Insurance is risky business today, and not for the reasons you’d think. An observation of the industry drivers suggests that insurance carriers are finding themselves almost at cross-purposes on organizational priorities. They are trying to be both Goliath, the mighty, accomplished warrior and David, the young, sprightly displacer. Being successful in either construct is challenging enough…
On the Goliath side of the spectrum, carriers face emerging new categories of risk exposures, volatile market conditions and heightening risk and regulatory compliance requirements in most mature markets. These issues are magnified and only made more complicated when you consider the globally spread out, scaled up and fragmented nature of operations. The average carrier today is working across independent and dedicated agencies, MGAs, TPAs, outsourced and offshored IT and business process service operations, in-house shared service centers, distributed offices, and several digital channels. It also typically has numerous legacy technology systems at the backend, stitched together poorly, particularly in light of ongoing M&A activity.
Flipping to the David construct, these same carriers are very much aware of not just the potential distant threat, but the real and imminent impact of digital disruption to the insurance industry. In Silicon Valley and beyond, more and more ‘insurtech’ startups with new business models are emerging. They are enticing price-sensitive customers away by prioritizing customer experiences, technology-enabled process simplification, and an agile startup culture.
Customers who have had low satisfaction over the years with large brands are increasingly willing to take risks on this new breed of products and services, powered by data-driven personalization, the Internet of Things, peer-to-peer platforms and apps, mobile payments and interactions, and other digital assets, because it is easier to turn them on and off. Names like Metromile, Sureify, and Climate Corp are starting to become popular, with new developments each passing quarter. Last week, the promising P2P and bot driven startup Lemonade announced its intentions to start sales in New York after securing both state regulatory approval and reinsurance backing.
Goliath is looking to reinvent himself as a David in the insurance market.
These are both tough sides of the market. But where the worlds meet is where it gets interesting and also fuzzy. We see most insurance majors investing in several ways to jump into the digital playground – setting up innovation labs, investing in or acquiring promising startups, and creating new digital front ends to get customers in the door. However, once these initiatives are underway, as they have been in the last 2-3 years, is when the real work begins.
Successful carriers have to find ways to take the ideas and technologies from these isolated labs or startups into their broader organization. Innovation has to affect the working life of the contact center agent trying to cross-sell insurance products but failing due to lack of customer insight, of the agent advising customers on competing products, of the claims adjuster who has too many duplicative conversations, of the actuary trying to make the best bets but inundated by applications because of the new website.
Bottom line: In racing forward with new digitally-enabled business models and products, carriers have to have alignment between business units and global technology and operations arms, to redesign core insurance processes with the use of digital technologies. To be successful: focus on the end-customers and their experience.
Alignment will require carriers to also collaborate with various partners in their ecosystem.
The SVP of an American retirements, life and reinsurance provider shared his frustration with HfS, “Our key challenge is our ability to execute on initiatives in timely way. Even if we come up with great new products, we’re using TPAs and it takes them too long to convert and launch new products… It’s an arduous process. Time is money and resources for us, and our model is not streamlined. We often find ourselves at their mercy, but doing this ourselves would be too difficult. Our TPAs need to be more efficient and help us be faster to market. Sure, six months is better than eight but that’s not good enough anymore.”
The primary focus today to effect change across operational processes is around bringing to bear new technology enablers including process automation and analytics. These new levers focus on operational efficiency and effectiveness and make the best use of the large workforces usually working behind the scenes. It means evaluating your current portfolio for alignment on culture and investments in talent and technology to drive the kind of long-term change you seek – with service providers, TPAs, technology vendors, and other partners.
In trying to be both David and Goliath, insurance carriers will need to find ways to close the gap on their digital initiatives at the front end with the technology and operational backbone they have developed over the last two decades. A lot of this will come down to the type of organizational culture, talent, change management practices and policies that carriers are able to leverage in the medium term, and the partners they can work with to make it happen. Carriers will need to make strategic bets on service providers that share the same vision, make investments in areas that matter (like time to market) and are truly willing to come along for the ride… at the pace that digital is forcing today.