This article was first published as part of a larger KPMG International report called .
Deals aren’t the only way that M&A and CVC teams can help drive change across an insurance organization or group. Ali Geramian, a Director of KPMG’s Innovation Lab in New York, recently sat down with Lauren Tennant Pollock, a Partner with XL Catlin's Accelerate to find out how her team is using their skills and capabilities to drive transformation and cultural change across the organization.
AG: Can you give us a quick primer on Accelerate?
LTP: At Accelerate, we partner with startups and emerging tech companies to deliver new commercial applications for our business. Everything we do first starts with a business unit within XL Catlin having a problem they’re looking to solve and we look to startups to work alongside of the business unit to solve that problem. We start by defining a simple and quick experiment to test our hypotheses which we seek to prove/disprove over the course of the experiment. We hope that many of our experiments create scalable opportunities for the business and what is really exciting is when we can patch together the learnings from a multitude of experiments and to bring together a collection of startups to create meaningful product offerings and improve the overall experience for our customers.
Can you explain why partnerships have become a dedicated focus for XL Catlin?
We recognize that in order to move where the market is heading, we have to be agile enough to meet our clients where they are, and that might mean that we have to look to external partners in our ecosystem to help bolster our existing capabilities. This touches everything from how we collect data from our clients to underwrite risks, to help better distribute our policies, and so forth. We have established a number of target verticals and capabilities that are more important for our business units and we have aligned the roles and responsibilities of our team to dedicate to these areas, such as data and analytics, distribution, and artificial intelligence, for example. The best start-ups in our ecosystem have a lot of options for financing, and in our experience what they expect from a partnership is our deep insurance expertise, scale, customers, and access to data. We don’t just provide capacity, but we leverage our expertise to create mutually beneficial outcomes. It’s important to us to align interests so we can have optimal outcomes for the start-ups we work with and our customers.
How does your group scale innovation across XL Catlin?
Our approach starts with a hypothesis and a problem statement, and our experiments are intended to prove our thesis, meaning these experiments are meant to be small so we can get them done pretty quickly. We have a dedicated budget to develop these proofs of concepts, so once we have identified an area where we want to run an experiment, we can be agile because we have the resources to do so. Once we can prove that the idea works, then it is up to the business unit to expand ownership. While our team has the budget to run the experiments we want to pursue, we will look to other avenues once a budget is required to scale the innovation across our company.
Can you describe the systems or processes in place to help incentivize business units and stakeholders within XL Catlin to work with startups?
We quickly realized that it would be more efficient if we focused our time on business units who were engaged and actively wanted to collaborate with us right off the bat. It’s natural that some business units will want to act quicker than others, so it’s our responsibility to work closer with those teams and create an environment where we can help them become successful. We know there are countless problems to be solved in our industry. We need to understand which BIs have the appetite to solve big problems and are willing to invest time and take on the accountability to pursue solutions where we can be additive. I look for culture and bandwidth within a business unit to move the needle, but ultimately it’s not our job to force ideas if the business unit cannot act on it.
The leverage you can get from having an in-house venture capital fund and team focused on startups like we are is incredible.
Tell us a bit about the relationship with XL Innovate (XL Catlin’s venture capital fund).
XL Innovate’s mandate is different than ours as they started investing purely for financial returns, with their structure being an independent fund with XL Catlin being the sole investor. They don’t require a proof of concepts or a strategic partnership in order to write a check to a start-up the team strongly believes in, so this model allows them to think independently and make educated bets based on what they think can be game-changing startups. We see the dynamic between Innovate and us as a good thing. We have a very close relationship with their team, as the deals they are looking at get us excited. There may be instances where a particular start-up might not be the right fit for an equity investment but might be worth further exploring as potential partnership with us, and vice versa. The leverage you can get from having an in-house venture capital fund and team focused on startups like we are is incredible.
How is your team acting as a cultural change agent to scale innovation within XL Catlin?
For culture to change and permeate, it has to occur from the bottom up. At XL Catlin, we’ve recognized that it’s up to us to get our younger talent engaged and excited about our mission and to get their colleagues excited and bought into the innovation vision. As an example, we bring our XL Innovate portfolio companies and partners to our offices where our employees can engage with startups, understand how they’re tackling problems. This access enables our employees, particularly our younger leaders, to grasp how the culture of a startup empowers them to act with agility and tackle problems. Events like these are incredibly valuable as they get our organization excited about the mission. Our youngest employees are really transforming the culture, and someday they’ll be leading this organization.
As XL Catlin looks to transform in this era of accelerated evolution, how do you think the role of your team/role of innovation will evolve?
I anticipate that we’ll be evolving our offering to look beyond what we are doing today. For example, we are finding great managing general agents to partner with and we are extending capacity to these niche players, but ultimately we don’t just want to be a capacity provider. Capacity is abundant, so how do we do something more meaningful to move the needle? These are questions that we are actively thinking about today. I’ve been thinking a lot about what we’re seeing in banking, where incumbents stand up new companies that are solving a niche need, but whose business models are enabled through technology without the use of core legacy systems. Can this model work well in insurance? We think so, but only if a carrier is truly willing to put their capital behind a vision for the future. It’s something we’ll continue to explore and it’s incredibly exciting to be part of an organization that is actively thinking about how our industry will have to change in the future.
