SUCCESSFUL OPEN INNOVATION IN THE CONSERVATIVE INSURANCE INDUSTRY

SUCCESSFUL OPEN INNOVATION

IN THE CONSERVATIVE INSURANCE INDUSTRY

AN INTERVIEW WITH ORNA KARNI, VP OF INNOVATION AT AIG ISRAEL

WHAT SORT OF OPEN INNOVATION ACTIVITIES ARE TAKING PLACE AT AIG ISRAEL?

We do quite a lot with regards to working with startups. For us innovation isn’t just about technology. It can be based on technology but it may also be an idea for doing something differently or delivering something new altogether. At AIG Israel we have a clear process of how such external ideas should be handled. Firstly, we create opportunities to get exposed to new ideas by startups. We meet the people and make an initial evaluation. Sometimes the startups are simply a slide deck and at other times we meet more mature startups that have a product which only requires fine tuning and adaptation to AIG’s infrastructure and customers. Then we perform a business feasibility analysis i.e. the cost of developing a solution vs. the potential revenues it will generate. Naturally it wouldn’t make sense to take on risk over a project that doesn’t have a potentially high ROI in case of success. We then perform a technical feasibility and check the various aspects of connecting it to our IT, issues of data security regulatory matters and so on. If this checks out then we plan and execute a PoC. The great thing for startups working with us is that regardless of the outcome of our evaluation for AIG Israel, we may realize that they are a good fit for someone else at AIG as a group and in addition we have delegations from abroad where we invite relevant startups. That way, both sides have something to gain from the interaction beyond the outcome of a local PoC and a possible implementation later on.

CAN YOU SHARE A COUPLE OF SUCCESSFUL OUTCOMES OF YOUR OPEN INNOVATION ACTIVITIES THAT ARE PUBLIC?

We recently came out with a couple of new offerings that are based on startup technologies:

AIG SAFE LIFE, which is health insurance that offers personalized rates based on the customer’s lifestyle. A mobile app measures the customer’s level of mobility and since people who move more are usually less prone to medical risk, it is possible to offer reduced rates to those people as a result. In addition, the application which came from a startup called Shapa actually employs various techniques to positively affect the behavior of the customer in that regard.

AIG SAFE HOME, which offers a significant reduction in the cost of home insurance to customers who install a technology in their home that identifies pipe leaks early and alerts home-owners to their existence.

In both cases, these startups contacted us because of our reputation as a startup-friendly company and their technologies fit our needs. At other times we may encounter startups whose technology can be applied to AIG in ways that are different from what the startups themselves initially thought.

IT SEEMS LIKE YOU HAVE ESTABLISHED A STRONG COOPERATION WITH THE BUSINESS UNITS WHICH IN TURN ALLOWS FOR STARTUPS TO GET ADOPTED AS PART OF THE AIG OFFERING. WHAT SHOULD INNOVATION MANAGERS DO ON DAY ONE IN ORDER TO ACHIEVE SIMILAR RESULTS?

The first thing is to setup a clear and transparent process. Then the innovation manager should expose decision makers to this process as part of an internal “roadshow”, recruit their support and ask about the business goals and challenges they have that open innovation may resolve. You might get some resistance initially as you get feedback that a unit may “have everything it needs” or that the unit “builds all of its own solutions” and that is fine. Once you start generating value and demonstrate it clearly, engagement will build.

Another important thing is build real cooperation with the units. This shouldn’t be about you pushing something to them and expecting them to take it. It should be about working with business owners from within the units who are highly engaged with the various opportunities in the pipeline. This is in reference to the business units but also other involved teams such as legal, regulatory, data security, etc’

Finally, there’s no way around that the creation of strong working relationships with the various partners in the organization on a personal level is key for this cooperation to thrive long term.

WHAT DO YOU HAVE TO OFFER STARTUPS THAT IS VALUABLE AND THAT OTHER CORPORATIONS MAY FIND HARDER TO MATCH?

AIG has been in Israel for 22 years. We work with our customers and agents directly and so we have massive amounts of data accumulated over this entire period of time. This data is very valuable to startups.

Another significant advantage is that we are part of a global company including the rules, regulations and procedures of a massive, global corporation. If a startup can successfully implement its technology in AIG Israel, it means that it now can go to most global corporations and work with them.

Culturally, I’d say that people at AIG are very open and receptive to new ideas and technologies. This isn’t just new technologies and products but also new processes and procedures.

AIG is considered to be the most digital insurance company in Israel and as it constantly seeks to improve and adapt, open innovation is something it is very open to investing in.

STARTUPS MOVE AT A DIFFERENT PACE AND SPEAK IN A DIFFERENT LANGUAGE THAN CORPORATIONS. HOW DO YOU MITIGATE THE CULTURAL DIFFERENCES BETWEEN STARTUPS AND THE CORPORATION?

We have standard agreements with startups based on the work we have done with a partner from the legal department. Also, we actually have an innovation partner within the legal department at the AIG global level. What that means is that startups get the benefit of being a certified provider at an AIG global level once they go through the process at a local level with AIG Israel.

In terms of keeping up with the startup’s fast pace, we have internal SLA’s we try to adhere to since we know that the startup lifecycle is much shorter than that of the corporate projects. We have to respond to startups much faster than we do to other projects since if we wait for six months to offer an answer then the startup might not be there anymore.

For this to happen, we have inserted open innovation into common practices such as a regular management review of the startup related projects and defining the project involving a startup as part of the official work goals of the business unit partner assigned to this project.

WHAT ARE THE MAIN THINGS TO KNOW WHEN STARTING AN OPEN INNOVATION ACTIVITY LIKE THE ONE AT AIG ISRAEL?

Understand who your customers are and what their needs are - just like you would with customers at every domain. You mustn’t act in a bubble. Your activity is like a product and management is your customer and you should act accordingly.

Engage the people - This is about everyone and not just managers. Many people get very excited about innovation and it is your job to harness this passion for the benefit of innovation activities. Innovation cannot be dictated to employees and the activities must be designed to draw people to act.

If you do these two properly then you are taking your first steps in the right direction.