Big data, technology, and demographic changes have increased competitive pressures to the point where innovation has become essential for insurers. However, innovation is often at odds with many insurers’ governance structures. Governance seeks to define a framework under which business decisions are determined and executed.
In contrast, innovation by definition seeks new methods, ideas, and products. Viewed by many as a natural, or even acceptable, state of affairs, this tension can edge out a potentially profitable initiative, recasting it into a familiar mold with few growth possibilities.
In this article, Milliman’s Paul Fedchak and Stacy Koron discuss if the process really has to be that way.
In an industry not often noted for innovation, COVID-19 has proven that insurers can rapidly innovate to help businesses and consumers manage risks and protect against losses. For example, insurers quickly added benefits for COVID-19 critical illnesses and waived member cost sharing for diagnostic testing related to COVID-19. In addition to COVID-19, other significant changes, such as technological advances and healthcare reform, have fostered innovation in life and health insurance products.
Innovative products and services enable insurers to respond to client needs in new ways that competitors have not considered or been able to provide. However, innovation may be viewed as disruptive in the heavily regulated insurance industry, and regulators charged with protecting consumers might be concerned with ideas that are untested. Even when regulators are convinced that an innovative insurance product or service would greatly benefit a consumer population, they might be constrained by regulatory limitations.
In this article, Milliman consultant Stacy Koron explains why a principle-based approach to insurance industry regulations may be a more effective way to foster innovation.