A new study, Harnessing Innovation in European Insurance, conducted by Pierre Audoin Consultants (PAC) and sponsored by CGI explores the dynamics of the current insurance market in Europe and how European carriers are focusing on innovation to drive their future growth and competitiveness. Although European carriers have a reputation for conservatism, 70% of the 200 large carriers surveyed in the study believe innovation is critical to their future growth and competitiveness, and 84% now have a formalized innovation strategy, along with dedicated innovation teams, processes and budgets.
The study’s findings closely align with insight from the CGI Client Global Insights, which reveals an urgency among carriers worldwide to develop digital transformation strategies while modernizing legacy systems and using new technologies to drive innovation.
So, how do the findings of the PAC/CGI research compare with innovation trends among U.S. carriers? As in Europe, the pace of change in the U.S. insurance sector has picked up dramatically. Large carriers are seeking to protect their businesses through technology and are making significant investments.
In particular, U.S. carriers are increasingly investing in innovation centers. Over the past 4 years, carriers have invested $7 billion in technology, with a significant portion redistributed to innovation centers. Carriers are opening these centers in locations separate from their traditional businesses to avoid the constraints of traditional ways of thinking and operating.
Other U.S. carriers are going a step further and launching entirely new and separate innovation-focused businesses. Take one large Midwest insurer, for example, with whom CGI works. The insurer initially built an innovation center made up of both business and technology staff and located off campus. Interestingly, the CEO also maintained a second office in the innovation center.
The new center was focused on developing new technologies and products, with the ultimate goal of adding new core capabilities to the insurer’s overall business. However, the insurer encountered a roadblock in running the center—cultural resistance. As a result, it decided to start an entirely new company instead of superimposing the center on its existing business.
Another example is a $2-billion-plus West Coast insurer with whom CGI also partners. The insurer acquired an e-insurance company to help drive innovation for its direct-to-consumer channel. The company is an entirely independent business with a separate IT platform, products and branding (including television commercials). It sells directly to customers instead of following the insurer’s traditional agent-based business model and has a strong focus on delivering a superior customer experience.
Whether investing in innovation centers or innovation-focused businesses, it’s clear that U.S. carriers, like their European counterparts, are putting innovation at the top of their strategic agendas. Carriers, for the most part, don’t create market share; they take market share. Policyholders are lured from one carrier to another. To avoid this ongoing churn and to drive competitiveness, carriers are aggressively pursuing innovation to deliver new products and a better customer experience. They’re investing in Internet of Things, data analytics, new business models and new IT platforms to attract and retain more customers.
CGI is working with carriers across the globe to develop and execute innovation strategies across their businesses and in specific areas such as automation, dynamic pricing, customer experience and more. If you’d like to learn more about the PAC/CGI research or our insurance innovation work, please feel free to contact me.