A.M. Best Recognizes the Importance of Innovation – How Will Your Company Score?
A.M. Best is a global credit rating agency for the insurance industry. Best’s Credit Ratings are a recognized indicator of insurers’ financial strength and creditworthiness.
Many departments within insurance companies create information that is analyzed and discussed with A.M. Best providing data and information based on extensive criteria they use to determine the final ratings published. Click here for full criteria.
On March 14, 2019, A.M. Best released a draft of their Scoring and Accessing Innovation guidelines for comment.
An excerpt from the first section of guidelines:
“ A. The Importance of Innovation.
Innovation is becoming increasingly critical to the long-term success of all insurers. With innovation, companies can develop sustainable competitive advantages and better respond to external challenges such as evolving consumer preferences, growing business complexity, shifting market dynamics, and ever-expanding technological advancements. Companies need innovation to outpace competitors, fend off potential external disruptors, and promote organizational longevity.”
At Hartford InsurTech Hub and Rainmaking InsurTech, we couldn’t agree more that innovation is vital to the long-term success of all insurers. We enjoy providing our partners with solutions that help solve their business challenges and assist them in achieving their innovation goals and objectives.
Hartford InsurTech Hub and Rainmaking InsurTech’s focus and expertise aids insurers to prepare for the future. A.M. Best’s innovation score criteria align with our company philosophy as we believe innovation is an early indicator of financial strength and long-term relevance.
If you are the Chief Executive Officer, Chief Innovation Officer, Head of Strategy or Chief Information Officer your company now has an externally facing score that reflects its internal innovation efforts. A.M. Best Ratings are looked at by shareholders, purchasers of products and state-wide insurance departments- an innovation score is an indicator the same group will be scrutinizing.
How can innovation be scored? Is it even possible? A.M. Best created a comprehensive draft [click here to view]. We were impressed by their detailed scoring system. The formula combines two factors: input, the criteria for what is moving your innovation forward and; output, the results, and level of transformation.
The top innovation score from A.M. Best is Innovation Leader. There are five ratings: Innovation Leader, Innovator, Adopter, Reactor and Non-Innovator.
Innovation Leader Score:
What is moving your innovation forward (Input) = Support of Leadership (4) + Innovation Culture (4) + Resources (4) + Process and Structure (4). It’s also important to mention that the Output Score is worth DOUBLE = Results (2) + Level of Transformation (2).
To better understand what it takes to place in the top category (Innovation Leader), A.M. Best offers a detailed explanation. Hartford InsurTech Hub and Rainmaking InsurTech also propose questions companies should ask themselves.
What is moving your innovation forward?
Support of Leadership (4)
Through deliberate actions, all levels of management have demonstrated the organization’s commitment to the innovation process as articulated by its leadership. Companies operating at this level should be able to provide evidence that middle management understands leadership’s innovation directives, is actively working to accomplish these goals, and addresses immediate operational concerns in conjunction with—rather than at the expense of—innovation goals.
Questions: Is your middle management team rewarded only on departmental outcomes and cost savings? Does this leave them ample time to focus on innovation goals?
Innovation Culture (4)
Innovation initiatives are approached from a proactive perspective. The company can show through specific examples that it successfully encourages innovation throughout the organization and that innovation is part of its vision and mission statement. The company has successfully integrated innovation into mainstream operations across multiple business lines and products. Culture is forward-looking and focused, and fosters a collaborative environment.
Questions: What examples can you provide which innovation is encouraged in your organization? Where in your mission and vision statement does innovation appear? How integrated is innovation in your organization? Is your culture forward-looking?
The company devotes resources to innovation, and actively hiring/retaining talent is a key priority. Its strategy for managing these resources is clearly linked to its operational goals, allowing for their efficient transformation and exploitation. Staff is rewarded for successful innovation ideas and implementation. Not only does the company exhibit effective resource allocation, but its resource management strategy also includes opportunities for effective reallocation.
Questions: Are you hiring people who contribute to your innovation goals? How are innovative ideas and implementation rewarded? How are you retaining top innovators? Is the majority of your resource focused on day-to-day organizational capabilities?
Process & Structure (4)
The company’s innovation strategy and the processes and structure that support it are clearly aligned with its long-term strategic and business objectives. Facilities are in place to explore emerging issues. Data is used to make better decisions, create solutions, and solve problems, and data governance is well defined and managed at a portfolio level. These processes and structure facilitate innovation-driven growth that supports business objectives.
Questions: How are your strategic objectives and innovation strategy aligned? What data inputs are used to manage the objectives and make key decisions?
The Output Score is double Results (2) + Level of Transformation(2) = 8 maximum
Results (2) Innovation has resulted in a sustainable competitive advantage, with a measurable impact over a sustained period, and is replicable. The company has been proactive in using innovation to outmaneuver competitors and potential disruptors.
Questions: How has your innovation resulted in a sustainable competitive advantage? How do you measure that advantage? Who are your potential disruptors and are they atypical insurers?
Level of Transformation (2)
The company effectively uses cutting-edge processes and technology throughout the enterprise. The company’s innovation is at levels comparable to leaders even outside the insurance industry.
Questions: Do you benchmark your innovation with leaders outside of insurance? What cutting edge technologies have you implemented to create transformation?
We would love to chat with you more on the scoring system and how Hartford InsurTech Hub and Rainmaking Insurtech can assist in preparing your company to be rated by A.M. Best’s Innovation Score.