My heart pounds just thinking of a self-driving, incredibly fast Tesla. However, at a sticker price of $162K for the Model S, owning one of these innovation miracles remains a dream. Further, most of the car rental agencies I called chuckled when I asked about renting a Tesla. (Some suggested that their Cadillacs were comparable, but I chuckled in response.)
Of course, as my teenage daughter reminded me, another innovation could make my dream a reality - peer-to-peer car sharing. I downloaded a leading car-sharing app and, to my surprise, a search in the app quickly turned up a Model S with full self-driving capabilities - and just 15 minutes away from my home!
I held my breath as I checked the price. With a market value approaching six figures, my gut was that the minimum three-day “share” would be out of my reach. However, when the daily price appeared, I exhaled. While it was far higher ($179 per day) than I had ever paid for a rental, I could justify something around $600 for 3 days. After all, $600 for a Tesla experience was far less than a trip to Disney or even the sales tax I would pay to buy a Tesla. Why not? You only live once, and my birthday was just around the corner.
Excitedly, I clicked on the “Reserve it now!” button and quickly clicked through the next set of legal/disclaimer screens to get to the payment screen. When the payment screen appeared, the amount stopped me cold; the price now jumped to more than $1,000 for 3 days! My dream would have to remain just that.
A classic bait and switch? Not quite. The owner of the Tesla and the car-sharing company, in fact, were equitably splitting the advertised $179 daily rate. It turned out that insuring the vehicle for three days would cost more than the actual rental itself. In today’s insurance market, little (if any) competition exists in the car-sharing space to drive the price to what I would consider a reasonable level.
Challenges in driving insurance innovation
By 2026, experts expect the global car-sharing market to approach $300 billion. As I know from my Tesla experience, insurance will play a big role in enabling this market expansion. In fact, Elon Musk recently announced that he is building a “major insurance company.”
Often, the reason insurance carriers don’t compete in these emerging spaces is that developing and deploying products and services for new markets is hard. Insurance innovation, in general, is hard. My CGI colleagues and I work with insurance carriers of all sizes across the globe and see firsthand their challenges with innovating.
Further, findings from the 2020 CGI Client Global Insights confirm both the importance and difficulty of driving insurance innovation. We met face-to-face with 110 insurance executives to discuss key industry trends and their related business and IT priorities.
Executives cited driving product and customer experience innovation as one of their top IT priorities. In addition, more than half plan to invest in innovation technologies like blockchain and Internet of Things over the next three years, and innovating services, products and the customer experience is one of their top three IT spending priorities. However, only 18% are highly satisfied with their return on investment from innovation investments.
Why is this so? Some key challenges follow.
Access to technology
Ironically, accessing the required technology is the easy part. Insuretechs abound, and their depth and breadth of capabilities expands daily. However, many insurance carriers use these Insuretechs in isolation, and so their full potential to accelerate innovation largely remains untapped.
Another key challenge is integrating new components into legacy systems—quickly and seamlessly—to support the launch of new products and services. Integrating all the required external and internal applications and technology stacks while ensuring a great customer experience at the same time is daunting. Understanding the importance of this, however, insurance executives cited rationalizing, simplifying and modernizing applications and infrastructure as a top IT priority in the 2020 CGI Client Global Insights.
A third challenge is growing technology sprawl. This is a major concern for carriers because actively monitoring and managing vendors and technology requires significant time and money. To address this, executives cited optimizing systems and processes as their number one IT spending priority in the 2020 CGI Client Global Insights.
True innovation can be challenging. However, there are time-proven techniques that can be helpful. Actively solicit input from your policyholders. I can’t remember if there was ever time that my insurance company asked: “What can we do better?”. Pose problems, not only to experts, but also to neutral parties and junior team members - they tend not to be attached traditional ways of problem solving. Finally, don’t be afraid to fail. As Elon Musk himself said: “If things are not failing, you are not innovating enough.”
Understanding the challenges of innovation, CGI has developed a rich set of insurance IP and service capabilities to help our clients quickly test, deploy and scale their innovation ideas and strategies. If you would like to learn more, please contact me. We would welcome the opportunity to help “drive” your company’s innovation vision and roadmap.
With CGI’s experience in accelerating and scaling insurance innovation on behalf of our clients, I’m hopeful that one day soon my Tesla dreams will soon be realized - and without any extra help from Elon.