Disclaimer: do not read this unless you can accept ideas as mental yoga, and not as suggestions, recommendations or opinions.
Bill Murray is a great innovator. Or at least he’s played one on the silver screen. In the 1984 movie “Ghostbusters”, Murray’s character, Dr. Venkmen, and his cohorts spent a long time inventing a revolutionary new technology to get rid of pesky apparitions and spirits who were gradually taking over New York City. But what’s really strange (relatively, of course) about that story is the people of New York didn’t embrace the new technology right away. The amount of ghosts ripe for the busting had to hit a critical mass before alarm bells started to ring, and before Annie Potts’s character, Jeanine, was allowed to scream…”We got one!”. Before that point, the triumphant trio sat around like a bunch of Maytag repair men, with only their innovative idea and a petty cash drawer’s worth of lo mein to live on.
So what lesson can your industry innovators learn from Ghostbusters?
Innovation takes foresight, patience and a strong constitution. Did I mention strong constitution? If the unmet consumer need isn’t blindingly obvious (and it hardly ever is), other stakeholders won’t see the opportunity right away. And while not every innovation results in the kind of success that the “Proton Pack” (originally called the “positron collider”) enjoyed, that success rarely comes without trials and tribulations.
The insurance industry, like many others, is facing modern challenges that can be transformed into modern opportunities. And because there isn’t much innovation going on in status quo industries like insurance the opportunity is here, now more than ever.
Ready to test out that foresight, patience and strong constitution? Let’s discuss some of the challenges, insights and trends that are ripe for innovation.
First the problems: Leenuh, Greenuh or Subpoena?
With healthcare changes spawning endless political discourse, climate change causing the property and casualty insurers concern about their own financial health, and the shrinking distribution and economic slowdown in the life insurance industry, the low hanging answer is to get leaner. So how do insurance companies reduce costs to improve their bottom line? They may reduce staff, reduce expenses, slow down R&D, or reduce their investment in talent management and development. But the smartest leaders know that although these tactics are quick, they aren’t effective in the long run. They may also seek to protect margins by raising prices. In a commoditized business, this only works when everyone does it. When a few competitors raise their prices market share is lost unless there are specific points of differentiation.
And now: innovative trends that might be the future of your industry
1. Green products. An April 2009 Six Sigma blog post quotes a recent Yale study on the price differential between certain products and their green counterparts. Apparently, about half of consumers are willing to pay 15% more for household cleaning products and cars that are considered green. Your clothes won’t be whiter and you will probably won’t pick up any more chicks in a green car, although we haven’t seen any data on the latter.
What’s the difference? People are willing to give something up to do the right thing for the environment, and ultimately for their own health, safety and quality of life. This is such old news that I am a little embarrassed to write about it, but the opportunities have not yet been captured in industries like insurance. Insurance companies are starting to get on the bandwagon but none are properly identifying and owning the market opportunity. Paper bills and correspondence are going away, but isn’t there more that we can do?Does the average insurance company know its own environmental impact? Can it bias toward green with respect to benefits? Would people pay more to know that their insurance company’s footprint was more like that of a gecko than a gorilla (just for the record, mascots have NOTHING to do with environmental impact; see disclaimer)?
2. Pet Products. The amount of disposable income spent on pets, (e.g., healthcare, food, toys, grooming) has defied the recession. Spending in this category was about $43 billion in 2008, almost $46 billion in 2009 and isexpected to increase another 10% in 2010 according to the American Pet Product Manufacturer’s Association. According to the organization’s managing director, Bob Vetere, it is pets are becoming more valued in the family than ever before while being viewed as “non- judgmental companions”. And it’s already happening. While entire industries go out of business, companies likePetsmart have grown market share and are nearing pre-meltdown stock valuation.
A decade ago, you’d be hard pressed to find a good dog liposuction specialist anywhere in the country. Wealthier individuals are leaving more and more of their assets to pet trusts. Yes, pet trusts. These are trusts for the benefit of their pet, you know, just to make sure they go to the best colleges. Paris Hilton did more for the toy breed dog business than the hotel business. The feelings around pets create opportunity and margin. Is there a way for insurance companies to consider pets part of the family? Perhaps clauses that make it easier to direct funds to pet care? Maybe offering incentives for leaving proceeds to animal rights organizations or veterinary hospitals (This is not a recommendation, it is just a little Fancy Feast for thought… see disclaimer)?
3. Divorce. In the last couple of years, divorce rates fell – but not because of lack of irreconcilable differences. There are still plenty of those to go around (and then some). Divorce rates dipped because of the economy and the simple fact that it’s expensive to get divorced. Legal fees, the splitting of assets, and of course the emotional cost. People end up paying high prices in an emotional state, desiring to keep their lives intact, particularly when they cannot agree on anything. Legal fees for a divorce can cost $10-15,000 or more. As people become aware of the true costs a need arises for separation on more amicable terms. And with the introduction of gay marriage comes gay divorce, a whole new industry where people of generally higher wealth and education are looking for excellence and expertise. Perhaps insurance companies can offer “promise insurance” as an alternative to a prenup? Maybe people would feel more comfortable getting amicably divorced if they knew they could still cover an ex-spouse in their employer’s health plan? Maybe there could be more in the way of special considerations for people who are in a committed relationship but not married, thereby avoiding the need for divorce (Mom and dad, this is NOT a suggestion or endorsement…see disclaimer)?
What do we do with these insights?
First, stakeholders must agree that change is needed. Not subtle change, substantive change. Then, decision makers must commit resources to it, both financial and human capital. And processes must be implemented or imported for gaining the needed insight, developing an excellent idea pipeline, and communicating those ideas so that market is ready for them. Most importantly, the attitude and vision for change must be present. It’s far easier to see change as a threat than to see the loss of opportunity as threat. You read that right, its change versus loss of opportunity. Leaders with the most longevity see loss of opportunity as a bigger threat than change.
Those who innovate first, stick with it, and think long term will win (especially the insurance industry leaders who already deal with the long term and have a command for risk). And the competition? They’ll feel like they were stepped on by the Stay Puft Marshmallow Man.