ITIJ 208, May 2018
For the travel insurancce industry, sometimes the development of products and their delivery can seem to be happening at a slower pace than in other industries. ITIJ investigates the challenges insurers have to overcome when trying to bring a new product to market
Speaking to industry experts, it seems that the primary challenges faced by insurers depend on where in the world a company operates. For US-based insurance firms, the complex regulatory environment can cause no end of headaches, although there are ways and means of mitigating the issues that being regulated in 51 states causes. For European companies, meanwhile, the problem of legacy IT systems was mentioned by more than one contributor.
Rules and regs
Carolyn Leckie, Director of Marketing for US-based travel insurance comparison site Squaremouth, believes that the state-level regulation environment in the US serves as a limiting factor when it comes to innovation in the industry, saying that ‘it restricts new coverages’. This sentiment is echoed by Robert Gallagher, Senior Vice-Present and Chief Operating Officer of AIG Travel in the US, who told ITIJ: “The time it takes to get new products and rates filed can be lengthy. While the role of the regulator in protecting the consumer is an important part of the process and one that we endorse, it can extend the time it takes to get from product and service development to availability on the market.”
The path to regulatory approval can be a bumpy one, but there are ways and means to fill the potholes on the way. For Squaremouth, the answer lies in having the right partner. Leckie said: “Finding the right underwriter is key. Our underwriter, Berkshire Hathaway, is proactive, listened to our needs and assisted us. The research they’ve conducted
The state-level regulation environment in the US serves as a limiting factor when it comes to innovation in the industry
helps us determine what is important to customers and allowed us to tailor our new products based on these needs.”
Bringing a new product to market is an expensive business, and even for global insurers the issue of prioritisation of resources is a key consideration when it comes to innovation. Chris Price, Head of Travel Insurance in Europe, the Middle East and Africa for Zurich, told ITIJ that a company as large as Zurich has many competing initiatives, some of which fall under the banner of ‘company strategy’ and others that are just good ideas. “The skill,” he said, “is balancing these imperatives for as smooth a process as possible.” IT is one of a number of resource-heavy issues that must be considered when it comes to product – and indeed company – progression, a concern echoed by Rafael Senen Garcia, Chief Executive Officer of Coverontrip, a new digital insurer in Spain, who is well-versed in the challenges faced when bringing a new product and company to the marketplace. The IT legacy is an issue he faced in particular, as his new business process required the design of new software. Among the other challenges he cited were distrust, immobility, fear, being outside of your comfort zone, vanity, insecurity, and mediocrity. An intimidating list, to be sure. “In order for your innovative product to reach safe port,” he said, “you need co-operation and collaboration within your organisation.”
The issue of regulation, however, is not considered to be overly burdensome by Garcia – as long as products are compliant in the first place. The real question, he said, is momentum of the marketplace itself. How does an insurer know the exact right point to launch their new product? Is it too soon, too late, are the customers really demanding this from their service provider? “But these questions are not actually obstacles,” he opined. “They are part of the nature of the innovation process.”
Another problem faced by the insurance industry is historic – with huge amounts of knowledge and expertise on the table, sometimes it can be difficult to take a fresh approach to a problem, said Paul Firkins, Hood Group’s Sales and Development Director in the UK. “To be truly innovative," he said, "we sometimes have to ignore what we already know, and look at completely new ways to solve a problem, create a new product or improve the customer experience.”
While innovation in the insurance industry does happen, for travel insurance in parituclar, it can be a difficult path to follow, as noted by Peter Dingle, Product Development and Innovation Director at Collinson: “One of the key barriers to innovation is that travel insurance is fundamentally a low emotion purchase. People look for the cheapest possible product and only care about what they’ve bought when they need to use it, not at the point of purchase. Even the strongest product features are meaningless to many consumers or simply overlooked. This means that any innovation that adds cost to a product is a real challenge and innovating without adding costs isn’t easy.”
Defeating problems one by one
Overcoming obstacles to innovation requires leadership, and for the experts spoken to for this article, this was a key deciding factor in the success or failure of any new venture. Chris Price said: “As well as a fundamentally robust business case, it helps to secure buy-in and understanding from as high up the organisation as possible.” Senen Garcia wholeheartedly agreed: “In a big group, the role of the top leaders is key. If the ‘number one’ person is pushing [for change], everything is easier. A culture of innovation can be built if the number one and Executive Committee are convinced that innovation is the only way for growing, and even for surviving, for the next 10 years.”
Leading from the top, then, is important, but new ideas come from a group of people exchanging their expertise, Firkins of Hood Group stated: “We bring together a diverse team of people including software developers, data scientists, customer-facing roles and marketing teams, and we’ll organise hackathons at our Innovation Lab in London, where we can collaborate on projects.” He added: “We’ll also bring in external experts, who might know about a particular innovation or product. This is a great way to develop stronger relationships with our partners.
Even better, is to get feedback from target customers and get their unfiltered input to solving a problem.”
Aligning great leadership with a strategic drive, demonstrating the potential for up-scaling, or applying a solution
An idea or change that will be for the ultimate benefit of a customer will always be well received
elsewhere, will also accelerate implementation of a new type of product or service, according to Price, who added: “An idea or change that will be for the ultimate benefit of a customer will always be well received and, all other things being equal, we tend to prioritise initiatives that will benefit those we have existing relationships with.”
The ultimate benefit of the customer is also an idea central to AIG’s approach to innovation, and the company has come up with some interesting ideas of late, which demonstrate how travel insurers can respond to customers’ concerns by offering them better products. Gallagher told ITIJ about how AIG is moving away from traditional ‘bundled’ insurance packages in order to allow customers to almost ‘build your own’ insurance. This, in and of itself, is not a unique approach, but what it does do is give the customer confidence in the product they feel they have more control over, and further it assists with the regulatory challenge in the US, as Gallagher explained: “This universal filing approach means AIG doesn’t have to file each product element individually, and offers increased flexibility for agents to provide a better-targeted product – and ultimately a better experience – for each distinctive traveller.” Products developed with this approach, he added, could also be easily introduced to other, less regulated markets, such as Asia.
One particularly eye-catching policy feature that will be popular with younger travellers is the Name Your Family aspect. Gallagher explained the details: “Currently if a family member becomes sick or injured, necessitating that a trip be cancelled, the policy dictates who constitutes a ‘family’ member. Our new feature allows travellers to choose up to five individuals as their ‘family’, which has universal value for all travellers, but is likely to be of particular interest to those in the LGBT community or millennials travelling with friends.”
Keep pushing the boundaries
Sometimes, an idea seems great initially, but inevitably, not every idea will come to fruition, and this is certainly true for the insurance industry. An insurer can occasionally come up with a potentially very attractive proposition that would make their customers very happy, but if an underwriting partner can’t be found, then the idea is stopped before it’s even got to market.
Carolyn Leckie said that Squaremouth had to speak to ‘nearly every underwriter in the US’ in order to find the best fit for the Tin Leg products that it sells, as it was important for customers to have a ‘consistent’ experience with the product. “In the US marketplace, there are a lot of carriers but not a lot of underwriters, which can be a barrier that requires a lot of careful research and consideration,” she added.
Getting an underwriter involved at the very beginning of the project is another way in which insurance providers can ensure buy-in from before the product is even developed. Hood Group, for instance, invites its underwriting partners to its hackathons, so that an insurance perspective is involved from the very beginning and they can tell quickly whether or not an idea is viable.
For Rafael Senen Garcia, some of the services he wanted to include in his new Coverontrip policies simply did not fit with any underwriter’s desire to offer cover. For him, ‘a lack of underwriting experience or underwriting capabilities’ is a weak point of the insurance industry.
Of course, occasionally there is a very good reason why an idea has not been done before. When an idea is first mooted at Zurich, it can often prompt a review from both local and global experts, explained Chris Price, and a firm ‘no’ at that stage can effectively bury an idea. Price added: “However, sometimes, where no firm consensus has been reached, the decision to drive forward becomes dependent on obtaining an acceptance of the risk from senior management, a standard albeit rigorous process within Zurich. The process can take time, but it is necessary and on the whole the system works. Our new Innovation Foundry is an example of how we have formalised this development process allowing us to explore many ideas and ‘fail fast’ with those that just don’t fit with our strategy at the time.”
Gallagher of AIG said that it is very rare for an idea to be abandoned altogether, but what is more commonly seen are delays to product rollouts due to that old chestnut – regulatory requirements. A failure to understand the prerequisites in a market will almost inevitably result in delays to introduction of a new product or service. In addition, environmental factors that are outside of the industry’s control can change priorities for the business, and given resources (time, money and staff) are finite, new ideas are sometimes required to be tentatively paused, while more urgent and pressing matters are addressed. Gallagher explained: “One example of this was when credit card (PCI) data security protection requirements were changed and intensified several years ago. This required the organisation to shift its focus and implement improvements and changes to the IT infrastructure, in order to be compliant with these new guidelines.” ■