Page 28 - Insurance Times December 2021

giants that have built platforms and also investing in their may neglect certain segments of the market in their quest
own platform which then serves as a point of sale place. For for bettering their own bouquet of products. Slowly, the
example, a successful start-up in North America provides disruptive innovation can even steal away a major chunk of
Property and Casualty insurance for homeowners and the market share from the bigger and more established
renters. It set up shop just a few years back using digital company since it can deliver a newer product that serves a
technologies and this is how it changed the P&C insurance better purpose. This is the Innovator's Dilemma detailed in
world into a simple, easy to understand product loved by the book by Harvard Business School Professor Clayton
millennials. After its launch it introduced its own API to other Christensen (Book Title - The Innovator's Dilemma: When
websites allowing real estate developers, e-commerce and New Technologies Cause Great Firms to Fail). Insurance
other sites to sell its insurance as a cover for their own companies using technology to disrupt the market are
products as well. This greatly accelerated the pace of InsurTech companies that are slowly gaining a foothold and
product innovation for this company. expanding their market share.

Thus, the entire insurance industry today is now poised for Architectural Innovation (using existing technology in new
innovation and growth with the help of new age markets) and Radical innovation (using new technology in
technologies. new markets) are other types of innovation. A January 2019
report titled 'The Future of Insurance, Vision: The Digital
The Innovation Matrix and Innovator's Insurance Strategy Playbook', by Forrester Research
Dilemma: suggests that the aim of insurance companies in the digital
world should be to increase efficiency and reduce costs in
Strategic Management has been a long told story about order to drive business growth and defend market share.
meeting company goals through a well thought thorough
strategy. However, goals may be set but cannot be cast in However, in the current technological shift where consumer
stone in the face of a changing reality. This is where demographics are changing, channels of distribution are
emergent strategy comes into play. Henry Mintzberg, the
increasing, and the consumer interaction touch point
well-known Canadian author and management strategist,
multiplicity abound, Adjacent Innovation is perhaps the best
postulates that on the continuum of time, an emergent way forward for insurance companies. Adjacent Innovation
strategy that is always adjusting and evolving as per the focuses on leveraging expertise in one area and applying
changes in the environment works best. For companies that
innovate, keeping abreast with such changes while they that knowledge in another area to create a breakthrough
introduce new products and explore new markets is and winning outcome or product. This type of innovation is
important to ensure that the risk-reward ratio is maximized. often easier to implement and skewed in the favor of
success since it carries a lower risk of failure.
The Ansoff matrix postulated by the famous mathematician
Igor Ansoff, maps Markets (existing and new) against The Need for Faster Product innovation
Products (existing and new). This matrix is often used to in Insurance today:
develop strategies around market penetration and product
development. In the digital world that we inhabit today, Today the Insurance landscape has changed. The Fourth
product innovation is primarily of four types across a matrix Industrial Age is upon us and New technologies like Robotics,
that maps markets against technology. Most of the Artificial Intelligence, Machine Learning, Internet of Things,
innovation in this digital world is incremental where it occurs 3D Printing, Biotechnology and the like are fusing together
within existing markets using the existing products. In this to create a New World. This has changed the face of the
case, improvements are made to these products over time. customer from being just a Policy Number residing in the
However this is not the most rewarding innovation since any Insurance portfolio of insurers to a living, demanding and
'Black Swan' or high impact but sudden events can overturn dynamic consumer of products. This consumer enjoys the
the benefits that may accrue making all these products luxury of high end technologies and the power of
redundant. information just with a right swipe of his or her smartphone.
This has naturally led to a more informed and conscious
Using new technology but still operating in existing markets, consumer who will most easily travel into the books of
the disruptive innovation is born. This type of innovation another competitor to save money, get better or faster
brings new products that may build a niche in the beginning service, and often also to find a better product that is
within an existing market. Often lead players in an industry bespoke rather than mass marketed.

28 The Insurance Times, December 2021