Page 30 - Insurance Times December 2021

negligible. In fact, these areas are the ones that especially of digital and the roadblocks including regulatory oversee
need product innovation. may stymie many of the innovations in pipeline. However,
it must be argued that with innovation comes the freedom
All innovation that happens in a company needs sponsorship for the end consumer to choose a better product, and for
and a champion. The internal champions are responsible in the organization an opportunity to reduce frauds, increase
not only providing a supportive atmosphere but also in channel efficiencies and reduce premiums for low risk groups
bridging the divide in the organization. Insurance companies or the good consumers.
have been reticent and fallen behind in the adoption of new
disruptive technologies in the past. The primary roadblock Adjudging Market Readiness for New
cited has been the lack of interest in many parts of the Product Innovation:
insurance organization to embrace new technology. The fact
that innovation budgets are constrained with allocation of Innovation in Product Development is primarily done to
scarce resources skewed towards existing products, and defend market share and help a company meet its revenue
legacy systems that are complex, innovation is the likely targets over time. If there was no monetary gain from the
sufferer in most companies. new product, the need to innovate would hardly be there.
It is therefore important to continually disrupt the business
model and keep innovating. Fail fast is a term oft used for a
However, with the consumers themselves now being
new trial and error experiment. This applies to innovation
cheerleaders and adopters of technology, insurers are left also. If there is an idea that is feasible and achievable,
with little choice if they are to stay profitable. Of late, the following through with the idea is worthwhile.
insurance landscape has seen the mushrooming of
InsurTechs that have adeptly married the benefits of Digital However, it is imperative to judge and calculate the market
and the deep expertise in certain areas to create winning
size of the opportunity that the product innovation brings.
new product propositions for the consumer.
This by itself is no easy task. Just a couple of years back, a
leading global reinsurance company was trying to
Data privacy has also been a much cited risk due to which
underwrite a new kind of insurance - epidemic insurance.
many insurers fall behind in the race to innovation despite This cover was to indemnify the losses a company faced due
the falling costs of cutting edge technology. Data being the
to an epidemic. While so far traditional insurance had a
new oil, with proper usage and analytical modelling, has the cover available for business interruption due to damage, a
potential to reduce insurance costs and create efficiencies non-damage business interruption due to an epidemic was
in markets. However, the moot question at stake is whether something no one had envisaged.
the data is being harnessed intelligently. Public debate
around how this private and individual policyholder data is This was an innovative approach and product however there
being leveraged has been growing. That the personalization was no significant market for it, until of course Covid-19
and customization of many policies translates into the happened. Similarly, many data companies were developing
intrusive and unfair use of data is something that many data pandemic models or infectious disease models which could
protection groups are lobbying against. be used by insurers to provide cover against financial losses
stemming from a contagion. These were innovative products
A paper titled 'Big Data and Insurance: Implications for but not needed because no one felt such a dire emergency
Innovation, Competition and Privacy' released by The would ever occur. However, the situation did occur. This
Geneva Association (a leading international insurance think pandemic is testimony to the fact that insurance innovation
tank) in March 2018 highlighted some of these risks. The is required but the product does have a risk of a not so
paper delved into the trade-offs of ushering in an era of successful launch if the market is not judged or is not ready
Insurance using the digital technologies versus the risks that for the product.
these technologies brought forth. Personalization of policies
may bring to the fore unfair and discriminatory practices Benefits of Innovation and the Digital
when dealing with the profiling of consumers and treating
them differently if their risk is greater than the average. The Dividend:
granular assessment of premiums based on individual scoring New Digital technologies have brought analytics, cloud,
as opposed to group scoring could bring a non-inclusiveness smart wearables, artificial intelligence, Internet of Things,
because the high risk individuals may not have the ability to Telematics, and more to spur Innovation in Insurance. The
pay the higher premium. Many of the cited risks due to use Digital Dividend is a tailwind that has the propensity to lift

30 The Insurance Times, December 2021