Briefing: The fast and slow market of driving innovation

Many UK general insurance (UKGI) market participants love the challenge of being creative in insurance – mainly because there is so much potential for the sector to lead the economy.

This motivation is often distilled into one ‘i’ word that is difficult for c-suite to define and even harder for them to turn into quantifiable metrics that they can stand behind – innovation.

Grappling with this ‘i’ word in a business setting is perhaps why many market commentators have already called for an end to ‘disruption’, instead calmly calling the impact of new technology ‘collaborative’.

But maybe we have just been looking at innovation the wrong way.

Let’s segue to apoptosis – the process by which the human body programmes cells’ death.

This is a ruthless process where an estimated 50 to 70 billion cells are removed by the body each day to refresh muscles and tissue, as well as remove damaged cells. Tiny immune system cells called phagocytes patrol the corridors of the body, hunting for cells that are ready to die.

There can be no growth in our bodies without this constant, ruthless destruction of cells that are no longer enabling growth – or creating space for new replacements.

This biological brainstorm may not be a typical punchy analogy for commercial business and how it handles innovation, but it does provide a coherent lens to help understand UKGI’s approach to the ‘i’ word.

In a perfect world, innovation should be a commercial entity’s equivalent to apoptosis.

People resist change because change creates uncertainty. Our industry, wired as it is to profit from defeating uncertainty, is particularly resistant to change. When you think about it, that makes commercial and evolutionary sense.

Ask any startup founder or internal change agent and they will likely attest that the underlying culture of most insurance entities is to resist change.

It often feels like innovation is an intruder. It is the thing that triggers the immune system to respond – as if danger approaches, rather than remains.

The hard and soft markets

UKGI has always been swept along on its own wave – the tide of the soft and hard market. These cycles have a material effect on the process of growth and innovation too, in my opinion.

I have little formal data on this view, but my observation is simple. The speed of market innovation is inversely correlated to the hardness of the pricing cycle.

When prices are rising, innovation slows – when hay is being made, who needs or wants change? But when prices fall, innovation quickens as growth or cost savings are sought to survive gross declines. Then there is a possible perfect moment of equilibrium – where the pace of price change is about to flip, but stability lulls us all. That is when innovation will be its most impactful.

Innovation is not a stimulant

Returning to our human body analogy, is innovation being used to defend against a viral threat? No.

It is being injected in – like a stimulant. It becomes a treatment, not a facet of the system. For example, c-suites that have put their faith in innovation programmes only for the programme to underperform and result in cut backs or cultural scars.

If innovation is used as a stimulant, it is then just a buzz – not a programmatic or systemic solution.

Innovation needs to be thought about in three ways.

Firstly, that everything created should be programmed with a sense of when it needs to die.

Secondly, by way of business operations, empowered functions should be able to sweep the organisation for ‘eat me’ signals.

Those functions should also be reinforced with emergency responders – those able to rapidly spin up prototypes, products, solutions and systems when opportunities or shocks from the market or competition emerge.

Human cells – tiny, smart and focused on their role in the overall body. Programmed to respond to change – and even request their own destruction.

Could the cells of insurance companies be structured to take inspiration from human bodies? Can insurance organisations have innovation cycles that cut through the pricing market?

Definitely an opportunity for intelligent design.