Tell someone in the insurance industry that it's all about risk,and they're likely to look at you like you've grown three heads andsay condescendingly, à la the current Geico ad campaign, “Everybodyknows that.” But the real risk in the industry, according to aleading futurist, may be the risk of doing nothing—of failing toadapt to the rapid, and global, pace of change in a business thatincreasingly and continually must prove itself responsive toconsumer needs, wants, expectations, and trends.

“It's a very complacent industry in many ways, and it reallyisn't listening,” said David Smith, chief executive officer ofGlobal Futures and Foresight (GFF), a strategic futures think tankformed in 2006 by Smith and fellow futurist Rohit Talwar. In a30-year business career, Smith has held executive positions atUnisys, the UK-based DRG Group, and other companies, and as head ofGFF has worked with and advised both the UK and EU governments, aswell as companies such as RSA Insurance Group, Siemens, Kraft,Bausch & Lomb, and many other organizations, includinginsurance companies and industry associations.

“I've been sloshing around insurance for around 20 years,” Smithsaid. “Most folks who rise through the ranks [in insurance] areoperationally oriented—and that's terrific—but the people at thetop are also very risk aware, and even chief risk officers are onthe board, so it's a world where the language and discussion go topeople who are risk aware.”

And, perhaps it goes without saying, risk averse. But thebiggest risk for the industry, Smith believes, lies right in frontof it: in the future that's hurtling toward all of us like anoncoming train, in the form of climate change, the rise of Asianeconomies, and especially, the swift evolution of high-techinnovations that are constantly changing consumer behavior, withmajor implications for insurers.

“The potential for the consumer-facing insurance markets isbeing driven by a massive confidence and behavior change inconsumers, all online,” Smith said. “Insurance is one of thoseproducts that can be completely satisfied over the Internet—therearen't many product or service areas where you can actually dothat.”

He added that insurers now need to “move from clunky, annual,impersonalized relationships linked to that renewal and/or acatastrophic event, to something that's much more personal andimproving of life.”

Smith maintains that the insurance industry model is based on anessentially antiquated idea, which sorely needs revision to adaptto today's new realities.

The old model, he said, “is paying money that I don't want topay, and then I'm not sure the claim will be paid—even the languageof 'claim' expresses doubt. The other way is something saving mefrom personal injury or loss of possessions—there's all manner ofservices that can be offered to the customer.

“Insurance will move from compensation for loss to prevention ofan event. The more interesting stuff is when it becomespreventative, reducing risk in the process. With the 'Internet ofthings,' you can have real-time information: you can get a pingsaying don't take this route down the street, this pizza parlor hashad three robberies in the past two months, this one is safer, oryou can have real-time cameras in the car”—Smith added that twoJapanese insurers are already experimenting with suchinnovations.

In order to do this, and in order to face up to changes inlifestyles, consumer expectations, and the global economy, insurerswill need to leverage IT in ways they've so far been slow to takeup, according to Smith. For industry leaders, this will mean doingmore with their own IT budgets, and encouraging, rather thanstifling, the innovative and entrepreneurial impulses—andpeople—within their own companies.

“In a lot of insurance companies IT is held together by chewinggum and a string,” Smith said. “It's a very difficult world tochange anything, and we're not really that connected yet. It'sreasonably customer centered in some cases; some [companies] havegot all their channels aligned, some haven't. So technology is theenabler and it's the barrier.”

Smith cited a Gartner report stating that in the insuranceindustry only 30 percent of IT spend remains after operationalcosts are accounted for—which means very little money left over fortechnological innovation relative to the overall investment.

“People are fantastic at deriving value out of the business andprotecting it, but less able to embrace new things where they don'thave the experience [to know] whether or not they will work out,”he explained. “Ultimately it's about people, attitude to risk, andpropensity to look out there, absorb social, technological, andpolitical change, and articulate that to the organization in a waythat senior folks feel comfortable investing in possiblefutures.

“People who get it—we call them entrepreneurs. Most companieswant managers to become leaders, but you want entrepreneurs,managers, and leaders. You need a mix of all these folks—you can'tjust keep firing the entrepreneurs when they get toodisruptive.”

Finally, Smith maintained that in order to survive and grow,insurers must have a high-level vision, not only of what's in frontof them but of the big picture, and how it's changing moment bymoment.

“It's incredibly dangerous in periods of high change to not havea vision,” he said. “If you don't you'll be a Kodak in no time—youget it, you understand the change that's happening, but you donothing about it because you don't know how to deal with it,”allowing your business to be eclipsed by new technology-enabledbusiness models.

“People are hungry for change, and doing nothing is no longersafe—it's probably the riskiest thing you can do. If you're notchanging business models fundamentally, then you're not changing.That's insurance.”