Where insurance meets innovation
December 21, 2016 by JOE GARDYASZ, Senior Staff Writer
From hackathons and in-house innovation labs to collaboration with the Global Insurance Accelerator, Iowa-based insurance companies are finding new ways to quickly advance new technologies as they strive to keep ahead of ever-increasing customer expectations.
We interviewed executives with four insurance companies that operate in different sectors of the insurance market to get a pulse on how their organizations are capitalizing on new technologies and to discover insights into their approaches to innovating new products. Here are some best practices that any organization may want to consider when looking at fostering innovation.
EMC Insurance Cos.
Over the past year, EMC Insurance Cos. has developed a strategic analytics function within its home office in Des Moines. As part of that effort, it created an in-house innovation lab. Made up of various teams from throughout the company, EMC’s innovation lab has a number of projects in its pipeline, the first of which was recently rolled out to the company’s independent agents.
“Our company’s leaders wanted to realize more value from data, and they wanted to combine the analytics and some of the technologies to create differentiated solutions for agents and add value for policyholders,” said Aaron Larson, who led the yearlong development of the innovation lab. “We’ve got some really good actuaries, some strong risk improvement engineers and folks from our strategic analytics who help integrate the emerging analytics and technologies into those solutions.”
Here’s an indication of how strongly EMC is tied in with leading-edge projects — and a possible hazard of having your team members working closely with other companies. As this story was being prepared for publication, Larson was hired away from the company by a startup technology firm. Now leading EMC’s Innovation Lab, as well as business insights and data warehousing capabilities, is Ian Asplund, formerly EMC’s chief actuary.
“Aaron created wonderful momentum that we’re continuing,” Asplund said. “What we’ve learned over the past year is really understanding the customer and what their needs are so that we can differentiate ourselves to agents and add value for policyholders.”
Overall, EMC has ramped up its strategic analytics functions to more than 40 people, with expectations to increase that to more than 50 by the end of the year. Additionally, in October the company became an investor in the Global Insurance Accelerator program in Des Moines.
The innovation lab is driven by input from the company’s network of 16 branch offices, and incorporates collaborations with startup technology companies as well as established technology vendors. The success of the innovation lab has also spurred EMC to introduce agile development more broadly across the organization, Larson said.
“I think we have consensus that it’s a really good complement to the traditional waterfall approach as we’re developing new products,” he said. “I think people have been very willing to deal with the ambiguity that comes with agile development.”
The innovation lab’s first completed project, Fleet Rewards, provides a telematics software application for insured companies to better manage their fleets of vehicles. That project includes seven or eight different technology companies that are helping with that rollout; each company solves a different problem the company encountered with the prototype.
For each project, the innovation lab team uses an agile development process that’s led by the branches. The team builds a minimally viable product that is then rolled out and goes through fast iterations of development, so that new products can be either scaled rapidly or quickly killed if they don’t advance. The Fleet Rewards program was developed from a concept to a minimally viable product in 90 days.
“What’s nice with the innovation lab is that we also work closely with our risk and underwriting departments,” Asplund said. “We have a lot of departments working closely together. That process of having the business units work together helped us keep the momentum in this (leadership) change.”
Another example of a technology project in the works is one in which EMC is partnering with several Central Iowa schools to pilot a school building monitoring system. Using smart building sensors on doors as well as water and heating systems, the system could let agents provide a new value-added service to policyholders for loss control and risk improvement.
“We’ve found that our agents and policyholders are very receptive to this collaborative approach,” Asplund said.
Principal Financial Group
One way that Principal explores potential technology-oriented opportunities is through regular code jams, both with its interns and also on a companywide basis, said Louise Billmeyer, the company’s chief information officer.
“It may be things we experiment with, such as understanding a business issue or how we can engage with third parties,” she said. “What has made us even more engaged around experimentation has been our adaptation of agile development. You learn, you fail fast, you redirect; that’s a real foundational piece of this.”
Among the trends that Principal has examined in the life insurance market is how to address declining interest by millennials in life insurance products, not to mention how rapidly changing technology is influencing consumers’ expectations in how they buy insurance.
“New generations are looking at ways to address protection and retirement savings differently,” Billmeyer said. “They do bring their biases in how they purchase things. If you look at what Amazon has done, it has really changed the expectations, and insurance companies need to factor that in. You’ve got to be able to position where you meet them where they are. Maybe they want to do it completely on their own, or in some cases they may want to chat with someone on the internet. You have to approach them the way they desire, when they desire it.”
Because Principal values the role of the adviser, the company is particularly interested in finding ways to help advisers better connect with customers as well, Billmeyer said. For instance, the company has experimented with making the insurance sales process more digital and mobile so that agents aren’t buried in paper.
Being an active member and mentor in the Global Insurance Accelerator has also been valuable in being innovative. As one of 10 insurance company investors in the program, Principal has an active network of executive mentors it provides to assist the startup technology companies in building business models aimed at developing new products.
“They may bring the technology and the IT, but there are other things we can help them with,” Billmeyer said. “It’s really a neat way to support innovation in our industry, and a way to foster innovation right here.”
Although Principal has not yet made any additional investments in accelerator companies beyond its initial equity stake in each, “there have definitely been continued conversations with companies in both cohorts,” she said.
Delta Dental of Iowa
Delta Dental of Iowa’s role as an active investment partner in the Global Insurance Accelerator has been of the keys to becoming a more innovative company, said Jeff Russell, Delta Dental’s CEO, who also chairs the Global Insurance Accelerator’s board of directors.
“Our belief is that you cannot just hire an innovation leader and put them in a department,” he said. “It’s got to be across the organization. I’ve seen technology officers hired and spaces set up — and often they’re the first to be cut in a downturn.”
The Des Moines-based insurance accelerator has served as an outlet for Delta Dental’s executives and managers to gain access to technology startups and new innovative ideas. “It allows us to see and interact with companies we would not otherwise be involved with,” Russell said.
Russell has taken his entire leadership team to the accelerator’s East Village office during its 100-day program to hear pitches from the cohort of insurance technology companies, even though only one of the companies so far has had a product directly related to health insurance, let alone dental insurance.
Delta Dental also pioneered “reverse pitches,” in which small teams from his company presented ideas to a panel made up of Russell, Accelerator director Brian Hemesath and his deputy, John Jackovin. “It was to put ourselves in the shoes of a startup to develop a pitch to present, what’s your message, what’s your product,” Russell said. Among those pitches was a look at demographic trends for health and wellness products for seniors, while another related to an internal technology innovation. At least one of the ideas has moved forward into development, Russell said.
“Our return on investment (in the accelerator) is easily generated by the work we do with our teams, he said. “If we were to do that outside the accelerator, it would easily cost $100,000. And we get the extra benefit of investment in the companies.”
Delta Dental has made significant investments in technology over the past three years in conjunction with the expansion of its Urbandale headquarters.
“That number has increased over the past three years and will continue to increase in the future,” he said. It’s largely in response to one of the biggest disruptive trends the industry is seeing.
That trend? “The consumer is going to be in control, and companies in the group insurance business have not always been good at building a relationship with that end consumer,” he said. “We often contract out that ‘last mile’ to agents and benefits people. We have to improve those relationships, knowing there will be new ways to buy those products.”
Grinnell Mutual
Although it doesn’t operate a formal in-house innovation program, Grinnell Mutual has taken a very active role as a mentor and investor in the Global Insurance Accelerator, said Kurt Eaves, vice president of direct underwriting and production.
“When we review the applicants to the accelerator and give our feedback, we’re specifically looking for ones that have disruptive technologies for the property and casualty industry,” he said. The company also works with the startup companies to mentor them during the 100-day classes.
The Grinnell-based insurer has made additional investments in two accelerator graduate companies this year, and works with startup companies in helping them test their technology.
In March it invested $750,000 in Drive Spotter Inc., whose technology product analyzes real-time video data from commercial vehicles to help drivers avoid accidents and costly insurance claims.
“We insure a lot of farmers who use tractor trailers to haul commodities,” Eaves said. “We’re going to use Drive Spotter’s program to create a commercial trucking program that agents can sell to commercial trucking fleets as a risk management tool.” Among its features, the software will allow fleet managers to choose a time and place to observe their drivers in real time while on the road.
In October, Grinnell Mutual was the lead investor in a $700,000 funding round with IMT Group in Serious Social Media, which is developing a software product that aids insurers in developing customized social media campaigns.
Eaves said that many of the independent agents his company works with are eager to market through social media but don’t have the staffing or resources to keep an active social media presence.
“We hope that from a technology standpoint we’ll get a return in terms of premium lift as we incorporate some of these technologies,” Eaves said. “And we could have financial benefit from the investment if some of these companies go public. But it’s more of a strategic benefit that we’re looking for in enhancing our product for better service delivery.”
