Innovation in insurance is not limited to a new shiny technology. The "innovation" doesn't need to carry the word "blockchain," nor does it need to have "AI" to provide value to the company. New concepts, new insurance products, can be and are innovative in many ways, and they require people, processes, and a mindset to make them happen.
Mariel Devesa, head of global business development for Phyn and former head of innovation for Farmers Insurance, shared her experience and insights on innovation. Stephen Goldstein joined Mariel to facilitate the fireside talk and to ask the hard questions.
Below are some notes and my opinions on the topics that Mariel and Stephen touched in their talk.
"The shiny disco ball syndrome" is when someone says "we need to do this" and then four weeks later "oh, we need to do that," and later "we need to focus over Continually shifting focus on whatever is in fashion or is getting the most publicity at the moment."
How carriers go about innovation?
There are many different ways to innovate within companies from operational efficiencies to new disruptive business models. Mariel shared that generally, carriers don’t have a shortage of ideas. In reality, sometimes there are so many options that it can be paralyzing to start. One way to approach it is by looking at where you can make the most significant impact. It may begin as a small pilot but have the potential to grow substantially; as was the case with the rideshare.
The path of insurance and rideshare connect well to the previous session with Jay Cohen on regulation and innovation. Farmers insurance was the 1st mainstream carrier to launch a rideshare offering in 2015. However, in early days there were regulatory battles where the general insurance industry took the position of wanting to shut rideshare down. Mariel and the team focused on what consumers wanted as well as understanding a new business model that had insurance implications.
There was a coalition between the insurers and the Transportation Network Companies (TNC) and other companies.
Sometimes initial reactions relating to innovation can be resistance or a belief that the player/business model is so small that it won’t impact the existing business. A different approach to take is to learn about the disrupter vs. making assumptions about the business. By understanding the actual business, this allows a company to see how working with the disrupter can create an opportunity.
"I remember that at the beginning of my work with Gus Fuldner, VP of safety and insurance at Uber, it was all about building trust." Both sides had reservations and concerns, however, trust was built, and it resulted in drafting the “compromise language,”  which created a framework for states to pass and provided clarity to build an insurance offering.
Working with the regulators
Generally, regulators want to solve problems that can arise related to new industries and new technology. When the disruptors and legacy companies come together to address the problems and create a path forward that solves the regulator's problems, it can potentially lead to faster implementation of solutions that can be operationally executed upon. Rideshare is one of these cases that is now taught as an example of legacy companies working with disrupters to advance new technology.
It’s important to embed innovation throughout the company and start changing culture and mindsets. It’s not about one team vs the other. The new vs the old. It’s about how does the enterprise move forward to execute on a larger goal.
Insurance has been innovating and changing all the time -- new insurance products, new methods, and new tools to collect premiums and settle claims.
Time to start an innovation team
In some instances, a company can benefit from creating a separate space for innovation to grow and thrive. It takes a different mindset and way of looking at problems and opportunities. It’s important to look at things from a fresh perspective. Not ask why it can’t be done but rather how can it be created.
Some questions centered around the changes that autonomous vehicles will have within insurance. It’s important for the legacy carrier to take an external view. Mariel shared that it’s not as relevant what you and I may like/be interested in. It’s more important to see who is using the new service or offering, what do they see as a benefit and how can you address the customer’s needs.
Some say autonomy will come in 2 years some in 50 years. The answer is somewhere in between. It’s not a matter of if it is coming, it’s a matter of when and how companies prepare for the change.
Regardless of when full autonomy becomes a reality in the mainstream, there are impacts that can be seen today that will only increase over time. One example is over the air updates (OTA). Traditionally autos are rated when they come off the line. However, when an OTA update happens and a car can drive down the freeway without out hands on the steering wheel or feet on the pedals, or can add the capabilities of a sports car what happens with risk? Dynamic changes are not generally reflected in state filings, or in rating structures currently. These changes in technology can potentially create opportunities.
Why should a carrier work with startups?
Startups can provide an injection of new ideas and life into a legacy company. By being nimble they can focus on creating solutions for problems without necessarily being inhibited by legacy structures and history. Granted the startup has to be able to execute, but it should be a mutually beneficial structure. They can provide great energy, insights, and expertise
Building new programs can be exciting, one caveat to watch out for is that once a program is built, it needs to continue to evolve and grow vs. be handled as a traditional product line that perhaps is fairly similar year over year. The business needs to grow this muscle/mindset to keep new innovations fresh otherwise there is a potential for it to grow stale.
Catching the startup bug
Stephen asks "after 10 years with Farmers insurance, why is the recent change to move to a startup?"
water. Mariel grew up in an entrepreneurial household and tells the story that in one part of her career she used to be a professional windsurfer, consequently, spent a lot of time in the ocean and feels a bond to water. With the world seeing devastating effects of water shortages and being a depleting resource the mission of helping the world speak water was a natural fit. Having the ability to have an impact on saving water resonated with her.
IoT and the smart home, help insurance companies to shift from being reactive--remedying post-accident--to being active and preventive.
Phyn is a leader in the industry backed by 10 years of R&D. The company was founded two years ago as a joint venture between Belkin, a leading company in IoT, and Uponor, A global leader in plumbing supplies. Additionally, Foxconn recently acquired Belkin with a future look into continuing developing smart home offerings. The thoughtfulness of the product design, the IP behind the offering, the people and the mission all resonated with Mariel.
At her job as a global head of business development, Mariel is looking at different verticals, and insurance is one of them. Phyn technology detects leaks, provides insights to consumers and has the ability to remotely shut the water off to avoid material damages. They are seeing good traction from both the individual homeowners as well as commercial clients.
THE OTHER SIDE
Having been on both sides Mariel can see both the challenges that an insurer has related to water losses and ways to structure programs, as well as how the start up can help the incumbent solve their problems by mitigating losses and improving the customer experience.
 National Conference of Insurance Legislators. “Legislators Approve Model Law to Regulate Controversial Transportation Network Companies (TNCs),” Press Release. July 19, 2015.