EP41 - Innovation in Insurance Does Not Announce Itself
Jens Heitland and I got into this in our last conversation on COVERED. Insurance and innovation are two words the public does not really connect, and I think that is understandable. From the outside, not much seems to change. It is an insurance contract, some claims, and some payments. The basis of the product is the same, and the client does not see much movement.
What stays constant is the trust between the client and the insurer. That has not changed, and I do not think it will. But around it, quite a lot is changing.
In this Episode:
Francois Jacquemin and Jens Heitland on why insurance innovation is harder to see than to dismiss, how cross-border trust networks actually function, and what global leaders need to work through on legacy systems, distribution, and AI.
But I believe the industry is actually among the heaviest investors in digital technology out there. The reason it does not feel that way is almost by design. When an insurer improves a claims process, the client just gets an answer a little faster. When a new digital channel opens, people start using it without really noticing when it arrived. A year later, nobody remembers that the change happened, and it becomes the new normal. Then another small change comes, and the same thing happens again.
And because it moves that way, slowly and step by step, the perception of stagnation sticks. I think that gap between what is actually happening and what people see from the outside is real, and I am not sure the industry has found a good way to close it.
Where Change Actually Comes From
I am fairly certain that innovation in this industry almost never starts because someone decided it was time to innovate. It starts when something outside changes fast enough that the insurer has no choice but to respond.
Electric vehicles are a good example. The risk profile is different from a thermal car; the value of the vehicle is different, and the way risk needs to be assessed changes with it. The insurer did not work on that because it seemed like an interesting project. The market moved, and the contract had to follow. And when there is a focused problem with a real budget behind it, things tend to move. When there is neither, they tend not to.
I also think this is why insurers in the same country often end up working on similar problems around the same time. They face the same pressures and the same shifts in customer behavior, so the response is similar too.
What Global Steering Actually Teaches You
I spent years in what large insurance groups call global steering. It sounds great, global steering. In practice, you have almost no authority at all. No budget, no operational line, just a mandate to coordinate across local organizations that have very little reason to change how they do things because someone at the centre has an idea.
And you learn fairly quickly that you cannot push innovation across borders in insurance by telling people to do it. The systems are different, the legislation is different, and a solution that works well in one market almost never travels cleanly to another. Not because the idea is wrong, but because everything underneath it is specific to that context. I dislike the phrase, but the devil really is in the details here, and that is something I have had to accept more than once.
Trust is what travels, but that only works when it is built between real people over time. We ran networks twice a year, bringing colleagues together from Thailand, Malaysia, Spain, Russia, Germany, Luxembourg, and other markets. The format was simple. Share what you are working on, share what is failing, and see if something from one place might help somewhere else. It was always collaborative, never top-down, and there was no expectation of immediate results.
And it worked, slowly, in the way that I think only real relationships work. People came back year after year. They called each other when something came up. I met some of those colleagues in Italy just last year, and it was good to see them. Those relationships are still alive after fifteen years. That kind of trust takes time and physical rooms to build, and I do not think there is a shortcut.
Building Outside and Bringing It Back
To move at any real pace in insurance, you often have to put the new thing outside the main organisation, a separate team, sometimes a separate building, with different habits and different permissions. I have seen this repeatedly with online insurance operations. The online team gets separated from the traditional sales organization because if it stays inside, the larger organization will slow it down, often without meaning to.
And that works in the early phase, the team moves fast and learns quickly. But at some point, it has to come back, because if it stays outside permanently, it never reaches the scale that justifies the investment. Bringing it back is a different challenge than building it was. I think of it like a pendulum. At one point, you need to be outside to go fast, and at another, you need to be back inside to scale. And the structure alone is not enough. If you have the wrong people with the wrong structure, it is not going to work, and finding that balance is not that easy.
The Data Problem Underneath Everything
When you talk about AI in insurance, you very quickly run into the legacy system problem. Two companies that look similar from the outside can have completely different definitions of the same data field, managed in different systems with different logic attached. Bringing those together takes months just to understand properly, and you cannot do much else before you have done that.
You cannot put a capable AI model on top of fragmented data coming from twenty different silos and expect it to hold up. The model may be very good, but if the data feeding it does not share a common language, the results will not be reliable. Building coherence in the data first is the work that has to happen, and it is not an exciting announcement to make, but I do not think you can skip it.
And I sometimes find myself wondering whether, in some cases, it would make more financial sense to build fresh rather than keep patching old architecture. A new entrant carries no history and can move faster because of it. But for an insurer already running real books of business across fifty countries, that is rarely straightforward. I honestly do not know what the right answer is there. It probably depends on the situation more than any general rule.
Where the Industry Is Heading
I think insurance is going to become even more commoditised. People do not want to take an afternoon off to meet their agent anymore. They want something quick, transparent, and available at any hour. And what happens in online sales influences the traditional channels too, even when it is not obvious. The client expects things to be easy, and that expectation is spreading.
I do not think that means distribution through people disappears, though. I am sceptical of that. Most people who would never buy insurance online still look online before they talk to anyone. The two channels feed each other more than they compete. And when something goes wrong, most people still want a person on the other end.
But availability has to be around the clock, and the process has to be simple enough not to need explanation. And then there is the AI question, which is real, and so is the accountability that comes with it. An insurer that lets a customer-facing AI system give wrong information is responsible for that. The technology does not carry the liability. You need to be able to balance technology and responsibility, and that balance is not easy to get right.
Dreadful and Beautiful
I said at the end of our conversation with Jens that insurance is dreadful and beautiful at the same time, and I meant both parts equally.
You are managing risk across time, across markets, across regulatory frameworks that keep changing, across human behaviours that are never fully predictable. Take two companies with similar products and try to bring their systems together across fifty countries with different legislation and different histories. It takes weeks just to map the problem, and then you still have to align the people. I have been in that room, and it is not simple.
But that complexity is also what makes it interesting. Dreadful and beautiful at the same time.
Timecode:
00:00 Why Insurance Feels Slow
01:27 Hidden Innovation in Insurance
05:47 The Client View vs What Is Actually Happening
08:23 How Culture Shapes Innovation Across Countries
10:28 Building Cross-Border Innovation Networks
14:55 Why Trust and Relationships Drive Results
16:46 Building Outside the Organization and Bringing It Back
20:18 Leadership That Enables Rather Than Controls
24:50 How Executive Sponsorship Actually Works
30:41 Empowerment as the Foundation of Innovation
35:18 Legacy Data and the Limits of AI
40:26 Startups, Outsourcing and the Future Model
45:05 Where Insurance Innovation Is Heading
François Links:
Apple Podcast
Guest:
Jens Heitland:https://www.jensheitland.com/links
Transcript:
Jens: Okay. Innovating insurance.
François: Yeah, I mean, innovation and insurance is something maybe the public doesn't really link together simply because insurance is seen from the outside as a very traditional, very slow type of industry. From the point of view of the client, nothing changes much: it is an insurance contract, some claims, and some payments. The means of it are not changing. The basis remains the trust that people have to have with the insurer. Then there's a piece of paper, or if it's not a piece of paper, now you have an app...
François: Digital, etc.
Yeah, but it's pretty similar. You have the general terms and conditions that respect the law that has been unchanged for a long, long period of time although if I say that, I'm sure plenty of legislators and control authorities will disagree because the law changes a lot. But the basis from the client's point of view remains unchanged. I believe this is why it's seen as an industry without too much innovation, but it's wrong. It's wrong. There are a lot of changes in this industry. I'm going to take the example of linking technology and innovation.
Jens: Mm-hmm.
François: Insurance is the industry that invests the most in digital technology. It's always done with the purpose of improving the client experience, improving client access to the insurer, and improving the efficiency of insurance services. But it's step-by-step. The real feeling or jump is very slow; the human brain works in a way that when there's a little change, one year later we forgot that change happened and everything is normal. Then another little change happens and that becomes the new normal. So it's very slow and the perception is somehow different.
Jens: But it's quite interesting. I only have things to do with insurance as a customer a client from your side. It's quite interesting when you live in different countries; the system is always different. It's sometimes hard to understand, but technology is different too. Some countries are super advanced, others are less advanced. Do you see big differences, if we just focus on Europe, in countries and the insurance companies inside of those countries innovating more or less?
François: Well, when I was with a big German insurance company, I was doing global steering, so I've seen a lot of innovative initiatives. They are different a bit everywhere. You can't say that there is one country more innovative than another. It depends on people and the challenges they face. If the insurer there doesn't need to innovate, they will just have a period of time where they innovate very little because it's not the focus. But when there are issues, challenges, changes in legislation, changing customer behavior, or changes in the whole ecosystem, that drives innovation.
Take self-driving cars actually, let's not go there because that's quite far and specific to some locations. Let's take electric cars versus standard thermal cars. There is a change in the way the risk is assessed. Because it is a different type of risk, the value of the car is also different. These are elements that influence the way insurance will be driven or how the company will act regarding insurance contracts. It also reduces or lengthens contracts depending on the matter you have. These challenges coming from outside the insurance industry touching the clients and potential claim amounts will drive innovation into focus. If there's a focus, there is lots of brain power and money involved, usually leading to outcomes. Countries tend to react differently because circumstances are different, but insurance companies in the same country will tend to innovate on similar issues because they face the same problems.
Jens: So it always starts with the problem they need to solve and then they're innovating. It's not for the sake of innovating.
François: Exactly.
Jens: Good. It's quite interesting because as a consumer, I wasn't even thinking about it like if I'm driving an electrical car, it is different than a lean car. These things are so far away from a pure consumer. It's always: "What do I get and how much do I need to pay?" That's what I care most about, mainly the payment, depending on the value you get for it. It's interesting to hear that the innovation cycle is different and that you are innovating internally as an industry, while we as consumers don't see it. That’s why it seems slow; I don't care if I have an electrical car or a gasoline car, I just need insurance. I don't care what's behind the scenes; I care that when something happens, I get help.
François: Exactly. But as an insurer, this is what you want, right?
Jens: Of course.
François: You want the client to be happy. car insurance is forced in a way because you have to have it, but the smoother it is for the client, the better. If we take the analogy with online sales, it influences the rest in the way of thinking. If you say online that it has to be seamless and easy for a client, that percolates to the traditional side. There’s a demand for seamless, quick, and easy-to-do-business-with approaches for both online and traditional insurance. What I find interesting is segmentation; it's not just two distinct segments. The majority of people not buying online will still look online for information.
Jens: Ah.
François: But they will not buy.
Jens: That's interesting because I'm on the other side; I would do 100% online. When we moved to the Netherlands, I did everything 100% online. I have never talked to a single person and I'm super happy with it.
François: Yeah.
Jens: Comparing that to Germany when we moved there in between, especially during COVID times I needed to organize everything online, but it didn't work properly. It was really hard to get things organized; I needed a physical card to be able to do anything. In the Netherlands, you have an app and everything is organized.
François: It’s quite interesting culturally. The Netherlands is more advanced in making things easy for the population to have freedom in how they approach consuming. Germany is a bit more traditional, and the French are more balanced. In France, being innovative is also a marketing tool. To contradict what I said earlier that insurers try to make innovation as invisible as possible in France, "innovation" is a word used in advertising to differentiate themselves from the competition.
Jens: Makes sense. So they see it from a business-driving perspective rather than purely reactive.
François: Yeah, exactly.
Jens: Interesting. You have worked in different countries and different organizations. How did you approach innovation in a group setting where you were part of the group organization rather than a country organization? How was innovation treated then compared to when you were more entrepreneurial driving one unit?
François: In the group, there were two periods of time. One was global steering. It sounds great like you have all the power but basically, you have no power whatsoever. The key is to establish networks. You bring colleagues from Thailand, Malaysia, Spain, Russia, Germany, and so on together into one room and let them speak about what they do, their problems, frustrations, and solutions. There was a lot of sharing. We hoped a solution built in one country could be used in another, but usually, those innovative solutions are hard to port because systems and legislation are different. The devil is in the details. If it's not thought through beforehand as something adaptable to all countries, it's difficult to port. But we gave ideas that solutions could be brought back to home countries where they found alternative solutions or copied them. It worked well because it was collaborative, never top-down. People loved those network events twice a year. We built a solid community; I still see some of those colleagues today.
Jens: It's quite interesting because looking back at what we did in IKEA, it was similar when I worked with sustainability and innovation. As a global organization, we built events to put all the sustainability managers from the countries together. We would workshop certain problems to find solutions, and then build smaller tech teams focusing on specific areas to bring back to the global level.
François: Yeah.
Jens: In the end, if you work in a very large organization, that's the way to do it.
François: I think it should be that way for all companies. In insurance, companies are similar in each country because cars and pensions are universal. It's important that these networks happen for different "tribes" digital or IT to create a real matrix organization.
Jens: Yeah.
François: Creating those links between people is very powerful.
Jens: What is interesting is that the relationship is the driver the personal connection when you put people in a physical room.
François: Yeah.
Jens: Maybe have some drinks and fun as part of it, but the relationship makes things happen. If you know each other, you reach out. If you have a problem, you say, "There was François in Luxembourg, I'll talk to him because he worked on a similar topic." If you only know them online, you won't do that most of the time. You don't have the trust or the "I look bad when I'm not good at something" fear.
François: Exactly, because that trust is built over a long period and through repeated meetings. Usually, there is no competition for the top job at that level. A problem arises, however, if a group expects immediate results from those events.
Jens: Yeah.
François: How did it work with IKEA? Was it also a step-by-step process that created a slow flow of movement?
Jens: 100%. If you want to drive something in the total organization, that's the way to go. If you want to drive speed, you need something different. We built a super small team of five to ten people working on the edge of the organization to look into how we can do something extraordinary that you cannot do in the normal part of the organization. You need to be invisible on the edge to do difficult things. One example was looking into how we build the future sustainable IKEA store. It started small changing the way we build stores and became a huge global project supported by the CEO.
François: That's interesting. In insurance, I worked on digital and online sales in my latest job. I saw them building the online insurance company outside even the main office of the traditional insurer because of the necessity to go faster and have the right tone and training. The organization was much smaller and more agile. I've seen that on numerous occasions. I joined a company in Luxembourg where we had an online department outside the standard sales team, but because we were a small team, the operational department was the same for both. That brought issues in flexibility for testing. Being "outside" is good for speed, but if you want to be scalable...
Jens: You need to bring it back.
François: You need to bring it back. It’s like a pendulum approach. Structure is important, but structure without the right people is not going to work. Finding the right balance of structure and people is a challenge.
Jens: Yeah, finding the right individuals who fit. If you build on the edge, you need "wall-breakers" who figure things out. Others need to be "diplomats" who figure out how to influence the rest of the organization. Leadership approaches are completely different in those setups too.
François: True. My experience is that they need freedom and support more than traditional leadership. They have a very strong, short-term vision "I want this client now." It’s almost shark-like, in a driving way. Micromanagement doesn't work with those types of people. They need freedom and someone to help clear hurdles.
Jens: Senior leaders who work well build trust so the team feels someone has their back. Not micro-management, but knowing someone is there for them in the worst case. That trust circle is vital. Large organizations are political ecosystems; you need to navigate that.
François: I was in that position creating a new department. Competence is a scarce resource. There was a thought of using one of the biggest countries as a center of competence for a global program. We had technical competence in life, disability, and health, but no competence in reinsurance. We needed to pull that from another part of the organization. When mapping out the value chain at the beginning, it was clear we needed that. We had to build trust with people across a very large organization to bring all departments together. It required a lot of "parley" to align interfaces. Board meetings were important not for the work done, but because the various "tribes" saw that there was a very strong sponsor who wanted this. The sign that the meeting happened was more important than the progress made in it.
Jens: We did the same thing. We always invited the "top dog" to open the meeting and then stay in the back for support. It showed everyone that this was the direction and that it was important for the business.
François: Yeah.
Jens: And the smart leaders join the evening activities to mingle. People who normally never have access to the management team can build trust with them. It’s good for the ego and the motivation. When I was young, I was always pumped after those meetings.
François: One thing that worked well was a "fireside chat." It was structured more Q&A than mingling but in a relaxed way.
Jens: That’s the difference between insurance and retail.
François: What do you mean? Insurance people drink too, I guarantee you!
Jens: We'll test that later! But seriously, there was more formality compared to IKEA.
François: In the big group in Luxembourg, we held town halls where strategic teams presented, followed by a human moment. The group CEO would come and say hi. Once, a junior person asked a question without introducing himself, and the CEO replied by asking "Who are you?" It was a cool, fearless moment that showed a human side proof that the team can interact without it being too artificial.
Jens: It’s a small thing that makes a huge difference. Enabling everyone to present, rather than just the manager, is huge. It doesn't happen in a lot of organizations, but you see that companies that are innovating more have a culture that allows this to happen automatically.
François: It goes back to the sharing element. It's something that goes without saying for me now. At the beginning of my career, I was more on the "doing" part. It’s important to show direction, but if you speak too long, people get bored and go on their phones. It's time for someone else to present.
Jens: I remember the leaders that empowered and supported me, and those that put themselves first. Innovation only happens when you are empowered and have trust. You feel comfortable taking a risk and trying something new because you know you have backing.
François: Backing is vital because innovation isn't a straight road; it’s a mountain path with hurdles and valleys. What was the "fail fast" factor like at IKEA? In insurance, failing fast is challenging because you only see results after a long period. We tend to be risk-averse.
Jens: It depends on where you are in the business. If you have a direct connection to customers, you have a feedback loop and can iterate faster based on daily feedback. But for the "future sustainable IKEA store," you have to build it to know if it works. In big companies, you build a pilot, which takes years.
When we did this, we broke the store into smaller pieces and tested small risks in other projects. For example, if you angle the store differently to the sun, you have less heat. But the IKEA store is a commercial machine; it’s placed by the motorway to be visible. If you want to change the angle by 20 degrees for heat, someone in the franchise organization will look at the manual and say that’s not going to work. Branding was non-negotiable, but store service and small things could be iterated constantly by a store team.
Technology is another part. Very large organizations have legacy systems and old data structures. You cannot just patch on something new like AI if you have 20 different silos. You need to integrate the data into one pillar first.
François: "Data in one pillar" that sounds easy! At least you need a library of what data means in each context. Data is not a simple topic. Regarding AI, it can do 80% of the heavy lifting in coding, but it needs steering. I wonder if it wouldn't be more efficient to create an insurance solution from scratch rather than upgrading legacy systems, but I don't know if that makes financial sense.
Jens: There are two aspects: how fast can you generate income to pay it back, and how much do you put in before that point? Figuring out how to use new technology across a global insurance group takes years. Building a digital-first version takes months. Adoption and scale are different conversations, but the final solution can be fast.
François: The beauty of insurance is that it is intellectually challenging. You need to memorize and understand a lot of elements, or you will make mistakes. Merging two similar companies is challenging because they manage the same products differently. To bring that together takes years. Large countries can have a system, but smaller countries need their own for flexibility. The complexity is what makes it dreadful and beautiful at the same time.
Jens: The insurance industry could look at pharma and healthcare. They shifted from big pharma owning all the labs to a model where they invest early in several startups and then buy the best ones when they reach a certain point. Startups are twice as fast because they don't have the boundaries of a large organization.
François: Exactly. History makes insurance slow and heavy. A white sheet of paper is a perfect starting point. Insurance companies are doing this through innovation hubs or investing in startups. TPAs (Third Party Administrators) are also powerful models in France and the Anglo-Saxon world, where part of the value chain is outsourced to organizations that do it faster and better. It provides speed to market and financial optimization. But if you rely on a TPA that becomes very big, they might decide they want to distribute their own contracts. You need a value chain that is flexible enough so you can choose your model.
Jens: Looking ahead, what are the one or two topics the industry needs to figure out to innovate even more?
François: Insurance will become a commoditized industry very soon. People don't want to spend time thinking about it; they want it to be as quick as a swipe on TikTok. It has to be quick, transparent, and available 24/7. I don't want to take an afternoon off to meet an agent. We need a model that respects distribution but ensures availability. We must balance the usage of AI and make it responsible. AI can give wrong information, and the insurer is responsible for it. We need to balance technology and responsibility so insurance is simple, fast, and always available.
Jens: Innovating insurance.
François: Innovating insurance.