8 minute read 18 Jun 2018
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How to build the insurer of the future

Authors

Shaun Crawford

EY Global Vice Chair – Industry

Driving solutions designed to reshape global markets and industry through convergence and disruption.

David Hollander

Former EY Global Insurance Leader

Transformation leader in insurance. Committed to help strategically reshape the industry’s business model for today’s digital age.

8 minute read 18 Jun 2018

The transformation will require revisiting business models, acquiring customers through new channels and creating rich user experiences.

Many converging trends are forcing insurers to become more digital. New technologies and the accompanying explosion of data are creating a shift to more tailored products and services. At the same time, that data must be protected across systems, operations and business processes. Rising consumer expectations, shifting market trends and a changing workforce are also driving the move to digital.

But where should insurers focus their efforts? We see nine strategies that will enable the move to digital and help create the insurer of the future:

  • Innovation
  • Agility
  • Workforce and digital culture
  • Customer activation
  • Cybersecurity and risk
  • Experience design
  • Data and analytics
  • Digital architecture
  • Digital governance
  • Innovation is intrinsic to the strategies, operations and cultures of digital insurers.

    The imperatives

    • Potential obsolescence for insurers that can’t adapt rapidly to changing customer expectations, shifting marketplace dynamics and continuous disruption
    • Competitive advantage through proactive development of new products and services
    • The ability to move to market faster and instill a “fail fast” mentality across the organization

    The actions

    • Establish an innovation function to fund, incubate and launch new capabilities
    • Create dedicated innovation spaces and sessions to foster collaboration
    • Assemble teams of design, development and subject matter experts to rapidly vet and prototype new ideas
    • Focus on minimally viable products (MVPs) faster
  • Agility requires dynamic cross-functional collaboration to rapidly develop, efficiently launch and continuously enhance new products, experiences and technology.

    The imperatives

    • Decreasing relevance of multi-year initiatives — often before they are released to consumers
    • High costs, long timelines and wasted effort from traditional development
    • Successful management of digital skills gaps by integrating teams across functions
    • Faster speed-to-market and quicker time-to-value

    The actions

    • Empower agile teams so that they are invested in digital vision and programs
    • Break down product features into prioritized components
    • Organize around multidisciplinary feature teams with the right digital expertise
    • Identify and empower product owners who know business challenges and customer needs
  • Workforce transformation must be a strategic priority with a focus on creating a highly adaptive “disruptor” culture capable of adapting to constant change.

    The imperatives

    • Lack of interest among the new generation of younger people in joining the traditional insurance workplace
    • Cultural and organizational struggles to embrace digital thinking, behavior or strategies
    • Need for digitally oriented talent and new skillsets

    The actions

    • Identify leaders with a digital mindset and train them on digital innovation
    • Communicate innovative digital successes
    • Grow advocates within the workforce to champion digital efforts
    • Develop strategies to attract and retain scarce digital talent and millennials
    • Accelerate re-skilling strategies to prepare the existing workforce to adapt to digital
    • Continuously monitor and track the digital change adoption through culture surveys
  • Digital insurers use digital and social tactics to share new value propositions, and activate consumers with personalized messaging and offers.

    The imperatives

    • Proliferation of digital channels through which carriers must support consumers in the sales and service cycles
    • Consumer dissatisfaction with brands that merely push content rather than actively, personally and meaningfully engage
    • Emergence of social networks as the only channel where consumers learn about new products and feature

    The actions

    • Build a sense of purpose, provide incentives and nurture community
    • Show genuine interest in consumer needs through compelling experiences and services
    • Marshal cross-divisional capabilities and resources to satisfy full range of consumer needs
    • Leverage data to gain insights about customers and how to effectively engage them
    • Amplify UX through social communities and turn your “super users” into advisors
  • Comprehensive cybersecurity can ensure appropriate security across integration and access points — but defenses are only as strong as the weakest link.

    The imperatives

    • Need to protect customer data, a highly valuable corporate asset
    • Severe financial and reputational impacts if customer data is compromised
    • Rising sophistication of cyber criminals in breaching defenses via digital devices and integration points

    The actions

    • Identify and document all data flows with third parties, and across systems and applications
    • Perform security and vulnerability assessments on all internal and external applications used to collect, process, store and transfer customer information
    • Define requirements for third parties, embed contractual obligations, establish clear SLAs and perform regular review of all controls
    • Implement and test comprehensive incident response plans for data breaches
  • Compelling omni-channel experiences represent a baseline for success in meeting customer expectations and winning critical “moments of truth.”

    The imperatives

    • Loss of brand value and damaged customer relationships through poor digital touchpoints and experiences
    • Failure to deliver quality and consistency across channels
    • Cost savings from simplified processes
    • Increased conversion and reduced churn

    The actions

    • Link innovative experiences to operational processes and enabling technologies
    • Design for the emotional dimension to effectively engage customers at key points in the journey
    • Apply analytics to derive customer insights and design on the basis of a needs-based paradigm
    • Track evolving digital and technology trends affecting consumer behavior, and continually enhance and redesign experiences
  • Traditional and digital analytics can be applied across the insurance value chain to generate highly relevant real-time insights and spark decisive actions.

    The imperatives

    • Consumer expectations for personalized experiences and offers based on their unique needs
    • Competitive advantage for any insurers that access and act on the wealth of new data
    • The need for better, faster and more informed decision-making at all levels of the enterprise

    The actions

    • Establish a data lake for scalable collection and management for all data types, with real-time access for right analysts
    • Integrate analytics with decision engines to apply contextual factors to analytics-driven insights
    • Deliver frontline insights using intuitive design principles to support adoption and usage
    • Automatically track and feed back the outcome of each decision or action
  • To meet evolving needs and rising expectations of digitally savvy consumers, digital insurers need fully flexible and modernized architectures and platforms.

    The imperatives

    • Technology that supports speed and scale to enable rapid innovation cycles
    • Superior real-time experiences with seamless integration of supporting technology
    • Rapid obsolescence of technology that requires modularity in underlying architecture

    The actions

    • Leverage technology advances via “platform-as-a-service”
    • Create an enterprise platform team focusing on message broker, platform choices and DevOps stack
    • Decompose applications to 12-factor-based independent micro-services
    • Create a coexist strategy for architectural transformation to manage transition from current to future-state components
  • Effective digital transformation is a large-scale enterprise effort, and thus requires proper governance along with strong ownership and solid processes for innovation.

    The imperatives

    • Agile teams risk delivering incompatible outcomes without coordination and alignment.
    • Digital’s rapid forward pace requires teams to have easy access to empowered decision-makers who can quickly resolve conflicts.
    • Surrounding digital transformation with an optimal support structure and connective tissue is crucial to sustaining success.

    The actions

    • Establish solid but flexible governance to quickly adapt to changing needs and goals
    • Create clear ownership and accountabilities, and define the rules for issue escalation and resolution
    • Embed digital governance into existing processes to make it part of business-as-usual operations
    • Entrust decision-making to different levels of the organization to avoid bureaucratic bottlenecks
    • Create cross-functional business-driven committees to manage core strategic assets and reinforce alignment and collaboration

The insurer of the future

The insurer of the future will look, act and be structured very differently than today. Insurers will shift from a product orientation to a customer orientation. They will be experience-focused, rather than risk- and cost-focused. Instead of being rooted in tradition and legacy, they will embed innovation at their core. And they will be agile and adaptive rather than resistant to change.

These changes will manifest most prominently in these five areas.

  • Traditional insurer

    Complicated features, long launch cycles, organization and economics-driven offerings, preset pricing, and dependent on manual research and legwork

    Digital insurer

    Quick speed to market, driven by consumer needs and lifestyles, internally and externally sourced features, tailored and more accurate pricing, and assisted by technology (e.g., drones)

  • Traditional insurer

    Agent-dominated and traditional mass advertising strategies and channels

    Digital insurer

    Digital-direct, personalized and contextual, social, and engaging

  • Traditional insurer

    Product-centric, reliant on agents, phone- and paper-based, labor-intensive and cumbersome

    Digital insurer

    User-centric with omni-channel presence, simple and seamless, and self-service-friendly

  • Traditional insurer

    Manual processing, long wait times, and dependent on subjective and self-reported information

    Digital insurer

    Automated processing, fast turnaround, and leverages objective measured and collected data

  • Traditional insurer

    Reactive, risk impact mitigation-oriented, and relies on broad demographic and historical information

    Digital insurer

    Proactive, risk occurrence monitoring and prevention-focused, and incorporates rich real-time data

Summary

The digital insurer will look, act and be structured very differently than the traditional insurer. Fortunately, insurers that undertake digital transformation programs are likely to see immediate value, while also supporting future innovation and instilling organizational agility for the long term.

About this article

Authors

Shaun Crawford

EY Global Vice Chair – Industry

Driving solutions designed to reshape global markets and industry through convergence and disruption.

David Hollander

Former EY Global Insurance Leader

Transformation leader in insurance. Committed to help strategically reshape the industry’s business model for today’s digital age.