How to Drive Change in the Risk-Averse World of Insurance

The insurance industry, by its very nature, is risk-averse and prioritizes stability. For over 600 years it has served as a cornerstone of financial security for individuals and businesses. However, this inherent risk aversion can stifle progress in an era defined by rapid change.

Embracing innovation is crucial for any industry to thrive, and the insurance sector faces a unique challenge: how to champion new ideas and technologies while safeguarding the very stability that underpins its core function.

To explore this dichotomy, we sat down with seasoned product leader Carol Anderson, who has led successful innovation initiatives at both MetLife and Farmers.

We'll delve into the challenges of leading change efforts, the importance of data-driven decision-making, strategies for navigating the risk-reward equation, and the surprisingly important role middle managers play. Ultimately, we'll discover how insurance professionals can become catalysts for progress, propelling their companies and the industry as a whole toward a brighter future.

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The Peril of Playing It Safe: Why Inaction Is the Real Risk

While the initial challenges associated with implementing change can appear significant, the true risk often lies in inaction.

The fear of missing out (FOMO) can be superseded by a more substantial concern: the fear of messing up (FOMU).

Carol highlighted the most fulfilling moments in her career as those where she pushed boundaries and explored possibilities. In her own words: “The days I was thinking about what is possible versus why we can’t do something, those days were the most fun. Asking, what’s the risk if we don’t do something? Pushing people to think differently about the business.”

“The days I was thinking about what is possible versus why we can’t do something, those days were the most fun."

By shifting the focus from reasons for inaction to potential benefits, Carol fostered a culture of innovation. This included exploring questions such as:

• Improved Customer Experience - Could technology streamline processes and personalize services, leading to happier customers?
• Enhanced Risk Management - Could data analytics provide deeper risk insights, enabling more accurate pricing and proactive risk mitigation strategies?
• Increased Operational Efficiency - Can automation free up employee time and resources, leading to a leaner and more efficient operation?

The Risk-Reward Equation: Aiming for Progress, Not Perfection

The pursuit of innovation within the insurance industry requires a careful balancing act. Carol highlights the industry's tendency to view success as a "grand slam" – a massive technological investment with immediate and flawless implementation. However, Carol proposes a more nuanced approach, advocating for a "small ball" strategy. In her words: "Success comes base-by-base-by-base. A single is easier to achieve than the home run, and the momentum gained from these smaller victories can ultimately lead to a string of successes."

"Success comes base-by-base-by-base. A single is easier to achieve than the home run, and the momentum gained from these smaller victories can ultimately lead to a string of successes."

Building a Culture of Calculated Risk-Taking

This shift in perspective encourages a culture of calculated risk-taking. By embracing smaller-scale implementations and pilot programs, insurance companies can validate the potential of a new idea before committing significant resources to a full-blown rollout.

Data analytics plays a crucial role in this process, providing an objective basis for assessing risks and potential returns on investment.

Furthermore, fostering a growth mindset within the organization is key. Challenges should be viewed as opportunities for learning and iterative improvement, encouraging experimentation and a willingness to adapt.

This approach allows insurance companies to reap the benefits of innovation while remaining true to their core value of risk management. By taking calculated risks and aiming for steady progress, not immediate perfection, the industry can unlock a future of sustainable success.

Navigating the Hurdles: From Obstacles to Stepping Stones

While the potential rewards of innovation in insurance are undeniable, the path to successful implementation is rarely obstacle-free. Carol acknowledges the common hurdles, including budgetary constraints, limitations of internal IT resources, and the ever-present challenge of navigating regulatory requirements.

Beyond these general challenges, project-specific risks can also derail even the most promising initiatives. These include ensuring the quality and accuracy of underlying data sets and models and avoiding the allure of "silver bullet" solutions without critically evaluating a technology's true potential and limitations.

Leading From the Middle: Collaborative Strategies for Overcoming Challenges

Despite these obstacles, Carol highlights the critical role of middle management in driving change. They act as the bridge between senior leadership and operational teams, translating broad visions into actionable steps. Her approach includes these key strategies:

Building a Business Case for Progress

Instead of focusing solely on a large, potentially unattainable ROI, Carol advocates for incremental wins. By identifying smaller, readily achievable goals that contribute to the larger vision, the business case becomes more realistic and persuasive

Data-Driven Education

Equipping both senior leadership and middle management teams with the knowledge they need to understand the potential benefits of change is crucial. Arming cross-functional teams (e.g. claims, actuarial, product, operations) with data-driven insights fosters buy-in and facilitates informed decision-making.

Finding Iterative Solutions

Not every innovation requires a massive technological overhaul. Carol champions an iterative approach, seeking "workable solutions that don't require massive tech integration." This could involve piloting new technologies with limited data sets or implementing a nightly data transfer process instead of a full API integration at the outset of a project.

Remembering the Noble Purpose: Protecting People and Assets

In the whirlwind of innovation and navigating change, it's easy to lose sight of the fundamental purpose that drives the insurance industry. As Carol reminds us, it's not just about collecting premiums, paying claims, or even occasionally raising rates. At its core, the noble mission of insurance is to empower people to protect their assets and safeguard their loved ones. By keeping this guiding principle at the forefront, insurance professionals can make informed decisions that prioritize customer well-being.

Beyond Transactions: Building Positive Interactions

Carol emphasizes the importance of constantly asking: "How can we create a more positive interaction with the customer?" This extends beyond simply streamlining processes. It signifies a commitment to fostering trust and reinforcing the value proposition of insurance.

Carol suggests circling back to this core purpose every day. It serves as a compass, guiding decision-making and ensuring that innovation ultimately serves the greater good. Whether it's developing new products, streamlining processes, or simply interacting with a customer, remembering the noble purpose ensures that insurance remains a force for good in the lives of individuals and families.

The Path to Progress

Here are the key takeaways from our conversation with Carol and a playbook for innovation in the insurance industry:

1. Embrace Calculated Risks - Don't fear failure; view challenges as stepping stones. Aim for progress, not perfection, celebrating smaller wins that pave the way for bigger successes.
2. Think Long Term - While the initial hurdles of change may seem daunting, the true cost lies in inaction. Don't be afraid to champion innovation and explore the potential benefits for your company and its customers.
3. Build a Business Case for Progress - Focus on achieving smaller, readily achievable goals within the larger vision. Quantify the potential benefits and build a compelling case for investment.
4. Educate and Empower - Equip both leadership and middle management teams with the data and insights needed to understand the value of change. Foster collaboration across departments to turn hurdles into opportunities.
5. Remember the Why - Never lose sight of the noble purpose of insurance: protecting assets and safeguarding loved ones. Let this principle guide your innovation efforts, ensuring technology serves a higher purpose.

By following these steps and embracing the principles outlined in this article, insurance professionals can lead the charge in shaping a brighter future for the industry – a future where innovation fosters progress, protects customers, and ensures the long-term viability of the insurance industry.

What are your thoughts on leading change in the insurance industry? 

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Let's work together to propel the industry forward, one innovative step at a time.