Why insurers should approach product development like start-ups


Ever need to catch a cab, but can't find one anywhere? If you need to be at your destination at a certain time, it can be a very frustrating situation. But with the creation of Uber, Lyft and other ridesharing companies, reaching your endpoint without driving yourself just got a whole lot easier.

That's because these start-up companies innovated and disrupted the stale transportation model by inserting more control and customization to people traveling from Point A to Point B. With a simple smartphone app, anyone can now catch a ride within minutes of entering their location.

So what does this have to do with health insurance companies? I think insurers should think more like these small start-ups. And so does Aetna.

Insurers and other healthcare companies must learn from software businesses and start-ups, which quickly assess what methods work and which don't when it comes to product development, says Brian Garcia, chief technology officer for Aetna's Healthagen.

"Most healthcare companies have traditionally followed a highly sequenced product development method with the belief that the more you plan up front, the more risk you can take out of the process," he said. However, "up-front planning actually increases risk."

That's because failure is an eventuality when companies are inventing products. And when companies place too much emphasis on the upfront planning, they can't identify where all the failures might eventually occur, Garcia added.

Instead, he recommends that insurers break down their product development process into smaller sections that are tested on consumers several times and refined frequently.

Such a managed product development process would allow insurers to get up close and personal with consumers, gaining a better understanding of what they need and want from their health plans. Particularly in the post-Affordable Care Act consumer-focused marketplace, insurers want to be as tuned into individuals as possible. 

In this age of innovation, however, the biggest mistake insurers could make is failing to respond to new ideas being introduced to the market. For example, long-established taxi companies have resisted the evolution that Uber has brought to the industry. So they could also be missing out on all the potential opportunities that arise from innovation disruption.

For insurers, that would be akin to ignoring new competitors like Oscar Insurance Corp., which created a completely new kind of online presence that's easy and transparent for consumers. Or disregarding the impact that consumer oriented and operated plans (CO-OPs) can have on the insurance industry.

Assuming insurers aren't interested in signing their own death certificates any time soon, I hope they are heeding the sign of the times and internally working to innovate and disrupt the industry on their own terms. - Dina (@HealthPayer)