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Customer segmentation has for too long been the battle cry of insur-ers’ marketing men. And yet, de-

spite its proven effectiveness at redefin-ing clients in order to spur new products, segmentation may well be a case of the cart leading the horse. Unique policies don’t write themselves: they have to be invented. Rather than paring down cli-ents according to risk profile and insura-bility, the more adventurous companies are creating original products first, then testing them on an unsuspecting market. This makes the safe harbour of using underwriting skills for existing books of business a never-ending cycle of ‘same old, same old’.

One ambassador for such ‘blue-sky’ thinking is the New York-based Insurance Innovation Institute (III). Launched in April, the III encourages senior executives to look closely at their innovation strategies, both externally, in terms of new product, and internally for business processes.

III President Kate Morris argues that innovation does not need to be a waste-ful expenditure of time and money; in fact, without constant product develop-ment, time and money will be squan-dered in chasing tired, old and unap-pealing business. To truly stimulate

‘disruptive’ techniques and products, the whole inertia-bound mindset of adhering doggedly to predictable core business must be ditched. Time must be freed up for product innovators to ex-periment without fear of failure.

One such disruptive technique is min-ing ‘big data’ for crucial insights into clients’ behaviour and the potential products that could serve it.

Morris argues that big data is poten-tially the most significant digital-era in-novation to affect the worldwide insur-ance industry. This leads on to strategic innovation, which Morris defines as creating or extracting ‘new value’ from insights, such as those gleaned through the forensic examination of big data. Finding exciting patterns and startling coincidences through mining big data can also generate masses of information about risk mitigation – fundamental to the insurance industry.

If clients are sensitised to the urgent need to promote product innovation in order to maintain their competitive edge, would that not qualify as a clarion call to their insurers to do likewise?

According to the latest PwC Middle East CEO Survey 2014, of 51 CEOs polled, almost a third believe innova-tion in new products and services is the main driver of business growth for their companies over the coming 12 months. Regional CEOs said that the main driver for their growth stems from the increasing share of business in existing markets, followed by innovation in new products and services (30 per cent); a big jump from 2013, where only 9 per cent were prepared to put faith in devel-oping new products and services.

Take motor insurance. For more than a decade, the insurance industry – with few exceptions – has regarded usage-based insurance (UBI) through telemat-ics with a mixture of curiosity and scep-ticism. Recently, though, there has been a meaningful upsurge in interest and in-vestment driven by rapid developments in technology and changes in attitude from both regulators and consumers. The potential benefit for an insurer of a UBI strategy is now, suddenly, much clearer than in the past.

THE THREE MARKETEERSWhen it comes to product innovation, insurers have been, by and large, risk averse. Safe, trusted and well-received products always appeal to underwriters – and their CFOs. However, making calculated bets on product innovation may unleash not only creative concepts that capture clients’ imaginations, but also a whole slew of new revenue streams. By Richard Brown, London

Big data is potentially the most significant digital-era innovation to affect the worlwide insurance industry.

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With new data-driven business mod-els, data captured will include a number of raw data elements for analysis of in-terest to insurers: data from the vehicle (VIN, odometer, speed, RPM); GPS data (time, location, motion); and accel-erometers. Using this data enables anal-yses that can establish the utilisation of the vehicle, and place those miles into the context of the road network to un-derstand the driving environment and the drivers’ behavioural response to these elements.

Additionally, utilising this data, not simply as a source of raw information, but as a competitive, data-driven busi-ness advantage, offers the power to lift

the insurer above parity by doing more of what matters most to customers. The opportunities across the insurance value chain are numerous; better pricing will ultimately lead to more profitable un-derwriting, greater customer segmenta-tion, improved claims servicing, fraud reduction, enhanced customer retention and cross-sell and up-sell efforts. Also, and more importantly, customer feed-back can create better awareness of risk, which can lead to a reduction in acci-dent and fatality rates.

Tariq Zeitoun, Chief Commercial Of-ficer at Abu Dhabi National Insurance Company (ADNIC) can see the imme-diate need – and customer appeal – in

hatching tantalising new products and innovative methods to market them.

“At ADNIC, we are committed to our ongoing strategy, which focuses on development in the areas of moderni-sation, innovation and technology, and customer service,” he notes. “As such, the development of our new website is a key component in the execution of our strategic plan. We have ensured that the latest technology has been implemented during the design phase and we believe that both our new and existing custom-ers will find the website to be clear, in-formative and intuitive.”

According to Zeitoun, ADNIC is the first insurance company in the region to launch a self-service medical insurance mobile app (ADNIC Mobile), which can be downloaded from Android and iOS application stores. Customers

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Utilising this data, not simply as a source of raw information, but as a competitive, data-driven business advantage.

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without Smartphones can also use the function through the website by ac-cessing the WebApp. With the newly launched mobile app, ADNIC’s medical cardholders can:• Locate and get directions to ADNIC’s medical service providers network• Locate and get directions of its branch-es, sales and services centres• Submit reimbursement claims of up to AED1,000• Upload and view claim documents• View claims along with status and treatment history• View medical insurance benefits• Generate medical insurance travel certificates for themselves and their dependents• View ADNIC product offerings•Access information anytime, anywhere

“We are always looking for new ways to enhance our new business streams,” adds Zeitoun. “One way is through AD-NIC’s partnership with Dubai Trade, a provider of integrated electronic servic-es from trade and logistics service pro-viders in Dubai, to introduce ADNIC’s Marine E-Cargo solution.”

This solution is accessible via Dubai Trade’s online insurance platform, Trade Shield. Through this service, Dubai Trade customers can utilise ADNIC’s marine cargo insurance services and e-cargo solutions. The partnership also enables customers to get online quota-tions for one-off shipments and buy the policy real-time, while Dubai Trade’s customers can generate insurance cer-tificates for their open cover shipments on a real-time basis. This avoids delays, physical visits and manual work by con-verting the insurance cover purchases in a straight-through process.

Zeitoun explains: “The marine cargo and logistics sector is vital to the eco-nomic development of the UAE and is a core line of business for ADNIC. We are actively investing in new technolo-gy that allows us to offer more efficient and optimised insurance services to our customers. Through greater automation, we believe we can help our customers achieve economies of scale and further cost containment.”

Meanwhile, Alexis de Beaure-gard, chief officer of marketing and retail product offering at AXA Gulf,

is convinced that in today’s world, e-commerce rules the roost. “As internet penetration has reached unprecedented levels in the region, improved online platforms, and surging use of mobile devices, Smartphones and tablets have led to people becoming increasingly comfortable with transacting online. Naturally, the insurance sector is a part of this exponential e-commerce growth, which has led to online insurance pur-chase gaining momentum.”

To illustrate her point, de Beauregard refers to AXA as being one of the first insurance companies in the region to have launched its e-services in 2008 and e-commerce in 2009. “The company

has always believed in offering creative ideas, global reach and highly flexible service capabilities matching the best-in-class insurance solutions to make its clients’ lives easier.”

In 2013, AXA Gulf began offer-ing customers access to more online services by improving its multi-access strategy, developing new services – available via a responsive web design that fits any device. Ease of claiming, following up their quote online and lo-cating a provider (from the convenience of their computer or Smartphone) are just some of the client benefits and ex-pedited routes to the market that AXA Gulf provides. Speaking in a personal

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sThe marine cargo and logistics sector is vital to the economic development of the UAE.

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capacity, Tony Cabot of Argo Group contends that innovative product de-velopment techniques and experimental routes to market are still at a nascent stage. “This process is at an early stage. There is a significant amount of inter-est around the business-enabling power of digital technology, but before a com-pany goes down this road, they must first establish an overall digital strategy. Trying to do business on a technology platform without an overarching strate-gy is like trying to win a Formula 1 race with a bicycle.”

Cabot believes most companies will look to personal lines as the first place to take advantage of online distribution opportunities. “While a large percent-

age of potential clients have access to technology, they have yet to become entirely comfortable with making an insurance purchase online. As the com-parative/aggregator sites become more common, and with better marketing schemes, I think you will see personal lines insurance purchases increase sig-nificantly. Ten per cent of the market,

beginning with motor insurance and household goods, and then some life and personal accident products, [will gravitate online fully] within three to five years.”

Ultimately, the irresistible force of digitisation goes up against the im-moveable object that is personal rela-tionships. “It really is about finding the right balance between the information offered online and traditional comfort found in a face-to-face meeting,” says Cabot. Apparently, the old adage ‘spec-ulate to accumulate’ may need recasting in the digital era: ‘innovate to accumu-late’ is the mantra now.

Call Out: “Trying to do business

on a technology platform without an overarching strategy is like trying to win a Formula 1 race with a bicycle.” Tony Cabot, Argo Group.

‘Speculate to accumulate’ may need recasting in the digital era: ‘innovate to accumulate’ is the mantra now.

While a large percentage of clients have access to technology, they have yet to become comfortable with making an insurance purchase online.

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