Insurance companies are betting their future success on innovation, but fewer than half have a strategy for making it happen, according to new research.
Following the release of an international survey by KPMG, the company’s Australian Head of Insurance Martin Blake says that the insurance sector is suffering inertia, unsure of how to move forward with change.
“The insurance industry seems caught in the innovator’s dilemma – much of the focus is on expanding products for existing customers or marketing current products to new customers,” Blake says.
“The insurance industry will need to lift its game if it wants to increase innovation and fend off disruptors. Relatively few insurers try to get first-mover advantage and fewer than one-in-four had a specific person accountable for innovation.”
The survey consulted 280 insurance executives, finding that half of insurers’ business models are being affected by disruption.
“Rapid innovation has created significant challenges for insurers with 48% saying that their organizations are already experiencing disruption from new, more nimble competitors,” Blake says.
“However, the report also finds that – while insurers clearly recognize the innovation imperative – most are struggling to catalyze innovation within their own organizations.”
Less than half of companies have an official innovation strategy. However, most agree their future success will depend on their ability to innovate. Blake says this is a worrying statistic considering that a majority of companies are currently already experiencing disruption.
“More than three-quarters (79%) say that they are already running just to keep up with their day-to-day requirements. Almost as many (74%) say they lack the internal core skills needed to drive innovation. Australian insurers were no exception to these problems,” he says.
“Insurers and intermediaries are increasingly finding that there is no ‘silver bullet’ to create a more innovative organisation; no ‘off the shelf’ package that drives new ideas.”
“Instead, organisations will need to navigate their own path through this new world of opportunity, developing new business and operating models and new partnerships in order to out-compete and out-innovate their peers and bold new entrants,” Blake adds.
The survey reveals that 32% of businesses consider themselves leaders in innovation, with 40% happy to sit in wait for change and focus their energy on catching up. The remaining 28% have no discernible philosophy regarding their future.
“With the forces of innovation and disruption all around, many more forward looking insurers and intermediaries are hoping to shift their innovation engine into a higher gear,” the report states.
“While most insurers know that they need to innovate, the vast majority face complex innovation dilemmas related to capability, capacity and cost. While many say they have already taken steps to drive greater innovation, our experience suggests that few are sufficiently bold.”