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Wake Up! Insurance is Changing!

Oct 5, 2017 | By: | Topic(s): Changing Market Demographics, Changing Risk Profiles & Needs, Data & Analytics, Data Strategy, Digital Strategy

“Insurers must disrupt themselves — a path many are on, albeit at different stages.”

  • David Smith, Strategic Futurist

The digital revolution is disruptive. It is rewriting the rules of business, and with it, redesigning organizational and business model structures. Many industry orthodoxies are increasingly irrelevant, yet most insurers have been reluctant to reinvent themselves. In addition, digital disruption is only a small part of the disruptive market that is “forcing the hand” of insurers to make a change. If an insurer hasn’t yet wrestled with the necessity for change, now is the time to wake up and understand the factors, then build a platform for transformation.

Defining disruption

The term disruption has been in wide use now for some time, but the nature of insurance disruption is ever-changing. In Majesco’s recent white paper, Changing Insurance for the Digital Age, we take a deeper look at the current state of insurance disruptors and how they are pressuring insurers — pushing them out of their traditional orbits and toward new spaces and opportunities. We cover the need for a new insurance paradigm and discuss how organizations can move from the theoretical (“Yes, we could change.”) to the practical (“Here is how we will transform to meet the need.”) and toward the future (“Here is how we will build to enable future-transformation.”).

At a high level, Majesco’s new report highlights five areas companies must understand and adapt to in order to thrive, let alone survive, in this age of disruption:

  • Customer Expectations
  • The Sharing Economy
  • Change Management
  • Technology
  • and Cybersecurity

In each one of these spheres of disruption there is one common denominator: Digital strategy and solutions are key to the answer. Even under the topic of Change Management, one could largely argue that at its core, many of the changes brought about to systems and processes will necessarily involve cloud platform solutions. Cloud computing and digital capabilities, though separate concepts, are nearly inseparable in their implementation in today’s digital era. They rely upon each other. Digital is proving to be both a disruptor and a solution to disruption. Can insurers capture the disruptive opportunities to future-proof their organizations?

A New Insurance Paradigm — Transformational Transplanting 

For decades, insurers have strived to be rock-solid, foundational, consistent providers of protection and never-wavering keepers of the brand promise. Most insurers stick to their brand promises but they may not realize that in the digital era, they will need to create connection between what is expected by customers and how they deliver in order to not only improve upon the brand promise, but to exceed it. Companies need transformational transplants within operations, people, technology and insurance philosophy. They need to let outward trends and digital pressures reframe the scope of their inside risk management.

For example, in Changing Insurance for the Digital Age, we discuss the impact of Genomics, Digital Identities and data use upon insurance transformation. Genomics makes an excellent example, because it could re-create the life insurance market. In 2016, after analyzing several thousand DNA samples, a UCLA geneticist declared an ability to identify biomarkers, translatable signals in the bloodstream, that could be used to predict mortality. This type of breakthrough can both prompt InsurTech commercialization and quickly change incumbent business models.

Data-based, usage-based risk management will also refashion business models, as insurers work toward providing more preventive services that will gradually lower post-claims payouts and adjustments for the insurer and less hardship and inconvenience for the customer. The shift in risk product to risk prevention or avoidance services will provide new sources of revenue, but they will require tapping into hundreds of new data streams. With today’s technology such as smart devices using Internet of Things technology, homes can be protected from fire and water damage, factories with equipment can alert operators to safety issues and maintenance needs, construction companies can use wearables to track and monitor employees for safety and trucking or shipping companies can monitor all shipments to eliminate theft or loss. This will require not only a changing business model, but a growing network of partnerships that may include data providers, marketing partners and analytics services.

Much of this work will start with the organization-wide question, “Where do we want to fit into this new insurance ecosystem?”

Organizing the Organization

We are entering uncharted waters for many COOs. In fact, many will find that their role/name as Chief Operating Officer should be changed to Chief Organizational Officer, because organizing the organization is going to be one of the keys to changing insurance during the digital age. Think of all of the questions COOs will have to deal with in the coming days.

  • If we could automate more operations, which areas are strategically important?
  • Does IT have the expertise or time to handle the sizeable aspects of digital transformation? Which partners could best help us?
  • How do we gauge the talent we need to acquire against the directions we think we’ll be moving in the future?
  • If the organization is changing, are our people ready for the new model?

Many of these questions will pertain to people, and therefore, carriers should look to people, equally with (and sometimes before) technology, as the starting point of change. Cultivating a culture of meaningful change, with excitement behind the new organization will pay off with a smoother transformation. As you shift mental mindsets, you’ll be creating a new class of entrepreneurs and leaders who embrace the shift as vital to personal and corporate growth. Without agile and attentive leadership and key future expertise in place, transformations cannot happen. Digital engagement on the outside begins with entrepreneurial thinking on the inside. As we highlighted in our Strategic Priorities 2017 report, creating the new model of business will prepare the organization to reach new buyers, find and test new market opportunities, and find greater opportunities to provide value.

 

Digital Jump Start

Of course, organizational change and digital change may move at different paces. It would be ideal if the organization could change as fast as technology, or if it could become transformational “on a dime.” In its analysis of successful companies, MIT Sloan correctly noted: “…history warns us that mastering digital technology won’t determine which companies become corporate winners. Instead, making the necessary organizational and leadership changes will[i].”  But David Smith points out in Changing Insurance for the Digital Age that “There is little evidence – across all industries – that structures supporting future leadership are in place; while the future is digital, only 5 percent of organizations possess a strong digital leadership development program. 65 percent of all organisations have no such program[ii], and 30 percent of organisations admit to having a weak or very weak leadership pipeline[iii].”

So to help you begin your digital renaissance journey, these practical steps should be considered:

  • Insurers should scan the horizon five to ten years in the future – perhaps using a Three Horizons model as a guideline.
  • Change should be measured, and based around customers and employees.
  • Take an outside-in approach. Integrating external ideas and thinking can create new value propositions.
  • Crafting the right structures for partnerships to flourish will be critical.
  • The insurance value chain is expanding. New entrants in these areas will eventually threaten core business.
  • Establishing capabilities, via acquisition, partnership or talent is key.
  • Without agile and attentive leadership and key future expertise in place, transformations cannot happen.
  • Organizational renewal, new pathways to talent acquisition and retention and a commitment to people-centric policies and processes are all good places from which to embark on wider digital change.

Insurers will still have to surmount the inherent challenges of change and adaptation to the digital era … and Majesco is no different.  We are staying ahead of the changes to help our customers get ahead and avoid falling into the gap of irrelevance.  We are committed to continuously enhancing our P&C and L&A and Group core systems platforms. A major outcome of this commitment is our recent introduction of the first digital engagement and microservices platform as a service for the entire insurance industry, Majesco Digital1st Insurance.  The new portfolio of solutions will enable new business models, new products and customer engagement in the digital age, allowing insurers to embrace innovation and disruption.

It is a new age of insurance — a digital age. Each and every day, insurers must recommit to their business strategies and their renaissance journeys.  No matter where you are on the path of your renaissance journey, we encourage you to look into how Majesco may help you jump into your next phase and work toward an agile, future-focused framework.

[i] Source: MIT Sloan Management Review, 2017 http://sloanreview.mit.edu/article/the-need-for-culture-neutrality/

[ii] Source: Raconteur, 2017 https://www.raconteur.net/technology/developing-digital-talent

[iii] Source: Deloitte/Wall Street Journal, 2017 http://deloitte.wsj.com/cio/2017/05/23/5-ways-to-nurture-developing-leaders/

About the Author

Denise Garth

Senior Vice President, Strategic Marketing

Denise Garth is Senior Vice President Strategic Marketing responsible for leading marketing, industry relations and innovation in support of Majesco’s client centric strategy, working closely with Majesco customers, partners and the industry.

View Full Bio | Other Posts by This Author (56)
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