Ep. 56 – Innovation & diversity in the Insurance Industry

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Susan Joseph has been working in the blockchain area for the past 4 – 5 years. As a lawyer she has consulted with the insurance industry and most recently was the North American representative for B3i, the blockchain for insurance consortium.

In this podcast we discuss two of Susan’s passion: “Innovation and diversity in the insurance industry”.

 

What is blockchain?

Blockchain is a foundational technology that provides a highly flexible set of tools allowing businesses, governments and others to re-examine their commercial relationships. It brings opportunities for greatly enhanced efficiency and development of new products. Inherent in the technology is the ability for diverse parties to cooperate in a way where trust is brought about through cryptography or promoting diversity through the development of the technology in the belief that the widest spectrum of perspectives will foster the most valuable innovations.

On a more technical side it is an additional communication layer on the internet / web 3.0. It’s based on advanced cryptography, computing and game theory. Susan likes to refer to it as a distributed value technology and for her it presents the next step in the digitization of data – both communications and assets, while the data is created transferred and stored. It has wide-ranging implications for commerce, society and behaviour.

 

Is the insurance industry good at embracing innovation and diversity?

In Susan’s point of view, no the insurance industry isn’t particularly good at embracing innovation and diversity but that isn’t too different to a lot of industries though. Innovation, in the insurance industry, is highly regulated and particularly in the United States where you have 50 state regulations in addition to some federal ones.

Systemically it’s hard to set up innovation in this space and yet you see a demand for digital projects and easier access to products and different kinds of products. Innovation has to happen, or the industry just isn’t offering what the market wants.

With regard to diversity that’s a problem with every industry – services, technology and insurance. When you look at cutting-edge technology, Susan believes it’s even worse. The amount of diversity in a cutting-edge area that just isn’t there. Susan think it is really interesting in that in this technology, such as blockchain, which is intended to democratise, that we need to have this diversity of thought and diversity of voices.

it’s not, there’s not a full-throated diversity effort let’s just put it that way and I think it’s really interesting in this technology which is intended to democratize, the more diverse thought and diverse voices in there that needs to happen. Because that’s a population that we want to serve.

Diversity is diversity in terms of gender, types of voices, cultural and a lot more. It is an inclusion play. Plenty of studies have shown boars with three or more women really start to affect the culture and change and increased profitability. A set of diverse voices and thoughts will improve the innovation side of any company. It’s really hard to innovate in an echo chamber.

 

In a study by McKinsey in 2017– “Companies with more culturally and ethnically diverse executive teams were 33% more likely to see better-than-average profits.“

 

AM Best – Scoring and assessing innovation

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. On the 14th of March 2019, AM Best published a report requesting comments from market participants in the insurance industry and other interested parties on the draft of a new criteria procedure, “Scoring and Assessing Innovation.”

AM Best defines innovation as a multistage process whereby an organization transforms ideas into new or significantly improved products, processes, services or business models that have a measurable positive impact over time and enable the organization to remain relevant and successful. These products, processes, services or business models can be created organically or adopted from external sources.

For Susan this is a really interesting move. As AM Best is a trading agency this exercise helps to move the conversation perhaps all the way up to the level. However what concerns her is when you start to tie a number to innovation. A large part of what goes on in innovation is a lot of learning, research and development, especially in a new technology such as blockchain, which is a long-term proposition. In such innovations there isn’t necessarily immediate ROI on it. So, quantifying something can lead to one wanting to sort of “teach to the task” meaning getting to the result that one is “an innovator” and one may actually lose the pure learning piece involved with that innovation. Susan thinks that needs to be calculated within that score to encourage that, as it is part of the benefits of what some innovation units do in large corporations.

Susan has experience insurers who both approach to innovation one from a dedicated innovation unit and one from a “grassroots” manner. Both of these approaches have their pluses and minuses. However, Susan believes there is a need for a marrying of both approaches. You need an explorer’s culture that permeates from top down and bottom up.

For an insurance carrier to get the best possible innovation score with AM Best, Susan would tell them that they should examine how they are putting their current innovation in. That they should assess culturally across their company how innovation is perceived and who can participate and that they should set up some incentives for everybody innovating for the company and outlets for that.

 

Having a digital mind set

It is widely accepted that most of the large insurance incumbents have developed digital channels but not a digital mindset. Additionally, insurance is an industry that has a tendency of pricing itself on historical data, i.e. paper, instead of via utilising real time data.

With the arrival of tokenisation, crypto currencies and all sorts of digital assets most insurers are quite confused on the type of data points they should be accessing for underwriting those new risks. Part of the reason is because they don’t have a digital mindset.

Susan believes there is a need for the industry to be really shaken up through the entrance of a new player to the market. Similarly to what the Apple Card has done to the finance industry.

Susan believes there is a need for the industry to be really shaken up through the entrance of a new player to the market. Similarly to what the Apple Card has done to the finance industry.

 

Diversity in fostering greater innovation

Whether it is blockchain, AI, virtual reality or any of those types of technologies that are being looked as they largely have homogenous people providing the solutions. Without a diverse workforce in those innovation labs you will not be able to get the best of results. For example when the Apple Watch was first launched it didn’t include a woman’s cycle. That’s 50% of the population whose needs are being effectively ignored. A diverse workforce would have brought a diverse thought around the table and such mishaps wouldn’t have happened.

 

Is insurance the right industry for taking a lead in blockchain development?

Susan believes that insurance is the right industry for taking the lead in blockchain development. Because in general insurance is a social good that is provided through some sort of mutual mechanism. This ensures that those which are the least risky and the most risky can get covered by a policy. Insurance has a wealth of data which fundamentally has been built on trust. All these things conspire to creating a good solution on blockchain.

The insurance industry also has two consortiums looking at blockchain – B3i and RiskBlock Alliance. These consortia’s whether it is B3i, RiskBlock Alliance, a health consortium or Trade Lens or whatever consortia, the legal entity itself is a start-up. Susan believes that blockchain technology will best be served through consortiums. She has written a piece entitled: “Do blockchains and consortia go together like PB & J?”

 

Diversity and Blockchain

Diversity and blockchain is a not-for-profit that started out of a panel at MIT on blockchain and AI. At the end of the panel the director leading the panel encouraged Susan and its participants to launch the not-for-profit Diversity Blockchain Group (DiB).

DiB is dedicated to promoting inclusion and education. They’re trying to set best practices for the industry by publishing out statistics about diversity, training advisory boards, mentorships and sponsorship to help promote diversity. Susan encourages everyone whether it is at conferences, events, summits and even podcasts to help promote diversity. This needs to be a coordinated diverse effort.

Insureblocks supports this message as we had produced our very own podcast on Diversity in Blockchain.

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One comment on “Ep. 56 – Innovation & diversity in the Insurance Industry

  1. judy zaiken says:

    Great Insights…

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