Sigma 4/2011: Product innovation in non-life insurance

Innovation in the non-life insurance sector is more widespread than believed. That’s one of the key findings in “Product innovation in non-life insurance,” Swiss Re’s latest sigma publication.

The word “innovation” means different things to different people. For some, it only refers to groundbreaking discoveries that fundamentally change the competitive landscape. Against that benchmark, many observers perceive that insurers are slow to embrace product innovation, especially when applied to non-life insurance. But according to Swiss Re’s latest sigma publication “Product innovation in non-life insurance,” innovation in non-life insurance is more common than believed, although it tends to happen incrementally and be transaction led.

“Innovation refers to the introduction of something new that improves on the status quo,” says Swiss Re economist Darren Pain, author of the report. Being novel or inventive is not crucial for an innovation to have an impact. The key is whether the innovation involves developing ideas into marketable products or changing processes to add economic value.

“Insurance has a poor image of not being very innovative, but often people don’t appreciate the range and degree of risks that insurers routinely take on,” Pain says. Cyber insurance, supply chain disruption cover, and alternative risk transfer solutions are all recent examples of innovations in non-life insurance. Yet in developing new products, insurers always need to be cautious that innovations do not overstep the boundaries of insurability.

The report discusses the incremental nature of product innovation in traditional markets, explaining how this type of innovation builds on existing knowledge or infrastructure to secure benefits for insurers and their customers alike. In addition, the report argues that even though there are limits to how far insurers can go, there may be more scope to promote product innovation within the industry.

Go to our sigma page to download “Product innovation in non-life insurance.”

Published 6 December 2011

2014 sigma event: containing the...

Average insurance losses from natural and man-made catastrophes were lower in 2013 than in previous years. But floods and storms in Europe and Asia showed us the heavy toll that disasters can take on...

Read the whole story

sigma 3 / 2014

This annual edition of sigma reviews growth developments in life and non-life insurance in 2013.

Read the whole story