ARTICLE
11 November 2024

The Key To Innovation, Meeting Clients' Unmet Needs In The Insurance Industry Is Collaboration

W
WTW

Contributor

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Leading innovators in the insurance industry are working together to solve problems and develop new solutions to close coverage gaps.
United Kingdom Insurance

Leading innovators in the insurance industry are working together to solve problems and develop new solutions to close coverage gaps.

In most industries, there are challenges that organizations can't tackle alone. As the insurance industry undergoes an unprecedented digital transformation, we're finding that collaboration among industry players is vital to tackle challenges such as closing coverage gaps and more efficiently matching capital to risk.

How the insurance industry works collectively to better meet client needs

In June, we gathered a group of innovators from Lloyd's Lab, Tokio Marine Kiln (TMK) and WTW to share experiences and discuss unmet or underserved insurance needs and how to improve joint innovation efforts. We discovered that challenges such as emerging risks and changing client needs are a constant, requiring strong partnerships and teamwork to identify problems and develop effective solutions that benefit the industry.

Emerging risks and changing client needs are a constant, requiring strong partnerships and teamwork to identify problems and develop solutions.

Just because there's an unmet need, doesn't mean there's a viable solution

From a broker's perspective, organizations' risk profiles are constantly changing amid economic, political and regulatory developments. This might be due to uncontrollable external factors (e.g., climate change), or it could be deliberate changes such as a company shifting operations toward AI algorithms to complete work. Both will inevitably affect their risk profile and coverage needs.

Rob Jarvis from TMK explains, "We track emerging risks and how we see the world changing, and then we see the impact of those changes on existing products and where risk gaps start to emerge. The danger is ending up with solutions that insurers want to sell, but clients don't want to buy."

Insurers therefore face the ongoing challenge of working to meet emerging client needs while determining how to price these risks at a level insureds are willing to pay, yet can be profitably underwritten. For example, writing a policy that covers a new technology with limited historical data is difficult. There are some risks that are hard to effectively measure – multi-tiered supply chains have innumerable variables that make effectively pricing the risk impossible. Insurers might write a policy with more unknowns (like outcome-based parametric insurance solutions), but they will price in the risk.

Ultimately, brokers and insurers have imperfect understandings of the connection between emerging client needs and the desirability (and financial feasibility) of underwriting the new business.

Evaluating a solution is an inherently collaborative exercise

No one person or organization has all the answers, which is why collaboration is essential. We also know that a specialized industry approach to risk matters. For example, The WTW Research Network works with industry leaders to apply our research specialties and connections to help clients identify challenges and opportunities. This involves exploring emerging risks, analyzing emerging circumstances or markets where existing solutions don't meet the current needs, or improving familiar ways of doing business.

My colleague, Lucy Stanbrough, explains that "as a broker we are incredibly lucky to have daily interactions with insureds and insurers to understand their pain points, but we also need to think more broadly about the risks they are not yet thinking about. We're currently working through the results of our Emerging and Interconnected Risk Survey, which covers both perspectives, and we're looking forward to sharing what they are seeing – or missing – and how they're taking action.

This is where the WTW Research Network leverages deep subject matter expertise outside of the industry to better understand or model complex or emerging risks – both the new ones, but also the ones people feel really comfortable about and shouldn't. A recent example of this a new scientific partnership with the University of Colorado Boulder. Historically, the state of the tropical Pacific has cost trillions of dollars in direct damages and reduced economic growth. But most businesses have only begun to take advantage of the strong predictability offered by El Niño and La Niña. WTW and the University of Colorado Boulder will harness the ongoing 'climate prediction revolution' for business use and improve our ability to predict global climate for the coming season, year and decade."

Iryna Chekanava from Lloyd's Lab sees their programs pivotal in connecting brokers and insurers, enabling them to share client insights and data to understand and identify industry problems. A recent example is a joint effort between WTW, Lloyd's and insurers to address supply chain challenges, which resulted in a series of co-authored risk reports.

Iryna explains that the Lab Challenge program was specifically designed to tackle industry cooperation in early-stage innovation. "There are lots of areas – especially with emerging risks – where there is lack of collective understanding of the problem. We see shared thought leadership and experimentation as key to exploring problems and figuring out what a viable solution might look like," she says.

Effective partnerships are fundamental to unlocking – and scaling – new solutions

At first glance, many challenges are insurmountable for any single party. Bringing in the right expertise and technology partners can unlock solutions.

This is where the Lloyd's Lab plays a key role with Accelerator and Launchpad, which bring together brokers, insurers and startups/scaleups to design, build and scale new risk and insurance solutions. The Lloyd's Lab Accelerator guides cohorts of startups through a program that matches them with mentors from brokers and insurers to develop their solutions. Meanwhile, the Launchpad platform brings innovation leaders from Lloyd's market insurers together to assess solutions and deploy innovation underwriting capacity.

Rob Jarvis, a co-chair on the Lloyd's Launchpad, has found benefits in working both with startups and large brokers. He says, "Startups are great at moving fast and will either find product market fit or will fail fast. However, there are also advantages to working with traditional brokers who may move slower but bring a wealth of expertise and the ability to distribute new solutions at scale."

Collaboration in action

Here are a few examples that show how brokers, insurers and startups can come together to address emerging needs:

  • A recent graduate of the Lloyds Launchpad, Gaia tackles the unpredictability of costs and outcomes in in vitro fertilization (IVF) treatments. Gaia is an example of insurers partnering with a startup to design and deploy novel insurance structuring to solve an important problem IVF users face.
  • TMK partnered with FloraTrace to launch Rezylient Trade Disruption Insurance. With new controls on imports from areas of China into the U.S., there's risk of import disruption. This solution documents the provenance of goods, reducing the risk of import challenges for shippers.
  • Intangible Asset Protection (IAP) covers non-physical assets (e.g., secret formulas, software code) that are tied to company value but are hard to protect. IAP is a collaboration with TMK that provides tailored gap insurance to cover financial loss.

Insurance innovation takeaways

Regardless of the roles colleagues play in the insurance industry, some of the lessons we've learned in innovation are common and can be applied across the board:

  • Stay laser-focused on the problem. It's common to fixate on solutions or not dig deep enough into the problem itself. The surest path to successful innovation is through problem-first innovation.
  • Don't take "no" for an answer. What you want is "yes, if." Senior leaders juggle many priorities, and it can be hard to balance core business needs with innovation opportunities. If you believe in an opportunity, be ready to stay curious and persevere until you find a solution that solves the problem and addresses stakeholder priorities.
  • People who are successful in innovation tend to have lots of ideas – not just good ones. The shared experience of the group was that in all probability only about one in 40 ideas get all the way to market – and not all of these will scale effectively. You need to be ready to gather many ideas (from inside and outside the company) and have the right mechanisms in place to quickly identify the good ones. Iryna shares that "a key success metric for organizations is not just the number of concepts that went to market, but the 'kill rate' – the volume and speed at which you killed the ones that didn't work."

3 focus areas for successful collaboration

  1. Brokers and insurers should engage early to understand solution viability. The earlier that brokers and insurers work together on a new concept, the quicker all parties can assess its desirability, feasibility and viability. This is truly engaging a fail-fast mentality.
  2. Identify opportunities for joint ideation. Start with hard-to-tackle challenges like supply chain or climate transition and bring insurers and brokers together to understand the problems and develop solutions. This will drive better understanding of problems and better solutions.
  3. As individuals, be curious, play to your strengths and reach out. Across the industry, individuals have different views on clients, modeling, data and all the components involved in understanding and solving risks. It comes down to individuals recognizing industry challenges and then collaborating within companies and across them to gather a diverse range of perspectives. We'll then identify more problems, understand them more deeply and create better solutions for clients and partners.

In the insurance sector, when a diverse group of perspectives and expertise come together to solve hard problems, they can unlock and scale new solutions that improve the insurance industry for brokers, insurers and clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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