Editors' Cuts

An Introduction to Creative Disruption

Carrie Burns
Insurance Experts' Forum, January 27, 2012

Through recent, ongoing and soon-to-be-released research, Celent found that for CIOs two of the most important business priorities to be supported by IT are a focus on business growth and profitability. While these are age-old themes, the focus on growth goes back to the past three or four years, since the market crisis, said Craig Weber, CEO of Celent, at the research and consulting firm’s 2012 Insurance Innovation & Insight Day in Boston.

So, the big question is: How do you deliver on growth when competitors are trying to do the same, at the same time? The answer may lie in creative disruption.

As I listened to his presentation, “Priming the Pump for Innovation and Disruption,” I wasn’t surprised to hear Weber say that user experience is where an insurer can generate that differentiation. “That’s where you’re going to get agents or consumers to think about you differently and is the prime opportunity for creative disruption,” he said.

But, with all of the projects added to IT’s plate, is there money to throw at creative disruption? Weber pointed to some surprising numbers based on additional Celent research results that confirmed there is: IT budgets are growing. By a show of hands, attendees, though, said they’re not necessarily experiencing growth but are rethinking their spending plans and reallocating the funds.

Insurers are slowly moving some of that spending to innovation and disruption, while trying to balance it with operational excellence. The balance is different for every company. Weber explained, “If you have opportunities to improve operationally, that might be your focus area for the next few years. If you’re buying the creative disruption message though, we’d like to get you thinking outside the realm of working operationally, even if you’re capturing some of that low-hanging fruit.”

When Weber highlighted some “Edge” technologies—cloud, social media, mobility—that are related to creative disruption and innovation, attendees seemed especially interested in if or when and where in the business their peers are using them. Many (59 percent) of respondents to an upcoming Celent report said they are using social media for marketing functions today, and almost all (93 percent) expect to use it by 2015. Surprisingly, social media as a service or distribution tool is still not resonating with CIOs.

Even more surprising, Celent research results indicated there are some insurers using social media in underwriting. So, I asked: Who is doing this, and aren’t there regulatory and privacy issues to be concerned about? With the caveat that the research results were based on anonymous respondents, meaning those insurers aren’t identified, Weber passed to microphone to Mike Fitzgerald, Celent senior analyst, who researches the topic regularly. Fitzgerald said insurers prefer it that way—not to be identified. He said no one is doing it “officially,” but “I’ve never met an underwriter who won’t do everything he or she can do in order to make the right risk-pricing decision,” he said.

At a minimum, if underwriters are using social media as another pricing tool, they may achieve their desired result, but in the big picture, these actions run a greater risk than that which underwriters are trying to manage: these activities could be yet another contributor to the industry’s poor reputation.

No matter the area in which creative disruption is desired, what’s needed to drive creative and innovation is a process or a framework—measurements, steps, checkpoints, analysis, etc.—Weber said. Maybe by losing legacy, gaining speed, using straight-through processing, and focusing on agile IT delivery, operations and IT working together as partners, insurers can take steps in the right direction. With all the attention showered on our industry as being risk averse, this is one area in which a thoughtful and careful approach may really pay off.

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