Strategic cost transformation services

What EY can do for you

The Asia-Pacific (APAC) insurance landscape continues to evolve rapidly, as non-traditional insurers grow and challenge incumbents through nimble, frictionless, low-cost and customer-led delivery models. In addition, M&A activities are on the rise, as insurance firms reassess market strategy and consolidate market presence. (APAC M&A values are up 88% in the first half of 2021 compared to the same period last year.) Finally, evolving consumer behaviors are forcing insurers to re-evaluate their customer propositions and delivery channels. (In Hong Kong alone, 57% of consumers prefer digital channels to buy new insurance products, but only 1% of the 2019 distribution mix is digital.1)

In a swiftly changing market, and with one eye on growth, insurers can deliver cost transformation, but this requires a disciplined and systematic approach. Even in times of growth, cost focus is critical to unlocking capital flexibility, remaining competitive, and funding innovation and digitization. Many insurers have already begun their transformation journeys focused on market penetration, but few have realized the returns on investment, as costs have increased at an accelerated pace. Common issues reported include:

• Misaligned delivery against strategic vision
• Siloed cost reduction while ignoring other value levers
• Impediments from legacy infrastructure
• Lack of digital commitment across the organization, front-to-back
• Inability to eliminate redundancy in processes and tech

If such issues are not tackled head-on and with priority, long-term income and expense growth will converge and subsequently reduce profitability. With timely intervention, insurers can ensure stable and sustainable growth by fully utilizing income growth opportunities while fighting expense growth on all fronts, as shown.

Eight value drivers to fuel growth while improving costs

Embedding EY’s eight value drivers into your insurance team’s cost transformation programs helps your executives to deliver, measure and monitor amplified business value across the enterprise, front-to-back. The value drivers align the transformation program with the overall strategy and ensure sustainable return on investment guided by value creation and preservation levers.

Our value drivers are:

Value creation

1. Customer and staff experience

Enhancing the sum of all interactions a customer or a staff perceives along the entire user journey through parameters such as Monthly Employee Confidence Index (ECI), Customer Satisfaction Index and Customer/Staff pulse scores

2. Revenue uplift

Maximizing the revenue and profitability by improving operation efficiency and realigning business strategy through parameters such as referral rate, purchase cycle duration, cross-sell and up-sell ratios and customer persistency.

3. Cost reduction

Building a group of interconnected information technology resources that can function as a unit through parameters such a cost per policy quote, cost per Policy Owner Services (POS) transaction, Full-Time Equivalent (FTE) efficiency and hours saved.

4. Connected ecosystem

Managing the exposure to losses or risk through better internal controls, regulatory gaps compliance and reporting through parameters such as Application Programming Interface (API) integration, micro-services perception index, digital uptake index and third-party Service Level Agreements (SLAs) and outcome-based KPIs.

Value preservation

5. Risk reduction

Reducing the spending on wages, production, etc. in order to make it more profitable, through parameters such as control effectiveness score and internal/external accuracy rate, percentage of controls automation and the cost of non-compliance.

6. Resiliency

Developing the ability to respond to, recover from and resume operations through significant disruptions, through parameters such as time to recovery for policy admin system, number of automated control steps and number of breaches.

7. Scalability

Ensuring the ability to withstand pressure as a result of growth, without being hindered by its resources or structure, through parameters such as cost structure, fixed cost ratios and ratio of digital infrastructure cost to operations overhead cost.

8. Sustainability

Creating long-term value by considering how to operate in the ecological, social and economic environment, through parameters such as carbon footprint per FTE/process and paper utilization and waste.

A design-led approach to transformation

To help insurance companies in Asia-Pacific meet their goals, EY uses our Design-Led Rapid Process Transformation approach (DeRaPT).

This approach enables an accelerated, design-led and scientific approach to achieve process and functional transformation –fueled by digitally enabled solutions rapidly delivered in production with a clear outcome focus. The eight value drivers underpin the KPIs/metrics for such a change.

“Design thinking”-based ideation is supported by immersive co-creation workshops to ensure client-centric outcomes. Clear “stage gates” through the phases act as checkpoints for “go/no go” decisions to avoid sunk investments and maintain an outcome orientation.

The approach follows three stages:

1. Diagnostic and “as-is” assessment (supported by EY wavespaceTM studios): Map the problem statement, assess performance data, and drive outputs in collaborative wavespaceTM studios that leverage the Eliminate, Optimize, Automate and Migrate (EOAM) design principles. Identify recommendations and their expected impacts, dependencies and owners.
2. Detailed design and development: Comprehensively define recommendations, including detailed process maps, policy, technology requirements, blueprints and user acceptance testing, user adoption and implementation.
3. Deployment: Scale recommendations then improve continuously (iterative refinements) and monitor benefit realization
    

These design principles lie at the heart of our solution that drives business-centric cost transformations. While straight-through-processing is the ultimate goal, legacy debt and constraints may hinder such implementation. Principles of EOAM coupled with customer insights (how customers consume the service/product and what they value) can help design highly efficient, client-centric and value-generating processes.

How EY teams can help

EY teams have extensive experience designing and delivering cost transformation programs. By leveraging EY capabilities across process design, client journeys, project management and our cost transformation accelerators, we can help you quickly realize benefits and contain costs over time.

Benefits include:

• Gain speed to delivery: Shorten diagnosis time by 60% and define priorities within 8-10 weeks.
  
• Help ensure benefit delivery: Realize benefits within 12 months, aiming for KPI uplifts of 30% or more for specific initiatives.
• Improve organizational alignment: Bring together multidisciplinary teams from front-line distribution to back-end servicing for an end-to-end design through our wavespaceTM workshops.
• Create and preserve value: Enable your realization of comprehensive intangible and tangible value across a wide range of drivers and ensure that value is retained. Uplift your innovation culture: Generate excitement about transformation and inspire participants to bring new ways of thinking across the organization.
• Use outcome-based commercial models: EY commits through every step of your transformation journey by employing an outcome-based commercial model.