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Innovating the Insurance Industry

Posted on January 26, 2016

Undoubtedly one of the hottest buzzwords in any business magazine right now is “Innovation.” The concept has changed the way companies large and small choose to challenge their employees, and the innovation-craze has pushed companies outside of just the technology industry to come up with the next great idea. So, where did this sudden need for innovation spring from?


Looking Towards Innovation

In this case we should give credit where credit is due, the innovation at the GAFA companies (Google, Apple, Facebook, Amazon) has profoundly changed the way billions of people function on a daily basis. Need to know an answer quickly? Just Google it on your Apple phone. Maybe you’re running low on household essentials - easy, hop on Amazon and it will be delivered to your office before it’s time to call it a day. You might even be so impressed that you share about it on Facebook. Most people can’t make it through one day without using the innovation put forth by one of these four behemoths which is pretty impressive considering that 15 years ago, most of these products/companies didn’t even exist.

To put in in perspective, it’s estimated that the apps on the typical smartphone would have cost $900,000 thirty years ago. Technological improvements over that time have moved the exclusive tools of millionaires into the hands of the masses. It’s possible people now have more computing power at their fingertips throughout the day than the NASA scientists who put a man on the moon in 1969.

But is “innovation” the sole property of software and computer hardware makers? Or can this concept be applied to other, more conservative industries? Is it possible to learn what the tech companies are doing right and apply them to any industry?


Innovation in Insurance

When talking about most long-standing, conservative industries, it doesn’t get much more steadfast than insurance. The industry has been around for about as long as humans have recorded transactions. The earliest records indicate it was practiced in the 3rd and 2nd millennia BC in both China and Babylonia. A system of insurance is clearly documented in the Code of Hammurabi, one of the oldest deciphered writings of significant length in the world, from 1750 BC.

Can innovation possibly be applied to such an industry? In fact, it has throughout its history. If one looks to the historical record, one can see insurance has driven innovation in crime prevention, firefighting, occupational health, road safety, healthcare, climate change, and other areas.

Ben Franklin’s creation of a fire insurance company in 1730 resulted in a number of safety innovations in American homes including the use of surveyors, chimney sweeps, and lightning rods.

While insurance receives much less press than the vaunted tech superstars of our modern era, it is an industry that is just as competitive. In this Darwinian environment, insurance companies must be innovative and dynamic in order to survive and flourish in the field.


Small Wins, Big Results

One of the problems inherent in discussing innovation is a common misconception. When speaking of the subject, many make the mistake of falling into “all-or-nothing” thinking. Innovation, in this view, is produced by a momentous invention that wholly disrupts the existing world order, like the Russian and French revolutions. Never mind that growth through these steps often produce anarchic systems that inevitably fail.

If one examines the historical record more closely, it becomes clear true and productive innovation is accomplished instead through a series of small steps (so-called “small wins”). It’s easy to look at Facebook’s one billion users and pronounce it revolutionary. But doing so would discard the existence of both MySpace and Friendster which preceded it. While we look back on these entities as failures, they were, in fact, trailblazers that made Facebook possible.

Innovation done properly is through slow and steady incrementalism, building and reinventing the existing processes. In insurance, innovation is often equated with new products and services. But this end goal is more easily accomplished by encouraging employees to think beyond limited definitions, tinker with existing products, and incorporate new ideas into improving old ones.

Central to this culture of innovation is the concept that good ideas can arrive from anywhere. “Flat” organizations that listen to customers and employees at every level invariably produce tangible business benefits for everyone. As it is in every industry (from technology, to hospitals, to construction equipment, to government), insurance companies that treat employees as a highly valued asset and recognize and reward innovative ideas are the ones that flourish and thrive.

And if your company is ready to take the next step towards “innovation,” then it’s time to call the Vocoli team.

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