In Canada, The Co-operators is staying true to a 74-year-old mission in an innovative way, which involves teaming up with a three-year-old InsurTech.

“Our mission is to provide financial security and peace of mind for Canadians and Canadian communities. We recognize this can only be accomplished by owning and securing our own financial future,” Peter Primdahl, vice president of Emerging Business Models for The Co-operators Group, told Carrier Management Guest Editor Michael Fitzgerald during a recent interview, introducing the ideas that led The Co-operators to join forces with Slice Labs,an on-demand insurance cloud platform provider, in a unique partnership.

“Specific to insurance, we are very focused on addressing unmet or underserved protection needs,” Primdahl said. In this case, it was the underserved insurance needs of Canadians sharing their homes on platforms.

But that’s only part of the story that started with the complementary goal of securing the future.

Here, Primdahl explains how members of an innovation team gained an understanding of the dynamic future world that lies ahead and how a greenfield operation known as Duuo, tied to a partnership with Slice, proved to be the right formula for moving ahead with its mission through changing times.

Fitzgerald: How did the innovation journey at The Co-operators start?

Primdahl:Three years ago, several areas of the company had been dabbling in innovation. We looked at things like ecosystems and so forth. But I would characterize these efforts as disparate activities—separate efforts without a central organizing principle. However, through these efforts, we gained an appreciation across the business of the impact of technology and data and analytics. Things like the iPhone and Facebook were changing clients’ behaviors and expectations. We felt that we really needed to understand the impact of these changes on people and communities.

We brought in an innovation consultant to provide us with a theoretical background on innovation and to train us on how we might be able to establish an innovation process to address the changes we were seeing.

We chose five specific issues and went through an immersive experience wherein we considered the complexity, uncertainty and ambiguity of the future. We gained an emotional appreciation of what was before us—not just a theoretical understanding of what is happening but a very powerful sense of what might be ahead. By conducting what we called our environmental scan, we came to believe that the future is nonlinear and very different. It galvanized our commitment to thinking and planning and doing something different.

Fitzgerald: And the insights from the environmental scan led to Duuo?

Primdahl: Duuo certainly wouldn’t have happened if we hadn’t gone through the environmental scan. Early in 2018, the company executives asked if I wanted to lead a team to investigate opportunities with InsurTech startups. That was around the same time that Slice Labs announced the release of its ICS [Insurance Cloud Services] Platform. Because it was so closely aligned with what we were looking at already, we decided to set ourselves a schedule of two months to conduct a hackathon with Slice. The work exposed us to all the elements of the platform and of the company. At the end, we were sufficiently satisfied with what we saw, and we entered a business and equity arrangement with Slice. The equity piece started as a nice-to-have but ended as a must-have during the course of the negotiations. Reason being, we saw tremendous upside potential in the company, so we loved the investment opportunity. From an operations perspective, we anticipated our two companies becoming extensively ingrained in one another’s operations because of our shared aspirations in the on-demand space, so the investment piece evolved into a prudent risk management play.

Learn More: About Peter Primdahl

Fitzgerald: Tell us what Duuo is.

Primdahl:Duuo is a business unit we established with the express purpose of leveraging the strategic partnership between The Co-operators and Slice Labs to deliver a new digital insurance brand. Duuo allows us to create new insurance products to meet the growing customer needs for easy, on-demand insurance solutions that satisfy emerging risks and elevated consumer expectations emanating from the continuous changes that flow from the rise of the digital economy.

The Duuo brand and our business/technology partnership with Slice allow us to meet the unmet or underserved insurance needs of Canadians participating in a highly innovative digital economy. Our first product is pay-per-use homeshare insurance for platforms like Airbnb, HomeAway and VRBO.

Duuo is a digital platform that does not lend itself to incorporating the services of intermediaries. We did not set out with the purpose of somehow disintermediating the insurance industry, as we believe analog interactions offer value for consumers for many types of transactions. Our direct-to-consumer distribution model is simply a natural extension of the higher-level strategies and business models we are deploying, as well as the market segments we are targeting.

Fitzgerald: Duuo is a separate unit from The Co-operators, a greenfield startup, correct? Why did you choose that approach?

Primdahl:Yes, it is separate. The greenfield model allows us to do things outside the constraints of existing business processes while remaining true to our co-operative values. It allows us to have a startup mentality with permission to do things differently. As an offshoot of the business, we operate outside of any existing rules and norms that are baked into an organization that has been around for as long as we have. This allows us to move faster, which is critical.

We recognize that Duuo is a different business model. Our thinking on this is heavily influenced by Clayton Christensen’s work. A business model in its simplest form consists of creating a viable, relevant consumer value proposition by leveraging a company’s proprietary resources and processes in such a way it simultaneously satisfies the company’s own target profit formula. These component parts of this business model formula are very different in a startup like Duuo as compared to a company like The Co-operators.

In an established firm, these aspects have been refined over time and are largely fixed in place. With Duuo, four or five months into this experiment, we are trying to adapt and revise this formula around our newfound resource, namely Slice’s platform. We are going to go through many iterations before we start to really refine the model down to what I hope will be perfection one day so we can satisfy our expected profit formula. To get there, we must operate with the speed and agility of a startup.

At Duuo we run with a tremendous pace. Making all this work requires that I assume a broader scope of accountabilities, which means I have to make a lot of decisions—and quickly—that I wouldn’t normally assume in a business role in a traditional insurance operation.

Fitzgerald: What are the next steps for Duuo?

Primdahl: Duuo is part of a wider initiative: our Emerging Business Models area. The mission is to test and refine new business models along the Christensen model I mentioned earlier. To do that, we need to earn the right for additional investment dollars—proof that the organization sees enough promise in what we are doing to keep investing in it. I think it’s a healthy way to think about it. There is a danger in plowing millions into innovation units that become academic and theoretical and fail to deliver on relevant business objectives.

To gain our next round of funding, we will need to introduce a few more products and services to test our new business model. So, that’s a priority for us. Right now, as I mentioned, we only have one product out there. We expect to release more products early in the second quarter.

Also, I definitely envision that we will secure new InsurTech startup partnerships, which will augment the current Duuo model. We are just beginning to embrace and collaborate with other startups to help us accomplish what we feel we need to accomplish as a group of companies.

Fitzgerald: What are the key learnings, takeaways for you so far?

Primdahl: There are so many, but I’ll focus on a couple of things. First, it is incredibly important to do something. We recognized that we needed to get out there and conduct our first experiments in a live setting.

My advice is to see if that first product, that first service or consumer value proposition will work. See what you can learn. Find out what’s resonating, what’s not resonating, that sort of thing. That’s really where we’re finding ourselves today. We’ve had this product out there for five months now, and it’s providing us with tremendous insights and certainly encouragement to start thinking about the next generation of products and services.

Second, be very cognizant about how we work with startups so that we don’t slow them down to any significant degree. For example, in the “business as usual” environment, the procurement process is very rigorous. It makes sense for it to be so to protect the organization. When we brought on Slice, we found a way to retain the key elements of our procurement process but also recognized that what can often take us many months needed to be reduced to six weeks. So, we worked with our executives and the relevant internal parties to find a process that satisfied both speed and security.

Finally, you must be willing to accept failure along the journey. I know we didn’t do things perfectly and there are things that I wish, personally, I would have done differently that I will change in the second go-around. But I think the organization has zero regret about investing in Duuo and getting it out there. To sustain innovation requires strong leadership and sponsorship from the C-suite and a commitment to a greater purpose, both of which we have in our organization.

Fitzgerald: What do you see as you go forward for innovation at The Co-operators?

Primdahl: Our future encapsulates multiple initiatives across the organization, under a strategy that recognizes that we can no longer drive this car by looking in the rearview mirror. The road ahead comes with more twists and turns. As Rob Wesseling, president and CEO of The Co-operators, has shared, we need to ready ourselves as an organization, starting with our strategic thinking and on through to business model innovation and finally the development of new products, services and consumer value propositions. We will continue to prepare our organization to be robust—not only to survive but to thrive in a world that’s going to be nonlinear and very different than any we’ve seen in the past. And we’re excited to work with new InsurTech partners that will help us navigate the exciting road ahead.

We don’t presume we have it all right. We are still experimenting. But we have a bit of a structure to it. And when you create a structure around innovation, it makes people feel a little more comfortable than if it’s disparate and seemingly initiated and applied like buckshot on the wall. Creating a method to what can sometimes seem like creative madness is more likely to yield a sustainable corporate innovation process.