Schemes – a hot bed of insurance innovation
A lack of innovation in the insurance industry is, according to a recent poll of AIRMIC members, the biggest complaint from risk managers.
Well, that’s not the insurance industry I’m working in – nor is it the one populated by the multitude of brokers that work with UK General.
In fact, innovation is very much a part of the 21st century insurance sector: from the consumer experience of telematics technology in motor insurance to the different capabilities insurers have developed to trade with brokers – such as user-friendly extranets, broker portals and supplying products via accessible platforms. Equally some innovations that, 10 years ago, were unheard of – such as insurance for gadgets and mobile phones or cyber insurance – had to be invented in response to changing conditions for consumers and businesses.
However, the industry is not always the original source of innovation. It’s prone to disruption from new entrants – think aggregators and Vodafone’s acquisition of Cobra Automotive Technologies with an eye on telematics – that have inspired a response from the established insurance players.
If, as the late Steve Jobs – founder of Apple – said, “Innovation distinguishes between a leader and a follower”, then innovation is crucial to developing businesses that will outperform their rivals in the marketplace. In general insurance broking, we’re now witnessing the greatest level of innovation in the specialist and niche schemes market.
But how does innovation look in schemes today?
Among more than 500 schemes we write with brokers, what we see is people concentrating on specific groups of customers within their communities and devising insurance products that couldn’t be further from the traditional, mass-market offering.
But the only way to achieve true differentiation in the products developed, along with having genuine commercial potential, is for the broker to have a comprehensive understanding of the customer: right customer, right product, right pricing, right distribution – the not-so-secret ingredients that determine whether you will sell anything at all.
If brokers weren’t already sufficiently self-motivated to create products that meet consumer needs more closely, then the Financial Conduct Authority’s focus on this is adding a regulatory prompt to greater innovation and concern with insurance’s reputation among consumers. The FCA’s director of policy, risk and research, Christopher Woolard, said: “We want firms to put consumers at the heart of their business models” – in saying that quote, he may unwittingly have defined what makes for a winning general insurance scheme!