innovation in insurance sector

7/29/2019 Innovation in Insurance Sector

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A well-developed and evolved insurance sector is needed for economic development as it provides

long term funds for infrastructure development and at the same time strengthens the risk taking

ability. It is estimated that over the next ten years India would require investments of the order of

one trillion US dollar. The Insurance sector, to some extent, can enable investments in infrastructure

development to sustain economic growth of the country.

ULIPs, insurance-cum-investment, are life insurance plans whose returns are linked to the stock

markets. ULIP returns fluctuate with the ups and downs in the stock market. Mutual Fund are

collective investment vehicles that pool resources of various investors and invests these resources in

a diversified portfolio comprising of stocks, bonds or money market instruments. Although both

these products are somewhat different in their working but more or less the fund pooled in both of

them are invested similarly. With the advent of Unit Linked Insurance Plans, the life insurance

products have changed from being only a life cover product to an investment vehicle with built-in

features of life insurance and tax benefits. These days innovative products are flooding the market

which offers the features of a traditional insurance policy with added benefits of high return from

the market instruments.

Bancassurance ,new concept catching up fast in India. One of the more recent examples of financial

diversification is Bancassurance, the term given to the distribution ofinsurance products through

branches & other distribution channels of the banks. The concept that originated in France now

constitutes the dominant model in a number of European and other countries and the same is fast

catching up in India as well.

Health Insurance, With proliferation of various health care technologies and general price rise, the

cost of care has also become very expensive and unaffordable to large segment of population. The

government and people have started exploring various health financing options to manage problems

arising out of growing set of complexities of private sector growth, increasing cost of care and

changing epidemiological pattern of diseases.

ACKNOWLEDGEMENT

Gratitude is the hardest of emotions to express and often does not find adequate words to convey

the entire one feels, although it is difficult to mention the nature of all, who gave me their full

support and cooperation throughout my dissertation work. I take the opportunity to intent my

sincerer gratitude to my mentor ,,,,,,,,,,,,,,,,,,,,,, for his helpful guidance during the research period.

This project report result is not only the outcome of the efforts put in by me but also by many

helpful hands like the faculty members , my mentor and many of my friends.


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Insurance Industry Thought Leaders Speculate on Innovation through 2020

By I&T Staff@insurancetech

Technologies that debuted in the 2000s will mature during the next decade, driving ubiquitous

computing, the analysis of an increasing number of data sources, and new levels of collaboration,

among other areas of innovation, say industry thought leaders.

Tags: Innovation, Great American Insurance Companies, Genworth Financial, Aite Group, Novarica,

X By 2, mobile, virtualization, business process, ,

Comments

MAY 13, 2011

Related: Go I&T's Top 10 Innovators of the Decade Gallery

Piyush Singh, SVP and CIO, Great American Insurance Group (Cincinnati)

In my opinion, there are two things that will truly impact the insurance industry in a dramatic way.

The first major area will be ubiquity and power of mobile devices, which will replace our traditional

fixed set devices. The desktop computer as we have known it will keep getting smaller and the

technology that powers these devices will keep getting enriched to the point that companies will

succeed in shrinking more power into the capabilities into the new mobile devices. The second

prediction is related to the [expanding] accessibility and availability of data on everyone (consumers,

businesses, etc.) that will change the way we look at our insured , as well as the ways we settle their

claims.

Scott McKay, SVP and CIO, Genworth Financial (Richmond, Va.)

The next frontier of innovation for the insurance industry will involve moving beyond simplyemploying a discreet new technology to instead deploying multiple maturing technologies in an

integrated fashion. New capabilities will stem from combining technologies that connect individuals,

automate processes and drive better business decisions. Imagine teams of actuaries and

underwriters collaborating in real time on pricing for complex risks using deep data sets and

sophisticated analytical approaches. Imagine high-touch, simple service experiences delivered for a

fraction of today's costs. In both cases, integrated technologies will be the driving force behind the

competitive capabilities necessary to deliver next-generation performance for both policy owners

and shareowners.

Clark Troy, Research Director, Aite Group (Boston)


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The next 10 years should be momentous for insurance technology. By the decade's end, as

electronic health records (EHRs) and health insurance exchanges drive standardization and

transparency of health information, some life and health insurers will begin to price policies by

analogy with telematics: customers' premiums will rise and fall with key health indicators, though

regulators will constrain this process and fraud will remain a risk. Across all lines, carriers that

manage data effectively and embrace and master predictive modelling will price risk better and gain

market share. Distribution will splinter between online commodity sales and increasingly bespoke

sales to high-net-worth individuals and institutions.

Matt Josefowicz, Managing Director, Novarica (New York)

It's hard to predict the most important technologies of the coming decade. Who would have

predicted in 2001 the mobile revolution? But the watchword for information technology in the

2010s will be ubiquity -- non-traditional devices; behaviour tracking; and data about people,

businesses, governments and risk will achieve a level of ubiquity by 2020 that we can't even imagine

today. For insurers, this will mean their added value will shift even further away from finding things

(customers or information) and toward analytics, risk management and service. Assuming privacy

regulations require it, by 2020 underwriting will consist of one question: "Can I look up everything

about you?"

Frank Petersmark, CIO Advocate, X by 2 (Farmington Hills, Mich.)

Two of the most important technology innovations of the next decade already have been invented:

information analytics/modelling and mobility/virtualization. The innovation will be in how the

industry applies these technologies to future business processes. Today, these technologies don't fit

well or easily into long-ingrained business processes. The real innovation will be fundamentallyupgrading and rethinking current processes to leverage such technologies. Information analytics has

the potential to reshape the industry into a much more effective and predictably profitable world,

providing carriers with a view of future risk and reward that they've never had. Likewise, the

mobility and virtualization technology has the potential to lead carriers to new products, services

and people in a much more efficient and customer-oriented way than currently exists.

The Journal of Risk and Insurance 1970 American Risk and

Insurance Association

Abstract:

Innovation is an important way to stimulate the growth of a firm or industry, even when, as in the

life insurance industry, the innovation cannot be patented or copyrighted. The study analyzes six

important life insurance innovations that have received widespread acceptance throughout the

industry and concludes that larger firms have a greater tendency to adopt them than do smaller

firms. Although some firms use committees to stimulate new policy innovations, about half use noformal methods. Life insurance innovations are adopted at a much faster rate than they were forty


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years ago; thus, a monopoly on a sound, new policy or rider today

disappears quickly. In analyzing three of the recent innovations, it was

found that mutual firms tend to adopt them more quickly than stock firms,

and larger firms more quickly than small ones. A firm that is an early

adopter of one innovation tends to be an early adopter of another. There is

no apparent relation between the recent growth of sales of a firm and the

speed with which it adopts an innovation.

Its No Accident- Insurance Industries are

Innovating

Posted by James Pasmantier at 8:33 AM,

April 28, 2011

A recent study by Deloitte, "Insurance Industry Outlook: High Hurdles Loom in 2011 & Beyond,"

suggests that that with a lagging economic recovery, insurance providers will be hard pressed to find

organic growth and profitability. The report states, "For some carriers, the longer interest rates

remain at historic lows, the deeper the hole they may find themselves in." But the lagging economy

is only one hindrance. New players from other industries, such as retail, are moving into the

traditional insurance space. Meanwhile, the consumer market is rapidly changing. Customers are

becoming more and more conscious of prices, are looking for specific services, and can easily

compare different policies and plans. These external forces are putting ever-increasing pressure on

insurance companies to experiment and innovate to streamline processes, win customers and grow.

The Dangers of Playing It Safe

Insurance companies have long lagged behind other industries in responding quickly to consumer

trends. In "Insurance 2020: Exploring Initiatives for Innovation," IBM's Institute for Business, states

that insurers have "problemsdue to culture, internal politics and the engrained aspects of human

nature that resist change." In other words, in an industry where companies minimize risk, they are

naturally risk-averse. This leads to reluctance to implement rapid, disruptive innovation.


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Because of this prevailing conservative culture, insurers focused on optimizing their process in order

to become more efficienta safe means of generating increased revenue when markets are stable.

Advancements in technology and data management were centered on optimizing products and

processes. IBM found that this narrow focus on optimization of products and processes resulted incompanies putting far less emphasis on innovation, particularly around new business models.

Rapidly shifting consumer trends are making optimization alone unsustainable. The market is

becoming increasingly bifurcated, as some consumers are concerned primarily with cost while

others concentrate on better service and ease of use. Customers are also shopping for individual

features and customizable plans, leading to increased pressure not only to be cheaper, but also

more accessible and flexible.

Finally, an uncertain regulatory climate, both in the United States and around the world, makes it

difficult to plan ahead. Unforeseen compliance demands and costs, risk shrinking profits or even the

viability in certain markets. With all these mounting forces, the insurance industry has little choice

but to rethink how it does business.

Innovating the Insurance Industry

While external forces may make the situation look grim, emerging trends are providing an optimistic

outlook on the future. According to an IBM Global CEO study, "Over 80 percent of insurance

executives ranked the rise of informed and collaborative customers as having a positive impact on

their businesses." Insurance companies that have previously lagged behind other industries in

adopting these practices are now looking to follow suit and are turning towards their customers,

partners and employees to drive innovation. Strengthened by the rise of new technologies suchglobal positioning systems, cellular technologies, the insurance industry is tapping new tools and


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data in order to better protect and provide savings to their consumers. In addition, utilizing the

opportunities created through cloud computing and social media, the insurance industry is

increasingly turning to innovation management software to manage and collaborate on all types of

ideas to increase effiencies and better innovate.

Innovation management allows employees to connect and share information, helping in traditional

areas such as product and process optimization by finding new efficiencies and sharing knowledge

and best practices. Meanwhile, by opening up to customers, insurance companies benefit from

direct feedback to identify growing trends and novel business models, locate customer pain-points

and develop products that meet underserved needs. Companies can also show their openness and

responsiveness to their customers, increasing customer satisfaction and retention.

Bright idea has helped leading insurance and financial services companies such as Nationwide and

Travelers to develop new

products and services

focused on growing

revenue by focusing on

customers. Most

importantly, we have

helped insurance

companies create a

culture shift, away frombusiness-as-usual

towards indentifying

opportunities to disrupt

and take risks. Opening

up the innovation process

to stakeholders, both

inside and out of the organization, will be essential to not only cope during these periods of

disruption, but also find new opportunities to grow and thrive.

Case Study: Nationwide Securing the Future through Employee

Innovation

As #118 on the Fortune 500 list, Nationwide's workforce exceeds 36,000 employees that maintain

more than 16 million insurance policies. With over $148 billion in assets, Nationwide is one of thelargest insurance and financial services companies in the world, and offering a diverse set of


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products. Nationwide attributes its success to its workforce and focus on employee collaboration,

inclusion and diversity. Thus, its upper management firmly believed that employee innovation will

be key in securing Nationwide's future as an industry leader.

However, their existing electronic suggestion box was insufficient, with no mechanism for sorting,

managing or implementing the thousands of ideas received. Nationwide also required a solution that

would properly reflectand enhancethe unique corporate culture, environment and identity it

had worked so intently to create. Finally, the solution had to be testable, gradually scalable, and

allow easy collaboration across borders, companies, divisions and organizations.

Nationwide turned to Bright idea to deliver a solution that was configured to fit its unique

organization. To gauge employee usage levels, the program was phased in to a small group with a

simple pay-per-user plan, giving Nationwide the flexibility to test the software with low risk. Dubbed

the "The Great Ideas System," it provided employees a low-barrier way to submit, vote and

collaborate on ideas while giving administrators the tools they needed to manage ideas, update

users and get insight into the company's innovation program.

Now, for over 4 years, Nationwide has been able to take control of its innovation process,

accelerating product development, increasing efficiency, improving processes and developing new

customer initiatives. Leveraging the diversity of its employees also yielded great results. One

particular program, in search of "High Impact" ideasvalued at $5 million or greaterresulted inideas earmarked for priority implementation and projected to drive $3.5 billion in potential revenue.

innovation in insurance sector

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