Briefing: What is the real blocker to innovation in UKGI?

When questioning the roadblocks that hamper industry-wide innovation, the insurance sector often points the finger at legacy systems, complex regulations and expensive transformation projects.

These are undoubtedly challenges. But they are not the real reason that innovation continues to lag behind customer expectations regarding UK general insurance (UKGI). The real blocker here is cultural.

At its heart, insurance is all about managing risk – and that mindset understandably filters through to the way companies operate. However, it also fosters an ingrained risk aversion that can stifle new ideas before they even reach the pilot stage.

True innovation requires experimentation and a willingness to accept failure as part of the learning process.

Insurance relies on risk to survive – otherwise no one would buy an insurance policy. Yet all too often, when it comes to their own businesses, insurers’ fears of getting innovation wrong outweigh the potential rewards of getting it right.

Another major obstacle is the decision-making structure inside many organisations. Insurance businesses are traditionally hierarchical, with complex governance processes that can slow decisions to a crawling speed.

Even when there is appetite for change at a senior level, good ideas can get lost in endless rounds of committee meetings, steering groups and approval chains. The result is that initiatives lose momentum – or worse, die altogether – before they ever reach the customer.

These historical mindsets are starting to change, however, with many firms now embedding innovation divisions within their businesses and giving them freedom – albeit just some – to fail in order to move forward.

Looking beyond insurance

There is also a reluctance from some within UKGI to look outside the industry for inspiration.

While insurtech partnerships have become more common, many traditional players remain hesitant to embrace external thinking in a meaningful way.

The thriving MGA sector is one bright spot, for example, but it is telling that many of these startups draw on diverse experiences outside of insurance to challenge conventions and rethink how insurance problems are solved.

Other sectors – from retail to banking – have already shown how data, artificial intelligence and digital experiences can transform customer relationships. Just look at open banking and the progress this has made in recent years.

Yet too often, insurers view these developments as interesting case studies rather than urgent calls to action.

Stopping stagnation

This cultural conservatism is understandable in an industry built on trust and long-term promises. But it cannot be an excuse for stagnation.

Customer expectations are shaped by the best experiences across all industries, not just insurance. If insurers do not meet these expectations, someone else will.

Technology can be a powerful enabler of innovation, but only if the culture is ready to embrace it.

The real challenge for UKGI is not upgrading its systems. It is upgrading its attitude to change.

That means building cultures where innovation is not just a project on the side, but a core part of the organisation’s DNA. Only then will the industry unlock its true potential.