New Report Uncovers Opportunities for Insurers to Create Shared Value
When you think about insurance companies you likely aren’t thinking about social impact. But at its core, insurance inherently benefits society by protecting individuals and organizations from adverse events and is an enabler of virtually all other sectors. Insurers benefit more than almost any other industry from societal advances however there are still untapped opportunities for the industry to target the societal conditions that most affect their business. That’s the focus of new research released by FSG and the Shared Value Initiative in collaboration with the international insurers Discovery, IAG and Skandia.
Using examples from pioneering companies around the globe and with a foreword from Harvard Business School Professor Michael Porter, “Insuring Shared Value: How Insurers Gain Competitive Advantage by Better Addressing Society’s Needs” makes the case for insurers to pursue shared value, a business strategy that aligns core profit making activities with pursuing large scale social impact, by activating an entire ecosystem of complementary stakeholders to create, for example, more resilient and insurable cities or prevent ill-health in target population groups. The research has uncovered three major opportunities for insurers to create shared value aligned to the role of insurers as risk manager, risk carrier, and asset manager:
1.Prevent risk and dynamically reward risk reduction
Prevention is powerful because everyone wins. For example, Discovery developed Vitality to improve health outcomes through behavior change incentives focused on health promotion. The model leverages advances in behavioral economics such as rewards and discounts, personalized technologies including wearables and smartwatches, and data analytics to facilitate changes in health behaviors. As a result, Vitality members generate up to 30 percent lower hospitalization costs and live 13–21 years longer than the rest of the insured population (up to 41 years longer than comparable uninsured populations).
2.Close the protection gap for the underserved
The global protection gap includes customers who cannot afford insurance or chose not to be insured for lack of education. In 2015 general insurer IAG set out to discover the increased role its business could play in helping reduce risk and improve safety for Australians. The insurer engaged more than 2,500 people from a cross-section of communities and geographies with connection and belonging identified as major factors in helping build greater resilience. In response IAG developed a community connection program called ‘Good Hoods’, a program which links individuals and community groups with resilience-building ideas and initiatives across Australia. The program aims to build a more resilient and connected nation while delivering shared value for IAG through reducing the impact unexpected events have on customers and claims.
3.Invest assets in prevention and protection systems
Asset managers have only recently begun to focus on the synergies between their investment decisions and the underwriting side’s efforts on prevention and closing the protection gap. Skandia identified Virgin Pulse as an interesting investment target, which develops tech tools to address employee and workplace wellness. Skandia now has acquired a 2 percent ownership stake in the company which as part of the deal developed an app for Skandia to measure employee health and fitness levels. After a pilot period where more than 80 percent of its employees signed up and a majority reported using the app at least 3 times per day, Skandia has started to offer the app to its corporate clients.
The research also identifies a number of powerful global trends that are affecting society and the environment and, therefore, the context in which businesses operate. By looking at their probable impact on the most common insurance business lines, five high-potential themes emerge as innovation hot spots for insurers: Richer and Healthier Working Lives; Healthier, Independent, and Fulfilled Aging; Healthier and Safer Urban Living; Greater Disaster Resilience; and More Secure Rural Livelihoods. Using creative approaches to systems change, behavioral economics, use of data and new technology, and engaging with government and communities, the companies highlighted in the “Insuring Shared Value” report show that it is possible for the insurance sector to move from a passive guardian to activist model where companies anticipate, prevent, and mitigate social risks.
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