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Getting Personal: Customer-Driven Product Innovation

Euan King
Insurance Experts' Forum, June 13, 2013

“It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them."  - Steve Jobs

It is no secret, and it is supported by many recent industry studies - attracting and retaining customers is the primary or secondary priority for insurance companies. To do so, insurers need to provide product innovation and get customers excited about new product concepts, protection offers and superior service. Insurers can work with the customers to create the solution to meet their needs and make it about them. This is an opportunity for insurers to disrupt and capture market.  
Part of meeting these demands is a paradigm shift from “mass market” to “personalized” products … products which are innovative and immediately available to meet the unique and evolutionary needs of customers. We are moving beyond having people fit into discreet categories by making them part of the process.

As an industry, we are steeped in tradition and regulation. We continue to provide insurance products and services that cover risk for a wide array of needs, but with a heavy focus on “commodity style traditional lines of business” including personal auto, personal home, commercial auto, business owners, farm owners, commercial property and commercial liability for decades.  But times have changed and we need to do so as well. The emergence of new exposures, new businesses and new business models, all wrapped in new technologies, are opening up the potential for product innovation and the ”future ready” insurer will be ready, willing, and able to adapt and capture these opportunities.
So what are some of these new product ideas?

Recently, Innovation Group sponsored a workshop focusing on these new and innovative ideas that can help propel insurers into the future. Concepts ranged from the incubation or early entry stage to those well on their way to realizing success and market penetration.  Just a few of these innovative concepts were:

•    Online peer-to-peer insurance that combines social networks with traditional insurance companies by inviting friends and relatives that agree to cover part of the damage, in exchange for saving significant insurance premium costs.  A new twist on the “Mutual Insurance” concept.

•    Online only insurer offering auto, motorcycle, home, travel, and personal accident insurance with  customer-friendly 24/7 portal for obtaining quotations, purchasing policies, and managing accounts within minutes, ensuring instant coverage.

•    One time location based event insurance to cover potential risks from sporadic or short-term events like travel insurance at airports, golf insurance at golf courses, or sports and leisure insurance at ski resorts or campgrounds purchased anytime and anywhere via mobile phones.
•    Niche specialty insurance based on customer activities such as specialized bicycle insurance for bicycle enthusiasts which includes personal accident benefit and extended coverage on overseas cycling trips.  

•    Niche specialty insurance based on customer needs such as specialized “purse insurance” for women with high-end purses and all contents, including pocketbook, credit cards, cell phone, etc.

•    Online auction / bid for a customer’s insurance need, similar to the Amazon concept.   

•    Garden insurance to cover damaged trees, shrubs and plants that are not covered under a homeowner’s policy and protects the significant investment.

•    Digital identify and reputation insurance to cover you on social media and the internet.
And these are just the tip of the iceberg when it comes to innovation.

There are so many more ideas developing in our industry that cannot be analyzed because these markets are still being defined, discovered and developed.   Accordingly, customer demands and expectations will help drive the necessary regulatory change.   This is a key point in the book, The Innovator’s Dilemma by Clayton Christensen.  Christensen comments that markets that do not exist cannot be analyzed and must be discovered together between customers and suppliers, (insurers). 


Unfortunately, as noted in the book, most companies innovate within a “sustaining technology context” – using what is known today, rather than what might be possible.  It's also important to include the role of disruptive technologies and how they can bring different approaches to product development resulting in innovation.

One example of disruptive technology is product configuration. As noted by many of the research analyst firms, product configuration can unleash innovation by enabling product ideas while offering variety and individualization quickly and cost effectively.  It defines, develops, and introduces new products to the market, which, in turn, captivate customers, generate new revenue and gain market share through market differentiation.    

Unfortunately, many core insurance systems lack the robustness and agility in their product configuration capabilities ...and it is not just legacy systems.   Too many current solutions are designed and architected around “traditional” products and markets of today, rather than future thinking and rationalizing for what is or may be possible tomorrow.  To be successful you need to think forward.

What does this mean?

Implementing a modern, flexible and robust product configuration tool is critical for insurers in a growingly competitive marketplace. It means product development and configuration can define and deploy products within hours or days, rather than weeks or months.  It means more enhanced usage-based insurance (UBI) with product structures that are robust and flexible to support customized products.  It means allowing the customer access and input to define their product to meet their needs and become part of the solution … personally invested in the process.  

Establishing an agile, iterative product creation and deployment environment is crucial to realizing targeted products and services that can evolve from concept and deployment to growth and change and finally adaptability for whatever may come in the future.  The bottom line is that making the move today means insurers will be well positioned for product innovation in the future and will establish themselves as “future ready” leaders rather than stragglers in this fast changing industry.

What you need to do now.

When comparing and looking at new core systems, think about an iceberg - what you see isn't all you get. There is much more below the waterline than above and that's the part that can impede your success.   Allot significant time to focus below the waterline on the product configuration capabilities for new and unique products … beyond what you do today.  As Steve Jobs said, “…. people don’t know what they want until you show it to them.”  So ask vendors and have them show it to you!  Your future depends on how you can innovate today and into the future.

Euan King is the CEO of Innovation Group's North America Software Group. He can be reached for further comment or information via email at kinge@us.innovation-group.com

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