The key to innovation in the insurance industry is “outside-in” thinking, according to an executive from Nationwide, who uses the term to reinforce the idea that customer-centric mindsets are the best way to move innovation forward.
Executive Summary“Are you using your vehicle to transport people?” That’s just one of the archaic questions that insurers might still be asking, Chetan Kandhari, Chief Innovation and Digital Officer for Nationwide, observed during a recent CM Virtual Roundtable, “Is Innovation Overrated?” Panelists Jeffrey Bohn, Chief Research and Innovation Officer, Swiss Re Institute, and Phil Edmundson, Founder and Chief Executive Officer, Corvus Insurance, weighed in as well, reporting on how an abundance of data paves the way for greater innovation.
“It’s too easy to think inside out,” said Chetan Kandhari, chief innovation and digital officer for Nationwide. “‘How do you put the customer in the center?’ is a question that we should ask,” he said, summing up his idea that “innovation for innovation’s sake” is not a laudable goal. The North Star is innovation trying to create a better experience for the customer, he said during Carrier Management’s Virtual Roundtable, titled “Is Insurance Innovation Overrated?”
“We have forced the customer to think about the way we are organized as a company usually, in our profit and loss [centers], and the customer doesn’t really understand that,” Kandhari said, going on to describe the complexity of some property/casualty coverages that leave customers thinking, “I don’t really know what I have.”
Carriers are missing opportunities to educate their customers about risks and provide better coverage, he suggested.“We need to say, ‘By the way, you bought this, but you didn’t have water backup for the basement. We need to add this,'” he said. “What is really ripe [for innovation] is articulating with clarity the value that you have—and by the way, you might actually end up making it a more economically positive thing for the company, too, if [customers] really knew what they should have,” he said, directing his comments to carrier viewers of the Roundtable.
“How do you make it so it’s not ‘I’m going through the motions of getting these products'” from a customer’s perspective? “How many people do you believe even open the insurance policy once they’ve signed up for it?” he asked.
For customers, “their life has evolved, but usually their insurance hasn’t,” Kandhari said.
Chetan Kandhari, Nationwide Insurance
“How do you create this dynamic platform to work with customers and really know what they want to get solved?” he asked, delivering an impassioned call for carriers to put customers at the center of innovation efforts.
“Other industries have picked up on customer behavior, have picked up on human behavior, [and they] use artificial intelligence to really understand and predict future behavior. That’s where we have an opportunity in insurance to focus on,” he added.
Data Moves Worlds
Kandhari and co-panelists Jeffrey Bohn, chief research and innovation officer of Swiss Re Institute, and Phil Edmundson, founder and chief executive officer of Corvus Insurance, said that an abundance of data sources pave the way for greater human-centered innovations that will make the process of buying insurance and adding coverages less taxing and confusing for customers.
“Just think about how many times people call the company and say, ‘Hey, I want to add so-and-so driver to my policy.’ And then [they] go through a set of questions. [The questions] are archaic,” Kandhari said, highlighting one such questions that many insurers still ask: “‘Are you using your vehicle to transport people?'”
“Or even take something as basic as buying a homeowners insurance policy and being asked how much to value your house at,” said Edmundson. Most of us can’t do that. “We don’t know what a total loss is on our house. So, we pick a number based on our mortgage value or what the bank needs,” he said, agreeing that a ripe path for insurance innovators is focusing on customer journeys—applying outside-in thinking to simplify insurance acquisition processes for customers.
Edmundson described the work of InsurTechs along this line, highlighting Openly, an InsurTech that operates as a managing general agency, and other similar companies for the simplicity of the customer journey. “They’re tapping into various datasets so that the process [for the customer] is, ‘What is your address?’ That’s it. ‘What is your address?’ And from that they can access Google Street View and see what’s your construction type,” along with construction in the surrounding neighborhood. “They can calculate the value of your house from its square footage and issue you a policy with a value that maybe says $5 million,” he said, contrasting that with the current situation where “total loss” covers replacement cost value on a homeowners policy.
“Think of how easy that solution is. It moves worlds,” said Edmundson, whose company, Corvus, uses new datasets to predict cyber and other commercial insurance claims.
Phil Edmundson, Corvus Insurance
“I see it in my business where we’re taking the 100-question forms for cyber insurance and moving them down to six or seven questions. And this possibility exists in so many places in consumer insurance and commercial insurance,” he said.
“Simplify. Put yourself in the role of the consumer,” Edmundson said, offering summary takeaways to Roundtable viewers. “The good news is we’re all consumers. We get it. But it is a bit of a mind change” for industry veterans, he admitted.
Swiss Re Institute’s Bohn also said that insurers should work to leverage new data resources that didn’t exist before to address the issues that Kandhari raised. “This data is the fuel,” Bohn said. “Compared to even five years ago, the amount of data that I see available in my organization and my ecosystem is just orders of magnitude greater than it was before.”
Bohn, who spoke earlier in the Roundtable about difficulties that innovators inside of insurance and reinsurance companies face in getting funding allocated to their breakthrough and disruptive ideas, said related problems exist for those proposing to mine the increasingly available third-party datasets. “There are still a lot of disconnected conversations between those of us, like ourselves, that are more on the ground on innovation and the people who have to fund things…They still don’t realize how difficult it is to curate that data for useful value-creating activities,” he said. (Related article: “Betting on Breakthrough Innovation.”)
Still, compared to five or 10 years ago, “there’s lots of investment in refining then curating that data that will lead to much more innovation,” he stated.