The Innovation Engine

Insurers: Effective Innovators—Almost


What if we told you insurance is one of the most innovative industries we know? (Hold the smirks. We are serious.) What if we went further and said that the insurance industry was poised to assume the leadership position when it comes to creating new products, services, and business models in our economy? You'd probably think we were trying to sell you a whole life policy. Well, the fact that you don't believe us—and again we are totally sincere about this—says a lot about the problem insurance companies have when it comes to innovation, a problem that we bet your industry may have as well. And therein lies a tale. Innovation in Life Insurance Let's back up a step. We believe that innovation occurs when:
1. There is a significant need or insight.
2. A product, service, or business model meets that need.
3. There is clear communication that connects No. 1 to No. 2. By this definition, the insurance industry is clearly innovative—at least when it comes to creating a product that fulfills a need. Consider some of the more obvious benefits available through one type of coverage: life insurance.
 Life Insurance
A. Need or insight B. Solution C. Benefit
Your heirs need money while your assets are in probate. Life insurance benefits are paid quickly. Your heirs receive the benefits from your policy quickly.
You need a way to protect your assets from creditors. Creditors cannot get at your life Insurance assets. Your assets are protected.
You want to make sure your heirs aren't saddled with any of your debts (including estate taxes and funeral expenses). You can take out a life policy whose benefits are specifically designed to cover these costs. Your loved ones are not burdened with expenses caused in your life or death.
You want to provide an estate for your loved ones, or to help fund a charity, after your death. You can take out a life insurance policy and have the proceeds fund whatever you want. You create the legacy you want.

The table begs one obvious question: Did you know about these benefits? Probably not. The insurance industry often has two of the three key ingredients for successful innovation: the need and the idea. What is missing is the ability to communicate these ideas in a way that is relevant to increasingly busy people. A Failure to Communicate An aside: The fact that up until now the insurance industry has fallen down when it comes to innovation is ironic because innovation couldn't happen without insurance. Every year, hundreds of new products are launched. Products that you put on your skin, your kids, your pet—services that require you walk up steps, get on new rides, and use heavy equipment. Business models that require you to write down your Social Security number and push "Send." The fact is that most of these new ideas would never be launched unless the potential liability associated with each was covered by—you guessed it—insurance. So, you would think that the insurers would be a master at communicating the benefits they offer. But the fact that they are not is, unfortunately, not unusual. Many times the best insights and products are overwhelmed by poorly executed communication. If you don't agree with this, consider that perhaps the most successful insurance marketing in the past decade involves a talking duck and lizard. There is nothing wrong with using a cute symbol to get someone's attention. But how many people could tell you a) the names of the companies employing either symbol, and b) what products they're selling, and c) what specific benefits those products offer? Our research shows: not many. Your honor, we rest our case. The good news is that it is incredibly easy to fix this part of the equation, particularly when you have a suite of products that are quite flexible and a CEO who believes change is necessary. For this reason, we believe the whole insurance industry is at a dramatic tipping point. Expect to see much more relevant and creative products soon. Why? Because we believe insurers are taking a cue from other industries and beginning to uncover meaningful and immediate needs that their products can readily serve. Once they figure out a way to communicate them effectively, watch out. Communication Is Essential Two of the questions we always ask when people complain to us that their hot new innovation effort has yet to gain traction: "Do people know about it?" and "Do they think they need it?" Invariably we hear some variation of "Of course they do" in answer to the first question and "How could they not?" to the second. Let's stop here for a second. Do you know that feeling you get in your gut when your IT department explains—using industry shorthand—a cool new technology? Think. What percentage of those words did you understand or care to understand? Do you remember how you felt on your first day in chemistry class, when you were being passionately taught something that had no relevance to you at all? What if this is how you are making your customers feel? What if they don't understand your product? What if the words you are using don't resonate with them? What if they don't see the benefits? What if they don't think your product is worth their time? Think back to our definition of innovation. It occurs when need + product (to fulfill the need) + communication (about how the product fulfills the need) are completely intertwined. If the communication fails, your whole innovation effort is severely crippled. Next time, we will talk about how to communicate your innovation effectively.
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Maddock is chief executive, and Vitón is president, of Maddock Douglas, an innovation consultancy that specializes in inventing and launching new products, services, and businesses. Maddock and Viton are the authors of Free the Idea Monkey (ISB Publishing, 2012), and Maddock is the author of Brand New: Solving the Innovation Paradox—How Great Brands Invent and Launch New Products, Services, and Business Models (Wiley, 2011).

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