Editors' Cuts

How Innovation is Derived from Counter-Intuitive Business Plans

Justin Stephani
Insurance Experts' Forum, September 13, 2012

Before yesterday, I had a hard time finding Celent’s “creative disruption” moniker very applicable to insurers’ business decisions. I considered it an abstract phrase employed to emphasize innovation in a sexy way—a useful reminder, but not revolutionary.

Yet, at Celent’s Creative Disruption Symposium on Thursday, I finally fell for the phrase’s practical purposes because of a succinct definition: Using a unique or emerging technology to pursue an underserved, or completely ignored, market.

Perhaps this isn’t new or particularly convincing to you, but maybe some of these everyday examples will be, which were illuminated by featured guest Michael Raynor, author of “The Innovation Manifesto.”

Netflix, Amazon, Google: They all began by pursuing underserved, niche audiences, Raynor asserted. Each company tailored its outreach to those who simply wanted their movies mailed to them instead of going to the neighborhood Blockbuster, those interested books not readily available at the Waldenbooks or Barnes & Noble superstore in the nearby mall, and those who had small marketing budgets that were best dispersed among cheap ad spaces online.

They perfected those unique business models and were (apparently) paying attention to the way the new technologies that enabled these business models were developing around them. Now they have cornered markets that they ostensibly created.

Celent Senior Analyst Mike Fitzgerald described it thusly early in the day: “Protect, perfect, and then grow like crazy.” 

Recently, segmentation and specialization of the market has become commonplace in discussions of analytics and the future of the insurance marketplace. Analytics can, if not now then certainly in the future, allow organizations to assess the risk behind very specific consumer differentiations; products can become tailored, almost personalized.

What if an insurer uncovers a common thread denoting a particularly risky strain of potential consumers that most or all insurers are avoiding? What if they focused on giving that specific demographic a set of tailored options that allowed them to glean a better consumer experience with better prices? Does that process sound familiar yet?

I imagine that’s how just about all forms of insurance came to be; however, with the rapid advancement of technologies supplementing the risk analysis process, the broad umbrellas of coverage the industry has been content with for a long time suddenly may not be good enough for the everyday consumer with very specific wants and needs. And by looking at the examples given earlier, businesses are beginning to understand where—and how—to look for the most profitable niches.

There’s even an example within the industry. Progressive arrived not 20 years ago seeking to serve the most neglected corner of the auto insurance market: non-standard drivers. Today, by protecting that segment and taking time to perfect a creative approach to covering it profitably, they now sit atop the mainstream market.

As counter-intuitive as it may seem, it’s these dark, risk-infested corners where the largest potential for profit and growth are lurking. The technologies are mature enough, and these markets are waiting for better servicing. Now, it’s up to insurers to apply technology creatively to these niches, and in due time, disrupt the marketplace at-large.

Justin Stephani is associate editor for Insurance Networking News.

Readers are encouraged to respond to Justin by using the “Add Your Comments” box below. Healso can be reached at justin.stephani@sourcemedia.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

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