The development and success of real cutting edge products require corporate cultures that are entrepreneurially focused and not afraid of market disruption.
Cutting edge life insurance carriers are those that encourage and reward innovation and the taking of marketing risk.
Perhaps one of the best examples of innovation in the life insurance business was universal life. Invented in the late 1970s, it was seen as a cutting edge idea and quickly embraced by a handful of companies willing to take the marketing risk. But, as with any cutting edge product, UL’s success was more a function of company attitudes and communication of those attitudes to customers than the invention itself.
Innovation is not synonymous with the creation of a new idea. Instead, innovation is a description of the whole process that is involved in transforming a new idea into a successful business effort. It involves the whole organization, which, in turn, must be culturally oriented toward that end.
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Transforming new ideas into business success should not produce the same results as copying the successful ideas and paths of others. Entrepreneurs are visionaries and risk takers, seeking advantage and reward well above industry norms.
So, it was not surprising that the earliest UL adopters were carriers culturally equipped to see and implement the concept as a strategic means to challenge the market leadership of larger, less entrepreneurial carriers that only seemed to see the threat of UL’s market disruption potential.
Much has been written about the theory of market disruption, and it has proven to be a powerful market strategy in many industries, particularly when the cutting edge product deviates from traditionally expected product improvement directions.
In most industries, products are traditionally improved in areas thought to be important to customers, such as golf balls that fly farther, car tires that last longer, etc. But this type of improvement almost always favors incumbent market leaders and sustains their competitive ranking because customers view it simply as an enhancement to an already preferred brand.
The same is true with life insurance, where improvements traditionally have meant constant numeric improvements in comparative price, cash values and/or death benefits–all items that usually require ever increasing scale to compete with the best. But, are those really the only items that customers value?
Considering the now 20-plus year annual decline in sales of new life insurance polices industrywide, it would seem that customers want more than just numeric improvements. Yet, many carriers continuously focus their product development resources on tweaking prices and values that are measured against standards defined, set and constantly revised by the market leaders.
The rationale behind this direction may lie understandably in the unilateral contract nature of products, requiring policies to have in-force shelf lives considerably longer than the competitive shelf lives of the underlying products. Thus, carriers prefer to stay the course with proven but undifferentiated competitive strategies, rather than invest in new but unproven ones that might yield higher rewards.