Insurers failing to innovate

Darrin Bull, Sovereign's senior manager risk and health product, spoke at last week's Australian and New Zealand Institute of Insurance and Finance Life Conference about the lack of big, game-changing innovations in the local insurance market.

He said innovation in New Zealand's life and health insurance market is dominated by small, incremental changes to products, with a particular obsession with benchmarks.

Living assurance in New Zealand covers 44 conditions and since May there have been five new releases in the market, he said.

"It's a bit like, ‘I see your angioplasty and raise you dementia," he said. "We need to break out of this arms race."

Bull said Swiss Re approves of the current model of incremental changes because it makes it "easier" for the reinsurer.

"But in my view what it leads to is a failure of the market to step up to the challenges... I think the market needs a real dose of innovation."

He said the products insurers produce "no longer connect" with the health situations of most New Zealanders; for instance, each year one in five Kiwis experience a mental disorder.

"This is a major condition affecting the lives of New Zealanders and as an industry we need to find ways to deal with it."

Another issue insurers have been slow to react to, Bull said, has been changing demographics, with a growing proportion of the population of non-European ethnicity.

"The face of New Zealanders is changing and in many ways has already changed. Most banks had migrant banking divisions 10 years ago."

He quoted author Clayton Christensen, who said one of the biggest barriers to innovation is good risk management and good management in general.

Along similar lines, he mentioned a UK survey that asked what the biggest barrier to innovation in insurers was. The answer?

Comments from our readers

On 15 August 2012 at 7:24 am not an olympian said:

10 years ago in financial services the mantra was innovate with new products. The investment guys did that and we saw CDOs, CMOs etc.

Good guy and fair enough.

The product is only one small part of the equation and advice is the key. What is better : having the products provide security (boring but good) or fulfilling some product guy’s desire to innovate.

On 16 August 2012 at 8:25 am Jeremy Bernstein said:

Interesting argument, however, rather than thinking of actuaries as a barrier to innovation surely they are primarily a barrier to insurer insolvency.

On 23 August 2012 at 6:55 pm waipu refugee said:

An actuary introduced me to the word autological. I wonder if this applies to this Darrin

Insurers failing to innovate

Insurers are lagging behind the rest of the financial services sector in innovation and need to do more to keep pace with changes to New Zealand society, an industry figure says.

Monday, August 13th 2012, 4:55PM 3 Comments

Comments from our readers

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