State Farm
Mark Oakley is a senior vice president at State Farm who runs the insurer's internal innovation lab.
- The insurance industry is facing mounting challenges, from tech-powered upstarts to an aging population. State Farm is tackling those hurdles with its internal innovation lab.
- Unlike the insurer's in-house tech unit, the lab is grappling with problems the company will face as far out as a decade, like autonomous vehicles, says senior vice president and innovation hub leader Mark Oakley.
- Key to its success, according to Oakley, is a separate funding stream that allows the team to take products from idea to production without having to ask the enterprise for financial backing.
- Click here for more BI Prime stories.
The insurance industry is in the midst of a massive overhaul.
Startups like Lemonade, which uses machine learning to determine the risk profile of potential customers and assign them a corresponding monthly premium, are challenging the human-centric model of legacy firms like Allstate. The growing age of the US population is also adding new pressure to roll out revamped products catered specifically to the elderly, while the rise of autonomous vehicles raises questions of how to provide insurance coverage for the nascent technology.
At State Farm, those threats are tackled by its internal innovation lab. Unlike the in-house tech unit that seeks to address near-term challenges within the next five years, the team is trying to solve looming problems the company may not face for another decade.
But setting up such a sector within 97-year-old State Farm - which ended 2018 with a net worth of $100 billion - required new thinking. It has a separate funding stream to take brand-new products like an Alexa application for seniors or self-driving-car coverage from "idea to production" without having to seek financial backing from the larger enterprise, according to Mark Oakley, senior vice president at State Farm.
"It's both within the core of what we do, but also looking at ways to serve customers more broadly that may not have anything to do with insurance at all," he told Business Insider.
The lab is yet another example of how legacy institutions are trying to revamp their often rigid organizational structures to embody a more Silicon Valley-like mindset. The goal is then to battle new startup challengers and adopt more digitally forward technology.
Oakley - who is State Farm's former chief information officer - manages the product teams within the innovation center, as well as a $100 million venture fund to scope out the next great technology and potential partners that State Farm can team up with. He shared some of the initiatives currently under development and how State Farm structured the unit for success.
Empowering the 'care circle' to help elderly customers live in their homes longer
Many children struggle with the challenge of what to do when a parent gets too old to function completely independently in their own home.
It was something Oakley dealt with personally. After his mother passed away, Oakley's father wanted to continue to live in the home they inhabited for over 50 years. The family was concerned about the potential health risk and sought out products in the marketplace to assist him in the least obstructive way. They couldn't find an adequate offering, so Oakley began tackling the challenge at State Farm.
"We're providing capabilities that allow a senior to live independently and enjoy the quality of life that they deserve and the respect that they deserve. And at the same time, providing a coordination of care for family members and loved ones, what we call the care circle," he said.
Alongside individuals from State Farm's own research unit, Oakley's team brought in gerontology experts and other professionals focused on the intersection of technology and aging to build new, non-insurance-based offerings.
While most initiatives have dedicated teams of six to eight individuals, the senior living project has multiple teams attached to it. Within each cohort are software engineers, data engineers, design specialists, researchers, and industry-specific experts.
What emerged was a voice-activated application introduced in limited scale earlier this year that runs on Amazon's Alexa and is connected to a separate app developed by State Farm. The concept is fairly basic, but takes what is now a common technology and focuses it specifically on the elderly.
Each morning, seniors can get a run-down of the day's activities via a voice-activated calendar that is shared with family members, who can input important events like a doctor's appointment and details like who will be transporting them to the facility. Infused in the offerings are also more socially oriented features, like the ability of loved ones to send music and photos to the device.
Drones, driverless cars, and in-house scouters
State Farm is also trying to get creative around emerging technology like drones and autonomous vehicles.
On the self-driving front, the insurer has employees doing driver simulations on the same autonomous technology that companies like General Motors are currently testing to figure out how to craft coverage around the offering. The company was also a founding member of Mcity in Ann Arbor, Michigan, a test track for self-driving vehicles.
"We need to understand the underlying behaviors of the car and the technology if we're actually going to be providing the coverage around that," Oakley said. "We have people that have access to that data."
And since 2013, State Farm has been working with drone technology in its lab to figure out how best to leverage the technology in the claims process. It now has drone pilots as claims representatives and is exploring how the unmanned flying machines can help expedite settlements in the event of extreme weather. State Farm is also combining drones with AI to simulate risks like floods ahead of potential disasters to better understand the impact.
To stay ahead of the evolving tech landscape, Oakley relies on "scouters," or essentially in-house venture capitalists who scour the globe for emerging trends, like AI, internet of things, blockchain, and virtual reality. "That's the beginning of what we're likely going to be engaging in for future concepts and future products," he said.
'Not having to compete with the current day'
Among the biggest challenges for legacy firms today is overcoming the cultural barriers that may prevent the uptick of new technology.
At State Farm, Oakley bypasses that through a separate funding stream that allows his team to be able to invest in future tech that could have a dramatic impact on the insurer's operations.
"The thing that really works is not having to compete with the current day," he said. "That is a huge enabler for me, to have the autonomy to bring something forward from idea all the way through to production and test."
Oakley is also very transparent around the initiatives his teams are pursuing. Unless it involves confidential information, all project data is posted internally for any employee to see.
Such a setup shows both how aggressively companies are trying to change their historic organizational charts to capitalize on promising emerging tech and how easy it can be for those efforts to be stymied internally. While each corporation will ultimately have its own unique structure, State Farm's serves as an increasingly common template for internal innovation hubs.