Ben Tran, our lead actuary in New York, recently co-presented at a Society of Actuaries webinar discussing his experience and observations of how culture differs between insurtech companies and Fortune 500 companies - particularly insurers - and the impact this has on their ability to innovate. Before joining Montoux as one of the first members of our New York team, Ben had a lot of experience working for large insurance and consulting companies.

When it comes to innovation, startup insurtechs have the obvious advantage of building every aspect of their business - including the culture - effectively from scratch. While individuals can hold strong views based on their past experiences, there is no company legacy or decades-old traditions to compete with in suggesting new ideas and ways of solving problems. To truly innovate, an insurance company would need to do more than simply implement new technology solutions - there would need to be a culture shift of innovation, and an openness to the possibility of radical change throughout the business.

Today we present you with some food for thought, by sharing some of the points Ben raised during his presentation.

Necessity versus complacency

A culture of innovation means not only welcoming new ideas, but encouraging them to be thought of at all. Ensuring no one is wary of questioning anything that seems ineffective or inefficient - including seemingly sacred traditions that are ‘the way it’s always been done’ - and that people do feel comfortable in suggesting alternatives.

“For insurtechs, the clear objective is to come up with a solution that solves the identified problem,” Ben said. “For insurance companies, the objectives are different – the main problem is more or less solved, and by continuing to do what they do today, they should be profitable. For example, if there was a mandate for a large insurer to not do anything new for the next year, but just perfectly execute existing processes, the short term impact would be limited.  They may lose a few points in market share, but would make enough money to not worry about layoffs or other negative company actions. For an insurtech, not changing anything for a year could mean death of the company.”

But this lack of urgency has led to complacency. In his presentation, Ben shared figures from an Insurance Nexus survey of executives which showed 91% of respondents agreed that the insurance industry must become more customer-centric in order to move forwards. But in the same survey, 63% felt reluctance to change current processes and infrastructure was the biggest barrier to embracing that customer-centric approach across the organization.

Working for the common good

In Ben’s experience, working within large companies often made him feel like his team was always a subset of the company. “There was also sometimes an ‘us vs. them’ mentality within the same company, as internal resources needed to be shared.”

An insurtech has the advantage of a smaller team, where business leaders are easily accessible, and knowledge is freely shared with the whole team in Ben’s experience at Montoux. “I didn’t always feel this way in a larger organization, where I was well attuned to my own team’s goals, but felt a disconnect to the company’s.”

Though the scope of a Fortune 500 company’s focus is much broader, by making company goals more widely accessible and understood, teams can prioritize the company’s success and have a better appreciation for the big picture.

The impact of strategic shifts

Ben said that while it’s obviously easier for an insurtech to change strategic direction, with less legacy infrastructure and technology to worry about - it’s also far easier from the people’s perspective. “A large company exiting a market or discontinuing a product line is much more likely to result in some layoffs, which is usually top of the employee’s mind when hearing about such strategic decisions.  Smaller companies have more of an incentive to change strategies that allow existing employees to fill in the new roles.”

Valuing the individuals in a company and figuring out new roles to retain the talent means team members can be less concerned with conserving their position as a cog in the wheel, and open to exploring ways of reinventing the wheel completely.

Be allowed to try, and fail

In Ben’s experience at large companies, he was required to spend a long time building a business case and get a consensus for any decision. '“This made sense, because you don’t want to upset the status quo and make sure there aren’t any adverse negative impacts that would ruin our existing processes”.

But in startups, Ben sees it is often more effective to get started working on many options quickly and recognize when when to give one up if it wasn’t working, to refocus on the other priorities. Ben said, “I wouldn’t look at this as wasted time, but as a step in the product development process, understanding what doesn’t work. Spending time on something and saying it just didn’t work is generally a bad explanation in larger organizations.”

Appealing to talent

Ben concluded his presentation for the webinar by comparing the appeals of working for an insurtech versus a Fortune 500 insurance company, for an actuary like himself.

He said when it comes to getting a sense of purpose and engagement, insurtech has the advantage. “It’s easier to feel needed in a smaller company, one where you can identify with the mission, and feel like your actions directly impact the final result.”

Ben believes while Fortune 500 companies could offer better job security for actuaries, insurtechs may offer a broader range of roles and responsibilities for actuaries seeking a greater challenge and to make more of a direct impact on customers. Ben said, “In a large company, your decisions may have more economic or social impact, but in small companies you are able to impact a greater percentage of your customers or company. On a personal level, I’ve always felt the latter to be more rewarding.”

Lastly, when it comes to the modern worker’s desire for flexible working conditions, Ben thought many actuaries may give a Fortune 500 the advantage, figuring there would be many individuals in the organization with the skills to fill in for another’s job. But in Ben’s experience, that cover wasn’t always provided so smoothly. “What happens though is that there’s specialization of duties, some politics and culture, and an established policy or process which makes it hard for an individual to maximize work flexibility. I have yet to see a company who says my valuation actuaries are overworked during year end, so I should bring some pricing actuaries to help out that time and make everyone’s lives easier. That approach would at least be discussed in a start-up. So I have always felt that flexibility was higher in a start-up where I can more effectively integrate work into my ever changing life that ultimately improves what I can give to both work and my family.”