Rating agencies are typically concerned with financial metrics and market position in determining an insurer's financial strength.
Now AM Best, the insurance specialist credit ratings agency, is launching an innovation rating to measure how an insurance company is positioned to cope with technological change.
AM Best's measure takes into account leadership, culture, resources and internal processes to rank carriers based on their overall innovation performance.
For industry executives, innovation initiatives can feel intangible. They require resources and investment today with no guarantee of return. Even successful initiatives can take years to come to fruition. For many, it is tempting to put off investing for long-term success in favor of investments that will impact next quarter's results.
Ratings agencies - and equity analysts - are beginning to consider the relationship between innovation initiatives and business viability over the long term. This should help sharpen the focus for any insurance management team who feels they can afford to postpone investment in technology.
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 organisational longevity.