In conversations with both existing and prospective clients theword "innovation" inevitably comes up, typically in the context ofwhat is considered to be the latest and greatest or most cuttingedge. Although it's a fair inquiry, as one can imagine, there aremany ways of tackling it.

But what are these clients really asking? Do they thinktechnology vendors have developed magic button technology in whichall an insurer or reinsurer has to do is click a button in the UIand every single transaction of theirs is somehowautomagically processed, coded, modeled, analyzed,underwritten and issued from day one? That's not to say it can't bedone, but it takes time to reach that level of efficiency andeffectiveness.

[Related: Welcome to the future: 8 ways that digitalinnovation is reinventing insurance customerservice]

The fact of the matter is that, unavoidably, innovation meansdifferent things to different people, and taking the time to figurethat out oftentimes stands in the way of the right way to approachit. Innovation is an important cog in the engine that helps movebusinesses and entire economies forward. Losing sight of the needto innovate is self-defeating, especially as it relates to theinsurance industry.

In his seminal work, Landmarks of Tomorrow,businessman, educator, consultant, and author Peter Druckerdescribes many elements true to innovation, but chief among themare the so-called "Three C's": capital, creativity andconsumption.

At an annual Boston Computer Society event I attended in January1984, Steve Jobs formally introduced the world's first-generationApple Macintosh computer. In his address to about 100 of us in theauditorium, Jobs was widely critical of where the PC industry washeaded, as he unveiled this small, boxy, yet somehow elegantmachine. He warned that if the "Big Blue's" of the world dominatedthe personal computer market, the industry would be stuck in the"corporate ether" and unwilling to even question the need forfuture innovation. "The status quo would be ubiquitous," hesaid.

Practically on cue, then came the question asked by notedtechnology journalist, John C. Dvorak: "But without the requisitecapital resources in place, how can innovation evolve?" Jobs, who'sconsider one of the greatest innovators of our time, turned andsaid, "Innovation has nothing to do with how many R&D dollarsyou have. When Apple came up with the Macintosh, IBM was spendingat least 100 times more on R&D. It's not about money. It'sabout the people you have, how you're led and how much you get it."Not many can argue that Jobs got it; for Apple it was never aboutfunction, but form and creating the ultimate user experience,always with the user, first and foremost, in mind.

That's not to say that financial resources aren't important.They assuredly are; however, the combination of money and ideasisn't enough. Innovation must also contain the element ofconsumption too. In other words, nothing created is trulyinnovative if it only sits on the shelf and is never used.

Today's global insurance industry has taken steps in the rightdirection by developing new products in recent years, e.g.cybercrime insurance products, Industry Loss Warranties,catastrophe bonds, etc., but one can argue that the driving forcesbehind that innovation mostly were a result of competition, notwith policyholders in mind.

Of course, innovation doesn't always take the Jobsian route, theone in which client demand steers the traffic. In fact, someinnovation is inevitable by virtue of a slight tweak here or there.Many products and services over the years have been reinvented inthat vein. But to maximize innovation and truly put it in aposition to succeed, it must start with the client. Technologycompanies, especially those born from the insurance industry, mustcapitalize on its ability to listen and learn from their clients. Aclient-centered approach increases the likelihood that aninnovation not only will solve one or more real problems, but alsothat customers will use it and find the experience favorable. Thatalone will result in a return on the innovator's investments.

Businesses in virtually every industry spend considerable sumsto create and tout product innovations designed to demonstraterelevance and promote growth. Innovation does require investment,but perhaps not nearly as much as some might think. The questionsof innovation relative to consumption within the insurancetechnology industry which must be honestly answered are:

1. Taking policyholders into account, to what extent does theinsurance industry "get it?" and;
2. If insurers do, in fact, "get it," are they willing to leveragethe vast amounts of technology at their disposal and incorporate itin their respective strategic objectives across theenterprise?

Client needs must come first, and by taking cues on where andwhat to innovate by listening to clients' concerns and ambitions,technology providers can learn to ask the right questions ratherthan to offer up software products and services, which may or maynot meet industry expectations. If I were an insurance company CEO,I wouldn't want to hang my hat on "may" or "may not." Smart CEOsonly bet on sure things.

A strong indicator that insurance buyers don't always appreciateor take advantage of ways in which to purchase insurance leads oneto believe that the industry, insurers and brokers alike, hasinvested in innovation over the years that never started with theconsumer. In many instances today, brokers choose not to championinnovative products that carriers spend time, money and effort onto create. As anyone remotely close to the technology industryknows, innovation requires investment, but it also needs to beconsumable and eventually it needs to make returns.

Not to pick on the late Steve Jobs, but when asked where hiscreativity comes from, his pat answer was simple: "Everywhere." Hewould then follow up with a diatribe on the importance and need tointimately connect with consumers in order to learn the extent oftheir obstacles – what issues in their lives can be improved viatechnology – and at the same time get a sense of their wish listtoo. The insurance industry is no different. Technology providerswhich drive those types of discussions with their clients are inthe best possible position to champion consumable innovation,innovation that serves a purpose, stands the test of time anddirectly and efficiently addresses real-life industry businessproblems.

The only way for innovation to creatively fill the gap betweenreal and/or perceived needs starts and ends with the customer. Itdoesn't live within the latest and greatest API, programminglanguage or alternative risk transfer mechanism. It's more thanthat. Innovation involves – and is driven by – a unique confluenceof an ability to listen, learn and then to proactively execute. Theinsurance industry is no different than any other in that regard;however, the industry must allow technology in its many lines ofsight and view it as an investment rather than as a burdensomeexpense.

Jim Rice is Senior Business Development Executive atXuber, a provider of insurance software solutions serving180+ brokers and carriers in nearly 50 countries worldwide. Ricehas over 17 years of experience in the insurancetechnology, predictive analytics, business intelligence and dataand business process management industries. Learn more atwww.xuber.com.