Strategizing a company’s digital transformation is arguably among the biggest headaches insurance executives face today. Years of underinvestment in IT and aging or antiquated systems have pushed many insurance companies into seeking quick fixes to modernize swiftly.
But the most challenging part is not implementing new technology; it’s redesigning the organization to support all other departments in the digital journey.
“There’s such a demand for change, and yet there is an inability to change quickly,” observed Ben Kosic (pictured), partner, Canadian Insurance practice at Capco. “A transformation, by its definition, is a thorough or complete change, and that’s rarely what insurers embark on.”
The ongoing digital-first shift can manifest in a small core change or several minor improvements to tech capabilities. But other companies are rolling out more robust, complex, and long-running programs that touch on multiple core systems. Wherever insurance companies are in this spectrum, insurance leaders must take stock of where they are and where they want to go next.
“Scoping the transformation project is probably the most key action an insurance company needs to take because it will define the priorities. It’s going to define whether you get early benefits or not,” Kosic explained. “How deeply are you going to cut? Are we doing open heart surgery or just doing some cosmetic work?”
With the tremendous energy and investment going into modernizing insurance systems, it’s understandable that leaders want to know when they’ll start seeing concrete benefits. But Kosic isn’t a fan of layering functionalities on antiquated systems to deliver immediate benefits, saying that these solutions “often come with compromises that push the burden of real change into the future.”
Instead, he suggests a slow approach can still bring medium-term benefits if leaders plan their digital transformation right. “It’s almost impossible to get big, quick wins,” Kosic told Insurance Business.
“The challenge is to embark on a meaningful, long-term change that replaces outdated systems and processes but still delivers benefits along the way. Most transformation plans must reach a certain target state in the distant future. The key to achieving benefits sooner is to develop a road map or a blueprint that creates what I like to call ‘islands of stability’ along the way.”
Insurance companies can take six steps to accelerate their digital transformation while creating ‘islands of stability’ – medium-term benefits – for themselves:
The first step is taking complete stock of technological capabilities in automation, cloud, data, and ways of working. Understanding where a company’s digital maturity stands can help leaders identify areas of growth and opportunity. Digital transformation experts can also provide an objective third-party view.
Robotic process automation (RPA) can take simple, routine tasks off insurance employees’ hands. {aired with machine learning (ML), companies can tap into complex, human-like automation that can quickly transform processes such as claims and underwriting.
Kosic explained: “Automation plays a role in transformation. Thinking of our’ islands of stability,’ you could create a parallel automation road map where you can add automation to just this component in phase one because it matches well with the data that we’re going to fix for that part of the transformation journey.”
Data is the fuel that feeds insurance companies. Amid the digital shift, the volume of data insurers consume will only grow, and insurance leaders will spend a lot of time synchronizing data across systems and functions.
“How do you wrangle data? How do you make it available? How do you create the metadata? How do you get it into the right people’s hands at the right time? These are all classic data problems and need to get addressed longer-term,” Kosic said.
A Novarica study last year found that insurers have gone from highly sceptical of cloud computing to embracing “cloud-first” infrastructure strategies in the last five years – and for a good reason. Public and hybrid clouds allow insurance companies to store and process data efficiently.
Cloud adoption is an alternative to rolling out expensive infrastructures with servers and data centres. It enables insurance companies to be more agile, developing new solutions more quickly and achieving faster time to market.
A well-worn saying in the management world is that culture eats strategy for breakfast. No matter how well-designed your strategic plan is, it will fall flat unless your team is galvanized by shared values.
“Work from home is a great example of applying forces to an existing culture,” noted Kosic. “If you’re breaking down siloes across products and going for customer centricity, that also changes an organization’s culture.”
It’s crucial to anticipate and plan the cultural change that new systems could usher in. “Real transformation is people, process, and technology,” Kosic said.
Environment, social and governmental (ESG) actions should be a component of any digital transformation. Rather than wait for regulation or social pressure to disrupt their digital journey, insurance companies should stay a step ahead by embedding ESG into their strategy.
“Regulation is always a follower to the demand for change. The forward-thinking companies are adapting and designing towards where they want to be in terms of the spectrum of ESG,” Kosic said.
