The Greenfield Approach: Accelerating A New Era Of Growth And Innovation In Insurance

By Daniel Cole and Robert Rudy.

This article first appeared on Fintech Futures on June 17, 2019.

The rise of insurtechs, together with cost effective, flexible digital technology tools and platforms is creating the opportunity for a new era of growth and innovation in the insurance industry.

Traditional models are being disrupted, creating gaps in the market where insurers have the opportunity to provide services in new cost-effective and customer-centric ways. Insurers can fill these gaps by taking a greenfield approach to building new business capabilities.

Greenfield businesses are completely new entities, or services, enabled by the newest digital architecture, with data and analytics at the core. This is predicated on the use of cloud centric and API-enabled architectures and underpinned by a robust eco-system of fintech and insurtech partners.

The time and investment required to launch a greenfield insurer has decreased dramatically over the last few years. The recent wave of insurtech start-ups has shown that it is possible to go to market with new insurance propositions for a fraction of the cost and time spent in the past.
For incumbent carriers this could be both threat and opportunity. After all, if you can build a greenfield bank in less than a year, how long is an insurer going to take? Does it mean an insurer should rebuild their existing estate in greenfield?

Over the past five to ten years, many insurers have invested a great deal in their core tech and digital capabilities. Customer engagement and experience still has some way to go, but progress has been made. In mature product and customer segments it’s hard to believe that re-engineering (again) can be the right thing to do.

Traditional models are being disrupted, creating gaps in the market where insurers have the opportunity to provide services in new cost-effective and customer-centric ways. Insurers can fill these gaps by taking a greenfield approach to building new business capabilities

However, it’s also hard to believe that these existing architectures, solutions and intertwined delivery capabilities will be dynamic enough to enable the next tranche of fintech and insurtech powered innovation. A perfect storm is forming in the combination of ecosystem-based customer propositions, partnership opportunities and insurtech/fintech API enabled services. As a result, insurers need the capability to incubate ideas extremely cost effectively, respond to partnering requests rapidly and manage many different (simultaneous) types of customer interactions. Whilst much of this is of course possible using the existing estate, an insurer considering this approach should ask themselves the following:

Competition: Do I face competition from business models that are difficult or expensive to replicate with my current assets? Are competitors gaining traction? Is my business at risk if adoption accelerates?
Technology: Is my current technology preventing me from innovating at pace? Will my IT transformation plans fail to achieve scalable technology built on cloud-based platforms, microservices, APIs and agile working practices at the pace that I need?
Cost structure: Is there potential to deliver services at significantly lower costs? Are some customer segments or product lines heavily subsidising others?
Culture and talent: Does my organisation attract digital natives able to bring new ways of thinking and working? Do I face the risk of “failing slowly” with my legacy talent base?
Strategic ambition: Are the investments in my innovation portfolio mostly incremental? Are we creating options which could drive 10-15% of new revenue?

If the answer to any of the above leads you to think that you should consider another way, then you should consider a greenfield approach to innovation, proposition incubation or partnership-based model development.

For those that haven’t yet re-platformed their estate and continue to eke out their existing legacy and associated complexity and cost, applying a greenfield approach provides an opportunity to incubate solutions to new customer challenges and competitive threats. It can also deliver knock-on benefits as the lessons and processes from the greenfield can be imported into the core/legacy and scaled up.

Greenfield should be seriously evaluated as an option when there is urgency to:

Meet customer needs in new ways – especially when the legacy technology or business model struggles to deliver timely solutions.
Addressing intractable cost pressures in the legacy business – services can be delivered at a substantially lower cost by designing processes from scratch.
Leveraging next generation core technology platforms and microservices offered by insurtechs – delivering a digital first architecture.

Adopting this approach is increasingly relevant for many and an urgent necessity for some. It requires new systems and technologies and a willingness to learn from mistakes. However, the opportunity is vast, and insurers should harness it now by creating greenfield businesses that will revolutionise the industry.