Digital Transformation Within Insurance… Change For The Better Or A Risky Game Of Chance?

A few weeks ago, I had the pleasure of attending the ‘Digital Transformation in Insurance: Customer Engagement and Operational Agility’ conference. It was very revealing…

Insurance is an old industry plagued with legacy IT systems. It is still heavily dependent on vast quantities of spaghetti code that began life generations ago. The COBOL programmers who wrote it, have long since retired. This slow-changing industry is locked in a time capsule and it is now dramatically out-of-step with consumer attitudes and expectations – especially when it comes to customer experience.

In this conference, it was fascinating to observe that some insurance companies continue to function in the pre-internet mode – using paper, telephone and postal deliveries to process claims. At Zuhlke’s roundtable, a senior executive from a mid-sized company openly admitted that his organisation’s attempts to buy off-the-shelf software packages have fallen flat. Four years after the software purchase, the company was still reliant on paper and telephone. Furthermore, despite management’s attempts to introduce change, the culture and the mindset barriers stubbornly resist all but the most critical changes.

Is there a valid reason for change resistance?

As a representative from an insurance comparison company observed: “As long as the cash flow remains positive and the revenues keep growing, who would want to bring in change?”

It’s hard to argue with such bottom-line logic. It is also very apparent that many senior executives are not swayed by the prospect of business growth plus the numerous customer satisfaction and retention opportunities promised by new technologies – digital in particular. In fact, many companies have yet to start their digital journey. I noticed that the Digital Change & Process Manager from a mid-sized insurance company (which has yet to embark on its digital journey), was gaining massive experiential value as an observer at Zuhlke’s roundtable.

This reluctance to embrace digital change is perhaps understandable. Most firms have grown up and matured using traditional applications such as ERP. They see digital transformation as a distraction – an unnecessary disruption to their existing business. They do not appreciate the value of digital opportunities. They often initiate investment without any clear vision in mind. And many do not have the in-house digital leadership capabilities to embark on – let alone deliver – a digital change programme.

Why is progress slow for some early adopters?

Later, in the conference, I heard from other large insurance companies that have been trying hard to introduce changes – and many have made progress.

Some of these companies have already seized the initiative and adopted modern software methodologies, such as Agile and Scrum. Others have built analytical platforms and taken advantage of data. And quite a few have built front-end systems or mobile apps to reach and transact with new consumers. But there’s a problem. Progress has been slow. Digital Transformation Officers have struggled to implement these new processes. And this common problem stems from one fundamental error…

Digital transformation programmes have been planned as one ‘Big Bang’ initiative – a single release that is supposed to change everything. Instantly!

This is a serious strategic misconception. Effective digital transformation is an incremental process. Instead of sudden overwhelming change, it introduces gradual shifts that permit new and existing systems to run alongside each other in perfect harmony. Business as usual in the midst of business change.

A top-down digital exemplar

During a coffee break, I did manage to speak to the Head of Digital for an insurance company that is well advanced in its digital journey. Unlike many in this industry, this company has critically evaluated systems of record, innovation and differentiation. Furthermore, the digital team not only understands but has carefully analysed the functionalities that do not add value to its digital vision. They have been quick to adopt and implement Agile and Devops. They have embraced new software methods and processes. They have also partnered with several technology providers that can offer the vital digital expertise lacking in the insurance company. What’s more, they have developed in-house training programmes to implement and deliver change.

This company has a strong digital vision. And it comes from the very top. The CEO has led from the front to guide and govern this change. He is fully aware of progress right across the digital transformation programme. As a result, the company is actively involved in many initiatives: apps, chatbots and portals.  Employees, at all levels, are engaged in a shared vision to make the digital vision a reality. A separate team also ensures that IT and business collaboration help to drive the digital agenda.

It is an exemplar – a model of how to build a flexible, resilient and very agile digital solution. This company can take new products to market much faster and, even more importantly, it can offer the seamless customer experience that modern consumers demand. But it is the exception; not the rule.

Last thoughts

During this conference, I spoke to several insurance executives involved in digital change programmes. My main (and slightly depressing) observation is that most insurance companies have neither the time nor the resources to change their core legacy IT systems. Most have no real appetite to build a new operating model that would help them transform into a digital insurance company. These companies also lack the business processes and roadmap to align their operating model to drive customer engagement. To put it bluntly, these organisations have not invested – nor, do they see any imminent need to invest – in digital leadership capabilities. So, the yawning gap between insurance industry services and customer experience expectations, seems certain to grow ever wider.

The impetus for change has to come from a top-down vision. This vision needs to adopt user-centred design and integrate it into the core engineering and development methodology. Zuhlke’s many digital transformation engagements have taught us that an organisation needs digital leadership capabilities to work harmoniously with technology- based initiatives to achieve real digital success.

So, with this in mind, let me leave you with the three types of organisation – Beginners, Fashionistas and Digital Experts – that I see emerging within the insurance eco-system:

Beginners Fashionistas Digital Experts
No digital vision and engagement Built a digital vision but lacks governance and engagement Strong digital vision, engagement, and IT-Business relationships
Existing business is still strong and no digital culture Digital culture existing in siloes Tech initiatives blended with digital leadership capabilities generating business value
Negligible digital investments Many digital based tech initiatives in siloes Strong Digital culture and good governance

 

 

 

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