This is an exciting time of innovation and impact for the insurance industry. As we’ve discussed in our research, insurance is the ultimate shared value industry, where social impact is integral to economic success. Reducing accidents, improving health, and helping organizations better prepare for economic risks both improve the profitability of insurers and enable better outcomes for the lives of millions of people.
Today, forward-thinking leaders in the insurance sector are preparing for drastic changes in their models, driven by new technologies like self-driving cars, availability and use of big data, and unconventional competitors like Amazon.
FSG recently hosted a dozen European insurance executives for a conversation on what these new changes mean for their industry and how they are adopting shared value strategies to better prepare for the future.
Why shared value?
Despite disruptive technologies and new competitors on the horizon, most insurance companies are continuing with business as usual. Participants from a number of companies saw purpose as the missing driver for proactive change in their organization, change that would better prepare them for the future.
Purpose helps companies define themselves no longer on “what” they are offering, but on “why” they are doing business. Moving, for example, from being a car insurer to an organization that stands for safe urban mobility profoundly influences the product and service offering, the view on the partner and competitor landscape, and which talent can be attracted.
Discovery, a South African insurance company, was founded on the premise of “making people healthier and enhancing and protecting their lives.” This purpose led the company to conceive its shared value Vitality product line that helps people to change unhealthy behavior though a set of incentives, and it led the company to use joint ventures, like their partnership with Generali in Europe, as the fastest way to scale the social and business impact they can have with their program.
How are these companies implementing shared value?
The logic for shared value is clear and appealing. But how can insurance companies, which are often complex, multinational organizations, successfully adopt a shared value strategy?
Throughout our conversation, participants offered advice for other insurance practitioners on how to introduce, scale, and analyze shared value within an insurance company.
How can you begin moving your company towards shared value?
Gain buy-in on the idea of shared value from executive leadership as soon as possible. Enthusiasm and support from senior leadership is a “license to innovate” for the company that enables employees to develop new ideas and to push these ideas in the company, help convince business-unit leaders to try new things, and free-up IT capacity for implementation down the line.
Involve employees in the shared value process, whether they were sourcing ideas, contributing extra capacity for pilot programs, or included as a test population for new products. It is your chance to motivate talent that looks for purpose in their work.
Develop pilot initiatives where you clearly project and measure social and business value creation in order to prove that such win-win strategies work out.
Consider changing the incentive system for managers at your company, moving from short-term only goals to longer term thinking. Some shared value business cases that break away from commoditized markets and focus strategies on unaddressed customers might have lower or slower profit in the short term, but improve your long-term competitive position.
How do you find and scale good ideas within a large organization?
Co-create products with customers and trusted partners to create a pull effect, i.e. ensure the product is taken up by the market. Médis, Ageas Portugal’s leading health insurer, for example, co-created a new diabetes program for corporate customers with an NGO and is leveraging the learnings to explore scalable solutions with other ecosystem players.
Make “sticky” products that add a tangible value for customers to pair with the elusive insurance value of remedying potential future risk. Instead of selling insurance, sell solutions, memberships, or service bundles that create a repeat customer experience. For example, BIMA finds that for its over 30 million clients in developing countries, telehealth helps to increase stickiness of its life insurance products, and consequently invested in a set of mHealth services (e.g. medical advice per sms) which are now part of a holistic product bundle.
Prioritize big bets to focus attention and investment where you see the highest chances of success. For example, do not invest in insuretech startups across the board or nurture a digital accelerator without a scope, but define the ecosystems in which you want to have an impact, identify the hurdles to reach customers, and prioritize partners (tech and non-tech) that can help you achieve your mission.
In settings in which you want to leverage a full ecosystem of different partners, sense and go where the energy is. For example, if you want to increase cities resilience to natural disasters, the ecosystem includes city mayors, local universities, small & medium enterprises (SME) associations and your sales agents. Your chances of success will be highest in the cities with the most motivated leadership.
How do you analyze your impact?
At the project-level, find a simple metrics you can track easily from the start. As Humana President and CEO Bruce Broussard recently discussed at the Shared Value Leadership Summit, tracking a simple metric like number of healthy days helped keep up the early momentum around their Bold Goals Initiative. Another company at our insurance convening found it helpful to use the SROI logic (Social Return on Investment, i.e. monetizing social outcomes). Whichever way you choose, make sure you project future impact to create a sense of possibility and excitement for the internal decision makers.
At the business-unit level, find the equivalent of the “Vitality Shared Value Equation,“ which measures incentive program cost, behavior change per incentive offered, improved risk outcomes and hence product value in terms of lower cost, better pricing, and uptake. It is actually an equation that can be applied for various insurance types. Seminar participants found that in can be helpful to create a separate business unit to pilot shared value programs. HUK Coburg, for example, created a special unit for all services around cars that is separate from the classic car insurance business and is run as a self-standing business.
At the corporate level, you can use tools like Integrated Reporting or the Shared Value Initiative’s Enterprise Framework to measure your progress. The Enterprise Framework is supported by 3 pillars that embody the organizational commitment (Purpose Pillar), the business infrastructure (Practice Pillar), and the hiring, competency-building and remuneration systems (People Pillar) needed to enable a company to advance shared value efforts at scale in a business. Together, these critical ingredients to success serve as a useful checklist for companies to understand where they are and where they can further invest in creating shared value.
We hope you find this advice helpful as you implement shared value strategies within your company. If you are interested in learning more about FSG’s work with insurance companies, please reach out to Nina Jais.