Innovate or die – a reality that is all too familiar for today’s companies.
As technology advances at a quickening pace, consumers demand experiences nothing short of the best.
For Madison-based American Family Insurance, the expression has been adopted as somewhat of a mantra, serving as a driving force behind major decisions including its recent acquisitions of three software companies.
The 90-year-old company offers property, casualty and auto insurance in 19 states, and has cultivated a culture of innovation that is demonstrated today by its presence within the digital world. Its partnerships with fast-moving tech companies, including Microsoft Corp. in 2014 and Google subsidiary Nest Labs in 2015, shows the industry’s future is one dominated by digital technology.
When American Family converted in early 2017 from a mutual company to a mutual holding company, it broadened its investment and acquisition opportunities to non-insurance businesses, including its most recent acquisition, Chicago-based data analytics software company Networked Insights.
“I think from the outside looking in, you’d think it doesn’t make sense,” Ryan Rist, director of innovation at American Family Insurance, said of the deal. “When we got to know what (Networked Insights) did and what they did really well, we realized that capability is an important side of our business.”
The acquisition was completed in December. Before then, American Family had been a client of Networked Insights, and since 2013, had been a minority investor in the company. The company used data analytics to advise American Family on the best products to put on the market and to evaluate the impact of its brand on certain demographic groups, Rist said.
“The pace of change has never been faster. Customers expect way more than they expected in the past,” Rist said. “And that expectation is now the last best experience they had, regardless of industry or product.”
Rist has been with American Family for 15 years and has held his current position since 2014. He heads the company’s innovation department, which was formed in 2012 – originally to lead the company’s new-aged efforts and to educate the company on the importance of innovating to stay relevant.
Six years later, that mission has spread throughout multiple areas of the organization, expanding the company’s footprint and contributing to what Rist calls American Family’s “ecosystem of innovation.”
“We now have dozens and dozens of groups that are focused on everything from transforming our core business to looking further out into new markets across the board,” he said.
According to Rist, the company applies lean startup and design thinking principles as part of its culture of innovation. The approach provides a framework for evidence-based project decision making: where and when to turn, when to persevere, and how to make progress by running experiments while continuously validating with customers, he said.
“At American Family, we use this approach to create something new where the customer, problem, solution or business model is unknown, and when improving a current process won’t achieve the desired business outcomes so process reinvention is required,” Rist added.
Shortly after the company launched the innovation department, it set up American Family Ventures, the venture capital division that tracks and predicts future market trends and is credited for partnerships with tech-focused companies CoverHound, Ring and One Inc., among others.
But the company’s mergers and acquisitions branch, which acquired Homesite Insurance in 2014 and The General in 2013, is the catalyst for last year’s innovative acquisition of Networked Insights, along with two home inspection software companies.
As for the future of the industry at large, Rist sees a never-ending need for insurance, as the notion of risk will always exist. However, he believes technology is changing the way people think about risk. Cybersecurity threats, the increased use of drones and ridesharing services are all examples of high-tech factors that raise new questions about risk.
Consumers’ expectations for their insurance experience have already changed.
“You’re going to see companies win in the market that are customer-centric, that use human-centered design to make the experience more value-added,” Rist said. “The switch from reactive to proactive is just one example of how we’re thinking about the future of insurance.”
Through recent partnerships with Google’s Nest and Ring (a home security tech company owned by Amazon) that focused on smart home technology, American Family has explored digitized methods of home safety that would prevent accidents – a fire or a destroyed roof from wind or hail – before they happen.
“If you really think about the guts of insurance, it’s really about data and insight and pricing and predicting this uncertain future event,” Rist said.