Innovation Labs in Insurance: Dead as a Dodo, or Finally Alive and Kicking?

We’re now starting to see the first signs of a new breed of insurance innovation labs, built by those slightly later to the party.

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Many of the glossy, high-profile innovation labs set up in recent years by insurers are being wound down, quietly closed off or turned into VC-only outfits. Given the rise of the Chief Innovation Officer as a board level role and the huge demands of customers to adapt to their technology needs, why is this?

Major insurance players have publicly cited internal perspectives and common challenges across their innovation lab models and, without naming and shaming any in particular, there are certainly a set of anonymized anecdotes that bear telling:

  • The hi-tech insurance innovation lab known internally as the “travel agency” for its seemingly only achievement in giving top execs tours of the local startup scene.
  • The global insurer who spent $60m on a mobile app innovation program that generated an impressive slew of apps, none of which had more than 1,000 downloads.
  • The major innovative insurer whose garage program is under increasing pressure from its CFO based on weak or unprovable ROI.

These tales, fresh from the insurance innovation grapevine, are live issues for these businesses. Fundamentally, they are the same issues and weaknesses that have led to the winding down of an increasing number of insurance innovation labs. Examples from the last 12 months aren’t hard to find. Allianz X’s public closure of its 2-year old incubator program to focus on pure VC plays. LV=’s quiet unwinding of its Fast Track innovation team.

What’s more, there is a steady brain-drain of insurance innovators leaving senior roles at traditional insurers, frustrated at the limitations placed on their ambitions and plans. Think Matt Poll of Neos and Darius Kumana of Wrisk.

This isn’t an insurance-only issue

While this is frustrating (and bad) for the sector, it’s not an insurance-only issue. The unwinding of the innovation lab model is happening worldwide across multiple sectors: Ogilvy, Disney, Coca-Cola, New York Times, and Nordstrom have all shut their labs in the last couple of years.

Be it technology, FMCG, publishing, retail or insurance—the sector isn’t the issue. The factors behind these innovation lab closures, which are as real and tangible in insurance as they are elsewhere, boil down to three main killers:

  1. The lack of focus on the commercial viability of ideas, in favour of designing sexy new widgets.
  2. The failure to effectively hand proven ideas off to scale, in a mistaken belief that entrepreneurially-minded teams are suited to build things out to scale (the pioneers/settlers model).
  3. The “them ‘n’ us” syndrome fostered by standalone lab cultures, who can see themselves the hip, jeans-wearing future of the business.

At this point, I fear I may be at risk of coming across as opposed to insurance innovation. Quite the contrary: insurance needs innovation more than most sectors. As a sector that provides such a fundamental social benefit, it’s sad to see so many labs failing. The model is NOT broken, despite the gloom, but it does require these challenges to be tackled conscientiously.

The next generation of innovation in insurance

It’s important that these models evolve. We’re now starting to see the first signs of a new breed of insurance innovation labs, built by those slightly later to the party. Zurich is a strong example with their new Innovation Foundry, launched in January 2018. Although early days, the model has been built—from the bottom up—to beat the innovation lab killer issues.

There are some clear steps that have been adhered to, and which are showing promising early signs:

  • A strong emphasis on the commercial / financial viability workstream through all stages of idea development and incubation. UX prototypes are great, but they are nothing without strong commercial viability understood from the start. A commercial case should be prototyped and iterated in the same way and with the same vigor and excitement as UX.
  • A disciplined integration of the innovation team with the more operational and traditional delivery teams, whose skill sets are better attuned to scaling and running proven ideas at scale. Understand the respective roles of pioneers and settlers, and agree what the hand-off points will be. Don’t get evangelical about Agile—sometimes Waterfall is a necessary evil (though I hate myself a little bit for admitting it).
  • Deliberate democratization of the innovation process by building it to be an open accelerator for all employees’ ideas (and perhaps external ones too), rather than a closed innovation elite. Train managers and staff across the company to be entrepreneurs and to work in the innovation lab when developing their ideas. Play the slow game. Building an innovation culture doesn’t happen overnight.

These are learnings that laggard insurers coming to the innovation lab party late, are well-placed to take on board as they set out to construct their innovation plans.

I’ll close with words from Thomas Prehn, Head of Denmark’s MindLab: “With innovation soundly stashed in the basement, a lab-ish logo above the door, wrinkled posters of a well-defined model decorating the walls of power, and the staff being rebuked when they don’t follow this new protocol, the preaching of that process has become superior to any impact it might have. But innovation should never revolve around process and methodology. Innovation is a mental capacity, a mindset of relevance, meaning, and value creation. It means embracing that learning comes from experiments, from curiosity and courage, from being responsive and fragile. These are all individual, human traits that must be made to flow in the organization’s bloodstream as unconsidered behavior: as habits.”

Let’s not give up on insurance innovation—this sector needs it like few others.

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Dan White // Dan White founded and runs the core team at London-based Ninety Consulting, drawing on his background in digital transformation and his prior experience as managing director of a Top 10 U.K. Digital Agency. Within Ninety, Dan leads the core team in setting the business’ proposition, building client relationships, overseeing delivery, managing partnerships, and planning for Ninety’s ambitious growth trajectory. Dan also serves as a Trustee of the Ninety Foundation, through which 90 percent of the distributable profit from Ninety is directed. Ninety is Dan’s response to a sense of personal mission, and uses its profits to sustainably address a number of social issues. Dan is passionate and driven by the ambitious targets that he is chasing: 5 million lives positively impacted by 2020, on the way to a total £1bn of charitable giving over 30 years. When not focusing on Ninety, Dan enjoys canoeing, camping, climbing and mountaineering, particularly if he can coax his young family off their screens to join him in the great outdoors.    

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