The insuretech market is booming globally, with new entrants disrupting every aspect of the supply chain from distribution through to underwriting risk. Traditionally, insurers have been comforted by being able to model historic data to predict events, from the frequency and likelihood of natural disasters (and their subsequent pay-outs) through to analysing a customer’s risk profile.
With younger, tech-savvy and more agile companies hot on their heels, the traditional General Insurance businesses shouldn’t be written off. In fact, it’s quite the opposite. GI is re-inventing itself through data and new technology. In the next installment of our 'Technology in insurance' series, we speak to Graeme Findlay, Legal & General’s Innovation Delivery Director about how they’re embracing innovation and being tasked with breaking their own concepts in order to change their business model.
Graeme, you’re part of L&G’s innovation arm. Can you provide some context on why you set it up as an independent venture?
With new market entrants like Lemonade creating a business around what frustrates customers most, we knew we had to put our resources into breaking the traditional insurance model. Our view is that if we don’t, someone else will. Retail has seen this happen rapidly – you can no longer be a market leader by being operationally efficient and distributing Brand spend across stores to leverage economies of scale to remain profitable, and the same goes for insurance. For me, the main determinants of success in the new digital world are finding market fit and executing at speed.
Are you saying this is about the race to be first to market?
In some businesses, innovation is improved efficiency in processes which provide increased profitability in the short term, but this soon wanes. Launching new propositions gives you advantage medium-term, but features can easily be copied and you’re back to reducing margins as competitors launch comparable products.
At L&G, of course we’re focussed on all these issues, but I’m particularly focussed on significant, market changing innovations which will really make customers sit up and take notice. We looked at all the parameters of what made innovation, slow and took steps to remove them, firstly within Insurance and now latterly across the L&G Group We’ve created an innovation model we’ve called the Alpha Beta Pilot Process which has been effective in ensuring cross functional support, engagement and successful end deployments This means we can create and deliver within a regulated environment in a much shorter timeframe.
Do insurance culture and innovation culture really go together?
Surprisingly so. We’ve had to look at how we did things in the past and completely ripped up the rule book. The past was about waterfall, long lead times, building the POC, validating it, checking it balanced and then we’d engage Compliance teams before we could even consider launching it. Fast forward and we’ve created a new way of working, involving “pizza teams” (each slice symbolising a representative from each relevant team) and individuals entirely empowered to make decisions. This means we’re embracing new thinking in the business, enabling individuals to maximise their contribution and provide new development opportunities right across our organisation.
As an Innovation function we are embedding our Innovation model right across our organisation. By being a separate, independent team, we remain close enough to our businesses to be supportive but distinct enough to maximise the pace at which we can move and deploy.
This has had other benefits hasn’t it?
Absolutely. Our engagement levels have shot up as employees are being included in new projects; their opinions matter and importantly they get to make decisions on what they feel is best for the customer, whilst remaining true to our core values. It’s allowed us to bring in some brilliant talent from places a range of Retail and other non-FS sectors.
How much of your role is focused on building engagement and driving cultural change to be more innovative?
Around 50% is focused on stakeholder management and communication. Personally, I think we can’t communicate enough in order to remain successful. This includes demonstrations of products with the Exec team, monthly ‘show and tells’ with our sponsors and anyone else who wants to attend and understand our progress. We’re constantly seeking feedback, centre checking and moving on.
You mentioned something called the Alpha Beta Pilot model earlier; can you tell me more about this?
We work with the business to understand a problem they have. We focus all our effort on solving it within a week. At the end of the week, we switch and spend two weeks trying to break our solution. The rationale behind this is we’re not wedded to an idea or protecting it because we think it’s good. We’re looking at how a competitor or new market entrant could replicate it and, if it can be broken, we don’t have an idea. If you look at ONE Versicherung, a Berlin based insurance company who reverse engineered Lemonade, it shows what businesses will do for the edge.
Once we’ve determined we can’t break the solution, we present back to the sponsor and ask for a small budget to create a small proof of concept. With pre-agreed spending levels and shorter timelines, we’re able to show them tangible products quickly and they love it. It also means we’ve changed how we work with our partners and similarly, an effective process means we’re making decisions quicker, turning things round faster and there are more partners wanting to work with us.
So, we’re not talking about new propositions here, we’re talking about a fundamental change to the business model?
Absolutely. We can’t just build products from pain points. We need to look at where the market and technology trends are moving. We all know that Blockbuster decided not to explore streaming as a result of customers not being willing to embrace it. Technology moved on and now we all stream content across multiple devices. We’re focused on where technology is moving too. Customers want to buy in a different way; what does this mean for brokers, other intermediaries, even aggregators? Regulation is continually evolving and now consumers are more educated on what they want. Younger generations have a completely different view on the value of insurance, so we need to see where they’re headed.
By looking to the future we’re hoping we can build a model that connects with the customer. Can you imagine being prompted to buy your travel insurance when you submit your annual leave request at work?
Over the years we’ve seen large insurers making considerable investment in internal teams. What considerations did you take into account when deciding to build or partner?
We have a mix. A core team supported by external partners who we select for their thinking. I mentioned more partners want to work with us earlier and in part it’s down to how we select them. We’ve iterated the traditional Procurement processes and created a one-minute RFI process. We ask potential supplier to tell us their solution to our problem in five slides. If we like their thinking, we shortlist the best two, asking them to produce a three-minute video on how the solution will work. This way, they’re not spending huge amounts of time on irrelevant statistics – we’re selecting them for creativity, thinking and the ability to execute.
Thinking about skills, have you seen a change in the type of people you hire?
Yes. We have enough subject matter experts on insurance, and we want those from other sectors. I’d mentioned hires from non-FS sectors including appointing people from retail and cloud technology industries. We need to learn from those in radically more advanced businesses and use it to our advantage.
What does this mean for leadership?
If you have lots of subject matter experts, look for individuals who have a mind-set for Innovation. Direct Innovation experience is ideal but not always possible. I believe the heart of Innovation is mind-set. For example, if you “think you can” have a far better chance of succeeding then if you “don’t think you can”.
So, Graeme, you’ve touched on some of the innovations within L&G – can you let me in on some others?