By Michael
Foerst, Missouri Employers Mutual
 While
it may have its moments, the insurance industry doesn’t
have a reputation as a leader in the area of innovation. One result
of that is illustrated in the recent P&C Update issued by the
Insurance Information Institute. The update indicates that from
the period 1955 through 2006 the insurance industry return on equity
(ROE) was below the average of all industries over 85% of the time.
If all industries were operating in the same economic market an
obvious question that presents itself is why has the insurance
industry so consistently underperformed?
In the Insurance 2020 whitepapers, IBM makes a number of key observations
about the current state of the insurance industry and what that
might mean for the future. The first point is that changes implemented
by the insurance industry over the last several decades were at
the tail end of larger changes and directed at improving existing
processes. In addition, although making improvements in processes
and operations using newer technology felt like the right thing
to do, it was actually just a proxy for real innovation. These
changes supplied a stream of revenue enhancements of some stability
but left the industry open to disruptive change. If the industry
continues to follow this course, carriers will logically see diminishing
returns on these types of changes and leave open the potential
of a new competitor that will capture a significant portion of
the market.
That being the case it seems obvious that there is a need to recreate
parts of the industry. Yet, barriers and obstacles abound that
limit or compromise an organization’s ability to introduce
truly new or unique solutions. It starts from within. Most organizations
have a natural commitment to the way things have always been, to
maintaining the status quo. Another issue is that organizations
typically aren’t organized to support the type of teamwork
that is needed for taking the leap to a new s-curve. Management
commitment to the operational disruption brought on by innovation
is another challenge. Too often the leadership team that leads
the charge for innovative solutions is not ready for the impacts
on processes that seem to be working just fine. There are also
the external hurdles with which to contend. Customers need to perceive
the value in the new approach even if it is very different than
it was before and we have to understand the concerns of the distribution
channel as well as regulators.
In the area of technology, patents on intellectual property are
becoming a more frequent obstacle to innovation. Patents are supposed
to be granted only if the invention is novel and not obvious. Yet
patents on solutions that are viewed as obvious by most in the
technology field seem to be easier to get in recent years. The
legal system has complicated this further by making it more difficult
to invalidate an inappropriate patent than to prove infringement.
The landscape is getting so difficult to navigate with all of the
overlapping technology patents that many companies have little
choice but to move down the path and wait for claims of infringement
to appear.
We often think of inventions coming from the eccentric individual
inventor or the scientists working in large formal laboratories.
Today there is a new collaborative model of invention that has
evolved to take on the ever increasing complexity of some of the
problems we’re facing. A large number of contributors may
join together informally to take on the problem for the good of
all. One of the classic examples of this today is the open source
movement that has introduced a number of very successful software
products that many of us are running. For one entity to then attempt
to patent the work seems contrary to the intent of the patent system.
“Get a dozen sharp programmers together, give them all a
hard problem to work on, and a bunch of them will come up with
solutions that would probably be patentable, and be similar enough
that the first programmer to file the patent could sue the others
for patent infringement. Why should society reward that? ... The
programmer that filed the patent didn't work any harder because
a patent might be available, solving the problem was his job and
he had to do it anyway. ... Yes, it is a legal tool that may help
you against your competitors, but I'll have no part of it. It's
basically mugging someone." (John Carmack, Co-owner, id Software,
2005, sharing his opinion on Slashdot)
The protection of truly innovative solutions by a functioning
patent system is vital to our technological advancement and economic
growth but unless that patent system stays in touch with the real
world it can actually inhibit innovation and progress.
|
