This article is part of our insurance innovators interview series.
Q1: In your view, what has been the greatest innovation in the P/C insurance industry in recent years? Explain.
McGavick (XL Catlin): How commercial insurers are using data and analytics to analyze risks is our greatest innovative move in recent years. We’ve only seen the “tip of the iceberg.” New sources of analytics can be harnessed and put to work to make our operations more efficient but especially to help us solve problems for our clients.
The insurance industry has relied on loss information—things that have happened in the past. Today, big data and analytics are giving us more opportunities to develop new insights on new and emerging risks.
Q2: Describe the greatest innovation at your company during your tenure. (It could be a product, process or service.) How did it come about? (Feel free to describe more than one.)
McGavick (XL Catlin): There have been many, particularly in the risk product space. At the moment, one of the most exciting initiatives is the creation of XL Innovate—an XL-sponsored venture capital fund which we think has enormous potential. Through this initiative, we’ll look to partner with entrepreneurs who have the vision and ambition to address new risks with new solutions, unconstrained by geography, scale or traditional thinking.
I’m excited to have Tom Hutton, a past director of XL, leading XL Innovate. Tom brings extensive insurance-specific knowledge—as an executive with experience in risk analytics, as CEO of Risk Management Solutions Inc., White Mountains Re, and as a director of private and public insurance and reinsurance companies including Montpelier Re and Safeco.
Most recently, Tom served as the CEO and founder of New Energy Risk Inc., a provider of innovative data analytics, strategic consulting and financial risk transfer solutions to the renewable energy industry worldwide. XL partnered with New Energy last year to launch an innovative fuel cell insurance product. That’s where XL Innovate will make its mark—facilitating collaborative partnerships that deliver first-of-its-kind insurance products.
Q3: In your view, what innovation or innovator outside the insurance industry has had or is having the greatest impact on the P/C insurance industry?
McGavick (XL Catlin): The smartphone has rightly earned the title as a disruptor of industries. For the commercial P/C industry, smartphone and tablet technology has changed how we communicate with each other and our clients and helped us streamline processes.
Mike McGavick, XL Catlin
For instance, our risk engineers are using tablets to collect risk data on the industrial and commercial properties we insure, share it with our customers, and immediately pass it on to our underwriters to use in analyzing and pricing the risk. It was a process that previously took days, now hours.
And of course, because mobile technology is changing entire industries, it has an effect on our business as well. Things we used to insure in the form of bricks we now have to figure out a way to protect in the form of bytes. It’s a great challenge to the industry and will dramatically change the kind of insurance that makes up the bulk of how we remain relevant as a sector.
Q4: Describe one or more ways in which your company encourages innovation. (Feel free to describe any elements of the culture or process.)
McGavick (XL Catlin): The mantra around XL is “innovation is in our DNA.” XL is the result of industry innovation to address the liability crisis of the 1980s, and that is well understood at all levels of XL. Innovation has always been part of the culture at XL, but a friendly dose of competition has helped reinforce it, keeping our colleagues excited about innovation. We launched our internal Competition 25 innovation contest in 2011 to mark an anniversary. It generated a lot of new, actionable ideas, many of which—like our CapAssure product—we brought to market. And that’s the spirit we are trying to keep alive through a variety of means every day.
Q5: What is the biggest obstacle to innovation within the insurance industry? Explain. What is your company doing (or what can the industry do) to overcome this obstacle?
McGavick (XL Catlin): We’re not fast enough. We need to innovate faster to outpace the risks that our clients are facing or will be facing. Insurance has relied too long on hindsight to develop and price products. Change continues to pick up speed. Therefore, we can’t expect to make judgments on today’s risks based on long data sets—meaning the industry can’t afford to collect 10 years of data before providing a solution. Whole industries will come and go in that time frame.
We need to be more forward thinking. To help us, we’re connecting with both industry and nonindustry partners to seek their expert advice, pool resources and intellectual horsepower to see what we can do together.
I stress the importance of collaboration—both inside and outside of the organization—to break down innovation obstacles.
Q6: Do you believe the next innovation to impact the P/C insurance industry will come from inside the industry or from an external innovator? Why?
McGavick (XL Catlin): I believe it should come from inside our industry but not without the assistance of external innovators. And that’s what we aim to accomplish with XL Innovate. Similar to what our complex accounts team did for Bloom Energy, our XL Innovate team will seek outside independent expertise to develop products that address very specific industry risks.
Q7: Describe your role in leading innovation at your company.
McGavick (XL Catlin): At XL, innovation is part of everyone’s responsibilities. Leading innovation happens at all levels. I’m in more of a position of support, making sure my colleagues have what they need to support development of their ideas.
Q10: Have you ever collaborated with market competitors to move an innovation forward? If so, why did collaboration make sense in this situation?
McGavick (XL Catlin): We’re proud to be a part of the recently announced Microinsurance Venture Incubator (MVI) Consortium.
Many insurers realize there are some risks that are best not to tackle alone. Together, however, we can address these risks by pooling our resources. While limiting our individual downside risk, we can bring to the table our greatest skills and assets to address some big problem and really show the value and potential of insurance as a solution.
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