovation labs where they work with universities and/or bring many departments together to innovate.

Another reason Mang believes Asian firms will be more open to this form of innovation is that a greater percentage of business interactions in the region are already done digitally, and the idea of platforms is such a core part of digital business models. However, more reliance on platforms and partnerships potentially makes companies in these markets more exposed to cybersecurity risks.

“Cyber risk is a top-of-mind subject in Asia. The region has digitised very quickly—perhaps because there are fewer legacy businesses—and more transactions are done on phones and mobile devices as a result.

“In this environment, I think we can expect the insurance sector to creatively use open architecture innovation to address challenges such as cybersecurity,” Mang says.

He stresses that a level of competition will emerge as companies look to embrace innovation and change in the most efficient possible manner and reap the rewards. But, he adds, there is no one model and technology that will be correct for every insurer—each must work out the best way of moving forward and adopting technologies that will stick.

“My main message to insurers is that it is too easy for the process of innovation to become undisciplined—it can be tempting to throw caution to the wind and invest in different ventures. Although it sounds counterintuitive, there has to be a process in how a company determines where to put its efforts. If insurers do this they are more likely to find a positive outcome.

“Carriers fear they will miss out if they do not act. But chasing the latest ‘shiny object’ is not the answer—there has to be a disciplined process to focus your attention and prioritise your investments.

“Technology companies may disrupt insurers, but insurers still have time to consider exactly how to innovate, how to invest, and what outcome they really want to achieve,” Mang concludes.

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