Digital transformation in the insurance sector: cultural and organisational

Changing an organisation’s culture takes more than simply communicating a directive. Some insurance providers have been around for almost 200 years — over which time their culture, and organisational structure have grown and evolved. Habits take time to undo, and change happens slowly.

For many insurers, there can be an institutional reluctance to take risks and embrace the pace of change needed to adopt new technology and ways of working. New, platform-based business models are not just unfamiliar, they represent a completely different way of operating.

The pandemic forced the industry to accelerate digital readiness programmes. To do this successfully, takes a shift in mindset from established processes rooted in legacy systems, to a more flexible, open and digital mindset that has “customer first” as its guiding principle.

1. Cultural change happens from the top down

Employees and customers are already thinking digital-first. They will be using digital technology, platforms and apps in all sorts of areas of their life, from home tech such as smart meters, NEST thermostats, Ring doorbells and smart speakers, to mobile apps to do their banking and shopping, and wearables to monitor their health. Selling the principle of digitisation is easy.

But as organisations adapt to the speed of this change, it’s important to bring employees along, too. That means seeing new technology as an opportunity, and being able to respond effectively to that opportunity.

Those at the top of the company – at executive and board level – will need to buy in to the technology, and to advocate for the changes the technology will make to how the business operates and relates to its customers. HR also plays a key role here, as recruitment and workforce requirements change. And they all need to be able to communicate it effectively internally, so the whole organisation is on board.

That means ensuring that the board really understands and supports the need for digital transformation, its long-term benefits and the technical, organisational and resourcing requirements that will drive the change.

2. Design your business to be truly customer-centred

Most insurers will say their business puts the customer experience first. But few really build their business to do this. Genuinely putting customers at the centre of your business means designing your products and delivery teams around the customer need; structuring and using data to create products, offers and rewards that are individually tailored to customers; and re-designing the business to be agile enough to bring new, innovative products to market quickly, enable instant decision-making for things like claims; and partnering with other providers to share information and data that can benefit the customer.

This means constantly re-thinking the business structure, based on agile principles.

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3. Foster an environment of collaboration and sharing

The principles of the platform model can be alien to some insurers. Sharing data under open insurance guidelines, rather than closely guarding it, or creating offerings as open source solutions to create ecosystems that will benefit consumers – these are big changes in thinking for the industry.

But if the industry is to compete in a world of smart cities, internet-enabled homes and digital health management systems, collaboration with partners both within and outside the industry is critical. This is where true innovation will emerge, not from siloed thinking but from collaborative models.

4. Develop cross-functional delivery teams

Traditionally, insurers have focused on the silo model. Team A creates a plan for Product A and it goes through various departments from the design stage, to testing and operation. An agile enterprise uses a business-oriented operating model instead, with an interdisciplinary team taking full responsibility for the product right from its design to its retirement.

Structuring teams around products focuses the teams on business delivery and outcomes, rather than tasks. It enables the business to deliver products (or changes) at speed, improves standardisation and service levels, and fosters collaboration.

By focusing on creating teams around product delivery and support, insurers can rebuild their businesses to focus on agility and the customer-first mindset.

In summary, digital transformation and open insurance go hand-in-hand — as does a “customer first” philosophy and innovation. No insurer can innovate without understanding what the customer truly wants and, more importantly, what they will want in the future.

Written by Johanna Von Geyr, partner and EMEA lead banking, financial services and insurance at ISG

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