Innovate in the Insurance Industry | Stephen Shapiro

So I want you to imagine for a moment that you are an executive for an insurance company. You're an executive for an insurance company. And I'm going to come into the audience for this. And here's a pretty standard process model for an insurance company. You can see what it says. You've got market products and services. Develop products and services, customer service, underwriting, claims. My question to you is what is. If you were an executive of one of these companies, what is the most important process for an insurance company? Anybody want to guess on this side here, the most Insurance. I heard somebody say something. Yes. What did you have? Underwriting. Fantastic. Why underwriting? That's how they make their money. Underwriting. Because that's how they make their money. They manage their risk. Look, if you're issuing bad policies, you're going to be out of business. Underwriting is in fact one of the most important processes, but it's not the most important process. Anybody want to take another guess? What's the most important process? Sales. Who said sales? Why? Sales. Great. So if you're not selling, you don't have any money coming in. Exactly. Sales is in fact one of the most important processes. But we're not yet at the most important process. Maybe this side of the room will have it. What is the most important process for an insurance company? Thank you. Claims. Who said claims? Why claims? Claims is the promise you make. Claims is the promise you make. If you like. I just had a fender bender recently. I really got my money's worth at that point. Claims is one of the most important processes. I want you to think about four insurance companies. They're not all direct competitors, but they're in similar spaces. So you have Unum. Unum is a company that claims that it can tell the relative difference in risk between two people who are men, both doctors, both driving Volvos, both living in New Jersey. One's right handed, one's left handed. They have massive ability and data on all of their customers. And they have a massive ability to be able to assess risk. Progressive. We now know progressive as flow and competitive pricing. But in fact, what made Progressive progressive when they entered into the insurance market in a big way was that they found the white space. They found what no one else was doing. Mobile claims. Vans. They have vans that will drive around looking for accidents and will issue a check at the site of the accident. In fact, they were playing around with putting chips in the airbags of their customers. So the airbag deployed, they could go right to the site and issue a claim. So for Them it was claims State Farm insurance. We know the mantra like a good neighborhood state farmers there. Okay, this is not a very singing group. I'll remember that for next time. I think there's karaoke later though, so you better get ready. Yes. So they have the largest distribution network of agents in the insurance industry. And then usaa, extremely appropriate for today. They only will insure people in the military. And because the military are very mobile, very transient, you have somebody overseas and the family's left behind their differentiator. The thing which sets them apart, the thing that is most important, if you ask them how they define innovation, it is anything that makes the lives of their members, their customers better. And in fact, in every single customer service survey that comes out, an evaluation ranking list, USAA is consistently number one, regardless of industry. So the question isn't what's the most important process for an insurance company. The question is, what's the most important process for each of these different companies? So for Unum, it would be underwriting. For Progressive, it would be claims fulfillment and now competitive pricing. For State Farm, it's the distribution network. For usaa, it is customer service. Now, the reason why I use this model with you is I want to give you a very simple framework to start thinking about your innovation efforts within an organization. Activities exist at three different levels. So you have activities that exist at what I will call the support level. Support activities are things which your customers would not pay for if they didn't have to. It's not something they're interested in because it does not create direct value for them. I want to be clear, if you work for a larger organization, this is not a function or department. I am not talking about hr. Every single person inside an organization, regardless of its size, does things that are support in nature. It could be time, reports, whatever it is. For these types of things, you ideally want to outsource them. You want to eliminate them if they're not that important at all, or defer them, do them at another time. At the second level, these are the things that are core. Now, your core activities are things customers pay for. You have to get them right. Look, as a financial advisor in financial planning and wealth management, look, look, if you're giving them bad advice, you're in big trouble. I mean, this is like fundamental. This is why they will hire you. So these things you have to do well, but you don't have to do them necessarily better than anyone else. So, for example, in the insurance industry, automotive claims processing is actually done by the same technology, software, platform, Regardless of which company you are insured by, because they've decided they have to do it well, but they don't have to do it best. So for these things, what you want to do is you want to simplify. Oops, that's not how you spell simplify. Automate. You might outsource to someone who does this as their key part of their business. You might use best practices, look at what others are doing. Again, you don't have to be the. You just have to do these well. And here's what I find is, in companies, and this is like the big revelation for a lot of them, they spend a ridiculous amount of time, money and energy on the things that are core. Although these are important, these won't set you apart at the highest level. You have what I call differentiating capabilities. And these are the places where you innovate. So what I want you to get is, and this is sort of the mantra, the tagline of all of this stuff is going back to the slides. What you need to do is make sure that you innovate where you differentiate. Because you need to be making sure that again, if you're answering all the questions properly, but you're asking the wrong questions, it's sort of irrelevant. And most companies are spending so much time on things that aren't going to set them apart. So you need to ask yourself, and I don't want to dig too deep into this. I mean, this is a deep philosophical conversation. I've done this with major hotel chains, major consumer products companies, and they have a difficult time articulating their differentiator in a way that it translates into what people do. But this is what I want you to take away from this. Innovation is inside your organization, everyone's responsibility. And there's a lot of books that talk about that. But the issue I have with these books is they also say innovate everywhere. And that's a mistake. Because when you tell your people, innovate how fast you can move papers, you're dissipating your energies, you're focusing on things that aren't going to set you apart. When you can clearly articulate what your differentiator is and you get everybody rallying behind it, people will know exactly where to focus their innovation efforts.