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Innovations in the Insurance Sector with a reflection on the case of Bulgaria Radostin Vazov

Innovations in the Insurance Sector with a reflection on the case of Bulgaria Radostin Vazov. Innovation Research Group VUZF University. “Innovation: Engine for Economic Growth” International Scientific Forum VUZF University 1 October, 2013. The worst innovation for the last 10 years.

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Innovations in the Insurance Sector with a reflection on the case of Bulgaria Radostin Vazov

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  1. Innovations in the Insurance Sectorwith a reflection on the case of BulgariaRadostinVazov Innovation Research Group VUZF University “Innovation: Engine for Economic Growth” International Scientific Forum VUZF University 1 October, 2013

  2. The worst innovation for the last 10 years Itmaybehardtorememberhowinnovativeideaslikecreditdefaultswaps (CDS) andsimilarderivativeswereexpectedtoincreaseprofitsandleadto a newworldoflow-riskinvestmentsandcontinuedeconomicgrowth. Thatdidn’tworkoutasexpected, andinnovationsometimesdoesn’t. Thequestionthenbecomeswhetheritisworththerisk? Mostcorporateexecutivesrecognizethevalueofinnovation, butfewwouldbebraveenoughtoboastofclearlyunderstandingtheprocessofimplementinginnovationin a businessmodel, andevenfewerofsuccessfullyintegratingcontinuouscyclesofinnovationintheirowncompanies.

  3. INNOVATION Relative frequency of mentions of the word innovation in books cataloged by Google books

  4. WHAT IS INNOVATION? “Trade-offsdefinethelimitofwhatispossibleat a pointintime, notwhatispossibleforalltime … allinnovationisaboutbreakingtrade-offs.” Michael Raynor,  ”TheInnovator’sManifesto” Вreakingtrade-offsthroughinnovationallows a companytoreach a pointin “strategicspace” thatcompetitorscannot, allowing a companytoprovide a productat a priceorperformancelevelcompetitorscannotmatch, Raynorargues.

  5. ProfessorKimB. Clarkargues thattherearethreetypesofinnovations: • Empowering • Sustaining • Efficiency

  6. Counter argument: • In the words of the old cliché, innovation and insurance are found together only in the dictionary. • the conservative reputation the industry enjoys has served to camouflage a tremendous track record of innovation

  7. Top10 MostInnovative P/C Insurance Products and its impact on Bulgaria

  8. Pay-As-You-Park: Private passengerautopolicyfromProgresso. Ratesarebasedonhowlongthevehicleisnotdriven. • GreenMaker:  R.W. Barkleyisselling a productliabilitypolicyforhomeorgarage-basedbusinessesthatmanufacturecosmetics, clothing, jewelry, toys, computers, beer, firearms, scubagear, musicalinstruments, motorvehicles, mobilehomesorotherproductsusingprimarilyrecycled, upcycled, naturalororganicmaterials.

  9. CommercialSpecificLiability (CSL): A low-costoptiontotheCommercial General Liability (CGL), the CSL letsbusinessownersspecifytheexposurestheywantcovered.  • VanishingCoverage: A multi-yearpackagepolicyfromHubb Insurance availableonlytoownersofhigh-endcoastalpropertiesandantiqueautos. Thepremiumisloweredbythesameamountthedeductibleisraisedeachyearuntilthedeductiblereachesthepolicylimitorthepremiumhitszero, whicheverhappensfirst.

  10. Home BusinessInterruptionProtection (HBIP): Coverslossof Internet connection, telephoneservice, HVAC andrefrigerator. Key familyinterruptionprovisioncoverstimelostduetofamilyemergency, includinginjury, sickness, pottytrainingaccident, orthe “Daddy, I’mbored” syndrome. • No-ShowCoverage: Thereiscoverageforshoddywork, butwhataboutwhentheplumber, electrician, rooferorothercontractordoesn’tevenshow?

  11. GlobalScoring: Chartushasdeveloped a policythatguaranteestoconvertitsautoandhomepolicyholders’ creditscorestowhicheverforeigncurrencypresentstheirfinancialhistoryinthemostfavorableterms. • RelationshipBreakdownCoverage: HartfordStreamcoverageistriggeredaftertwoloversbreakupandremainseparatedformorethanthreemonths. DoleMutualhascomeoutwith a Personal Equipment BreakdownCoveragethatcoversdamagetoreputationandegoduetoerectiledysfunction; includesViagraorCialisprescriptionco-pay.)

  12. Homeworkers’ Compensation: TheHarmforthasdevelopedinjuredworkercoveragespecifictohazardsofthehome-basedworkplace. Includesinjuriesrelatedtosolitaryworkersyndrome (whereindividualsexhibitreducedsocialskills), excessiveweightgain, unnaturalpetattachment, anddeteriorationofdrivingskills. • HoosierDaddyPolicy: AnIndianainsurancecompanyhaslaunched a policythatprotects a family’sincomewhilethebreadwinnerisimprisonedforfinancialcrimes.

  13. Are this products are real innovation?

  14. “Telematics car insurance—sometimes called black box insurance, pay-as-you-drive, or pay-how-you-drive insurance—could help to lower the cost of owning a car …

  15. TELEMATICS IS MORE THAN JUST A BLACK BOX

  16. TELEMATICS: INNOVATION TO OPPORTUNITY

  17. TheTribunereportedanothermajorinsurerfindingthat “a recenttestwith a group ofemployeesshoweddramaticchangesindrivingbehavior. Forexample, 25 percentofdriversintheinitial group oftestersscoredintheideal ‘safezone,’ butoverthecourseofthetest, thatfigureroseto 75 percent.”

  18. Life insurance, accident, and health insurance, and now everything from business interruption insurance to cyber insurance, reflect innovations developed by insurers in order to allow merchants to take risks for growth and families to survive in the face of unexpected hardship. • On the other hand, a look at the percentage of the available market buying various insurance policies may lead one to be concerned about the lack of movement toward expansion of that market penetration.

  19. \What is the future of INNOVATions in insurance?

  20. Innovationmustallowustogobeyondtherealmofthepossible, todowhatnoonecoulddobefore. Perhaps forinsurers, onegoalshouldbe to work to extendinnovationinsolvencyregulation to productandotherregulationsotheregulatorydragoninnovationmaybeminimizedandthesocialgoodservedbyinnovationmaximized.

  21. Conclusion • Innovations in insurance means to penetrate the market that the consumers have a low income. But you need to improve trust of consumers in the insurance sector. • Create a product that contains a value added elements not only a profit for the insurance company. Again, this means improving trust. • Finding the social element in their products…..which again improves trust. Therefore, innovation in the insurance sector has a lot in common with improving trust in the sector.

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