Leading innovators in the insurance industry are working
together to solve problems and develop new solutions to close
coverage gaps.
In most industries, there are challenges that organizations
can’t tackle alone. As the insurance industry undergoes an unprecedented
digital transformation, we’re finding that collaboration
among industry players is vital to tackle challenges such as
closing coverage gaps and more efficiently matching capital to
risk.
How the insurance industry works collectively to better meet
client needs
In June, we gathered a group of innovators from Lloyd’s Lab,
Tokio Marine Kiln (TMK) and WTW to share experiences and discuss
unmet or underserved insurance needs and how to improve joint
innovation efforts. We discovered that challenges such as emerging
risks and changing client needs are a constant, requiring strong
partnerships and teamwork to identify problems and develop
effective solutions that benefit the industry.
Emerging risks and changing client needs are a constant,
requiring strong partnerships and teamwork to identify problems and
develop solutions.
Just because there’s an unmet need, doesn’t mean
there’s a viable solution
From a broker’s perspective, organizations’ risk
profiles are constantly changing amid economic, political and
regulatory developments. This might be due to uncontrollable
external factors (e.g., climate change), or it could be deliberate
changes such as a company shifting operations toward AI algorithms
to complete work. Both will inevitably affect their risk profile
and coverage needs.
Rob Jarvis from TMK explains, “We track emerging risks and
how we see the world changing, and then we see the impact of those
changes on existing products and where risk gaps start to emerge.
The danger is ending up with solutions that insurers want to sell,
but clients don’t want to buy.”
Insurers therefore face the ongoing challenge of working to meet
emerging client needs while determining how to price these risks at
a level insureds are willing to pay, yet can be profitably
underwritten. For example, writing a policy that covers a new
technology with limited historical data is difficult. There are
some risks that are hard to effectively measure –
multi-tiered supply chains have innumerable variables that make
effectively pricing the risk impossible. Insurers might write a
policy with more unknowns (like outcome-based parametric insurance
solutions), but they will price in the risk.
Ultimately, brokers and insurers have imperfect understandings
of the connection between emerging client needs and the
desirability (and financial feasibility) of underwriting the new
business.
Evaluating a solution is an inherently collaborative
exercise
No one person or organization has all the answers, which is why
collaboration is essential. We also know that a specialized
industry approach to risk matters. For example, The WTW Research
Network works with industry leaders to apply our research
specialties and connections to help clients identify challenges and
opportunities. This involves exploring emerging risks, analyzing
emerging circumstances or markets where existing solutions
don’t meet the current needs, or improving familiar ways of
doing business.
My colleague, Lucy Stanbrough, explains that “as a broker
we are incredibly lucky to have daily interactions with insureds
and insurers to understand their pain points, but we also need to
think more broadly about the risks they are not yet thinking about.
We’re currently working through the results of our Emerging and
Interconnected Risk Survey, which covers both perspectives, and
we’re looking forward to sharing what they are seeing –
or missing – and how they’re taking action.
This is where the WTW Research Network leverages deep subject
matter expertise outside of the industry to better understand or
model complex or emerging risks – both the new ones, but also
the ones people feel really comfortable about and shouldn’t. A
recent example of this a new scientific partnership with the University
of Colorado Boulder. Historically, the state of the tropical
Pacific has cost trillions of dollars in direct damages and reduced
economic growth. But most businesses have only begun to take
advantage of the strong predictability offered by El Niño
and La Niña. WTW and the University of Colorado Boulder will
harness the ongoing ‘climate prediction revolution’ for
business use and improve our ability to predict global climate for
the coming season, year and decade.”
Iryna Chekanava from Lloyd’s Lab sees their programs pivotal
in connecting brokers and insurers, enabling them to share client
insights and data to understand and identify industry problems. A
recent example is a joint effort between WTW, Lloyd’s and
insurers to address supply chain challenges, which resulted in a
series of co-authored risk reports.
Iryna explains that the Lab Challenge program was specifically
designed to tackle industry cooperation in early-stage innovation.
“There are lots of areas – especially with emerging
risks – where there is lack of collective understanding of
the problem. We see shared thought leadership and experimentation
as key to exploring problems and figuring out what a viable
solution might look like,” she says.
Effective partnerships are fundamental to unlocking – and
scaling – new solutions
At first glance, many challenges are insurmountable for any
single party. Bringing in the right expertise and technology
partners can unlock solutions.
This is where the Lloyd’s Lab plays a key role with
Accelerator and Launchpad, which bring together brokers, insurers
and startups/scaleups to design, build and scale new risk and
insurance solutions. The Lloyd’s Lab Accelerator guides cohorts
of startups through a program that matches them with mentors from
brokers and insurers to develop their solutions. Meanwhile, the
Launchpad platform brings innovation leaders from Lloyd’s
market insurers together to assess solutions and deploy innovation
underwriting capacity.
Rob Jarvis, a co-chair on the Lloyd’s Launchpad, has found
benefits in working both with startups and large brokers. He says,
“Startups are great at moving fast and will either find
product market fit or will fail fast. However, there are also
advantages to working with traditional brokers who may move slower
but bring a wealth of expertise and the ability to distribute new
solutions at scale.”
Collaboration in action
Here are a few examples that show how brokers, insurers and
startups can come together to address emerging needs:
- A recent graduate of the Lloyds Launchpad, Gaia tackles the
unpredictability of costs and outcomes in in vitro fertilization
(IVF) treatments. Gaia is an example of insurers partnering with a
startup to design and deploy novel insurance structuring to solve
an important problem IVF users face. - TMK partnered with FloraTrace to launch Rezylient Trade Disruption Insurance. With new
controls on imports from areas of China into the U.S., there’s
risk of import disruption. This solution documents the provenance
of goods, reducing the risk of import challenges for shippers. - Intangible Asset Protection (IAP) covers
non-physical assets (e.g., secret formulas, software code) that are
tied to company value but are hard to protect. IAP is a
collaboration with TMK that provides tailored gap insurance to
cover financial loss.
Insurance innovation takeaways
Regardless of the roles colleagues play in the insurance
industry, some of the lessons we’ve learned in innovation are
common and can be applied across the board:
- Stay laser-focused on the
problem. It’s common to fixate on solutions or
not dig deep enough into the problem itself. The surest path to
successful innovation is through problem-first innovation. - Don’t take “no” for an answer. What you
want is “yes, if.” Senior leaders juggle many
priorities, and it can be hard to balance core business needs with
innovation opportunities. If you believe in an opportunity, be
ready to stay curious and persevere until you find a solution that
solves the problem and addresses stakeholder priorities. - People who are successful in innovation tend to have
lots of ideas – not just good ones. The shared
experience of the group was that in all probability only about one
in 40 ideas get all the way to market – and not all of these
will scale effectively. You need to be ready to gather many ideas
(from inside and outside the company) and have the right mechanisms
in place to quickly identify the good ones. Iryna shares that
“a key success metric for organizations is not just the number
of concepts that went to market, but the ‘kill rate’
– the volume and speed at which you killed the ones that
didn’t work.”
3 focus areas for successful collaboration
- Brokers and insurers should engage early to understand
solution viability. The earlier that brokers and insurers
work together on a new concept, the quicker all parties can assess
its desirability, feasibility and viability. This is truly engaging
a fail-fast mentality. - Identify opportunities for joint ideation.
Start with hard-to-tackle challenges like supply chain or climate
transition and bring insurers and brokers together to understand
the problems and develop solutions. This will drive better
understanding of problems and better solutions. - As individuals, be curious, play to your strengths and
reach out. Across the industry, individuals have different
views on clients, modeling, data and all the components involved in
understanding and solving risks. It comes down to individuals
recognizing industry challenges and then collaborating within
companies and across them to gather a diverse range of
perspectives. We’ll then identify more problems, understand
them more deeply and create better solutions for clients and
partners.
In the insurance sector, when a diverse group of perspectives
and expertise come together to solve hard problems, they can unlock
and scale new solutions that improve the insurance industry for
brokers, insurers and clients.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.