McDonald’s became a fast food empire by embracing an innovative franchising model, successfully commoditizing tasty food and offering an efficient customer experience. But lately McDonald’s has been struggling, in part because the industry giant became complacent and didn’t stay ahead of consumer trends.
“Places like Chipotle, Panera, and Five Guys do what McDonald’s does not: They offer a simple menu, allow customization, ostensibly treat their employees better, and serve food that is (or is perceived as) healthier, fresher, or more ethically raised. Most importantly, this has allowed fast-casual to get its hooks into Millennials,” according to Adam Chandler, senior associate editor at The Atlantic.
Insurers instinctively understand this lesson. A survey by KPMG International confirmed what I have been hearing from customers and Sapiens management: insurers value innovation.
More than eight out of 10 respondents to the survey, which included 280 insurance industry executives across 20 countries, said they believe their organization’s future success will be closely related to their ability to innovate faster than competitors.
But knowing something and actually executing it are two different things.
“Just 32 percent of respondents said that they consider their organization to be a first mover when it comes to innovation, while 40 percent seemed content to be fast followers. More than a quarter of all respondents reported that they had no discernable philosophy,” according to KPMG.
It seems that the surveyed insurance executives’ pessimism was based on cold, hard facts. Only 47 percent reported that their organization had an existing enterprise-wide innovation strategy, while a mere 39 percent said they have a budget for innovation.
It seems incongruous that insurers aren’t energetically preparing for the opportunities presented by digital and new technologies, such as autonomous cars, home sensors, the Internet of Things (IoT) and wearable technology. As we have seen from the McDonald’s example, sometimes a failure to eagerly embrace change leads to stagnation.
“We are a risk-averse company, very methodic and thoughtful and thorough in what we do, but time doesn’t allow you to do that when you’re in a turnaround,” said Steve Easterbrook, McDonald’s CEO, in January 2015.
Today’s insurers also face an ultra-competitive environment and can’t afford to wait. One of the best ways for them to reconcile the gap between their desire to innovate with the lack of their ability to do so is to upgrade their core policy administration systems and technology. Legacy systems simply weren’t designed to cope with today’s fast-moving market or unique challenges, making it difficult for insurers to obtain the agility necessary to stay ahead of competitors.
But not all new insurance solutions are created equal. Insurers should seek out an experienced vendor that has demonstrated a deep understanding of the insurance industry and has a proven record of helping its insurance customers innovate.