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When will Insurers stop using Complexity as a Crutch?

Ben Moreland
Insurance Experts' Forum, October 10, 2013

 

For the last several years, innovation has been a hot topic. Change is occurring faster and faster than most people can keep up with and insurers, in particular, have been heavily challenged to change their processes and legacy ways of thinking about their industry.  Analyst firms and some vendors have been predicting that those that innovate will be the market leaders and those that stay the course will be yesterday's news.

However, in all the innovation and insurance conferences or workshops I've attended the past couple of years, you always hear the same braking sentence, "BUT insurance is complex".  Carriers would love to innovate, if only insurance wasn't so complex.  Now I'm not in any way challenging this - insurance is a complex business with various products, regulations and customer segments that make the rules embedded within carrier's systems more nested than a sparrow's abode; BUT insurance is not the only complex industry out there.

One of the advantages of coming from another industry, is you get to have a fresh perspective on traditional answers.  I was fortunate enough to spend the first 15 years of my IT background in manufacturing, in particular, doing research for some pretty complex products: jet engines, space equipment, war simulation games, attack helicopters and elevators.  Did you know that a high rise building sways over several feet side to side over the course of the day?  The Citicorp Center in New York, for example, uses oil hydraulic systems to push a 400-ton concrete weight back and forth on one of the top floors, shifting the weight of the entire building from side to side. A sophisticated computer system carefully monitors how the wind is shifting the building and moves the weight accordingly. Some similar systems shift the building's weight based on the movement of giant pendulums.

However, if you ask a jet engineer about the complexity of a jet engine, they may respond it is actually very simple. It is just a matter of induction (getting air into the engine); compression (mixing the air with fuel); ignition (the air/fuel mixture is ignited and the gasses expand); and exhaustion (hot gasses exit the engine at incredibly high speeds).  The complexity is in the details. Yet jet engine manufacturers, Pratt & Whitney, GE, Rolls Royce and others have been innovating the jet engine design, manufacturing, assembly and servicing processes for decades.  They have never allowed the complexity of the system or regulations to be an excuse for forsaking innovation.   The competition alone has forced the leaders of these companies to continue to find new ways, new ideas, new processes and the use of new technology. Innovation isn't an option, it is a necessity.

For example, while carriers and other industries are looking at using special glasses or attachments to glasses that let them see documents hands free in the field, Pratt & Whitney was exploring this as a solution in their service departments in the early 1990s.  Engine service mechanics have oily, greasy hands and would have to stop work to go to a physical service manual to find the right part or assembly method.  In addition, unless they took longer to clean their hands or put on gloves, the manuals became difficult to read as the grease smeared the page.   In order to allow the service mechanic to continue working, they used glasses that would display the documents while they were working.  Natural language commands allowed them to search and navigate the documents hands free. They became more efficient and the documents remained readable.  This was almost two decades ago.

Insurers should have just as pat an answer as the jet engine architects - insurance is actually very simple, it is just data and processes.  The complexity is in the details.  The complexity should never be a barrier to innovation, but just the opposite - the driver for innovation.  It seems like a twist of words, but it changes the mindset in addressing the problem. Instead of backing away from innovation due to the complexity, you should be driven towards innovation to address the complexity.  Forward thinking carriers will make it a point to create an innovative thinking culture - not only to survive and leap forward in this industry, but also to attract the much needed younger talent.  As Denise Garth blogged a while ago, this is no longer your father's insurance industry. The time has come to shake it up.

How do you eat an elephant? One bite at a time.  How do you drive innovation within a carrier? One senior leader at a time who is willing to drop "complexity" as a hurdle to innovation and use it as a driver.  Change the culture first and the ideas will come.  Time to drop the crutch and embrace the change.  Time to innovate!

Ben Moreland is senior business architect for Innovation Group.  He can be reached for further comment or information via email at morelandb@us.innovation-group.com

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