Transformation in commercial insurance
Reading Time 3 mins
A story of operational instability.
The commercial insurance industry has been labelled as slow to adapt to change. Could a stronger operations capability be the key to unlocking developments in this sector?
Gobeyond Partners' Hervé Mazenod shares his views on how stable operations underpin successful transformation.
Today’s commercial insurance structure is based around a mature set of organisations using high levels of relationship building, which are often difficult to manoeuvre. This culture and approach has created challenges around the adoption of new technologies and much-needed structural changes. Further compounding these issues has been the steady increase in mergers, and too often limited integration of legacy systems.
With stiff global competition challenging the London Market’s position as a global hub, some areas have demonstrated an appetite to modernise and learn from other sectors. A good example of this has been the launch of the PPL (Placing Platform Limited) in 2016, an electronic platform enabling brokers and insurers to quote, negotiate and bind business electronically.
The rise of Blockchain, robotics, AI, and smart workflow have given the entire industry the opportunity for rapid change.
However, many of these technology projects aren’t delivering either the immediate benefits anticipated, or the sustainable competitive advantage that is required.
There is no ‘silver bullet’ – there are a range of priorities organisations need to focus on in order to successfully deliver the level of change needed. However, underpinning all of these is the need to raise essential levels of operations capability; something that we see many businesses struggle with. If you want to deliver successful, sustainable change this cannot be ignored.
Developing operations capability
As with many mature markets, the majority of carriers and brokers have long established operations functions. These functions typically incorporate: contract creation, claims handling, billing, underwriting support, renewals and data analytics.
However our operations maturity index, which has over 250 operations data points recorded over the last ten years, shows the insurance industry at a low level of operational maturity, when compared to other financial services organisations.
A rush to transform an organisation without the basic operations capability in place is a mistake we see frequently. It often means organisations are left frustrated at protracted programme timescales, benefits not fully realised, or change not properly embedded.
This lack of operations maturity is something that manifests itself differently in parts of the insurance industry. For example, consumer organisations have better disciplines in capacity planning when compared to commercial, yet both are weak when it comes to linking up sales/underwriting and operations.
Typical patterns of renewal periods drive the wrong behaviours, with spikes in client service around renewals and relative complacency during the contract lifetime. It also means that there are often cost and client experience improvements left on the table stemming from a lack of consistent focus on these issues.
Digging deeper, we see that many insurance businesses don’t understand true performance levels such as quality or cost to serve.
The end result is the same – dissatisfied clients and unrealised business opportunities – which operations management techniques could help to mitigate.
The wider problem, however, is that commercial insurance organisations are expecting their operations functions to cope with complex, long-overdue transformation programmes, without a fundamental understanding of their current problems.
Insurers, carriers and brokers have to recognise that their operations engine needs the power to deliver their bold strategic aspirations.
Without taking action to improve their operations capabilities, they will fail to deliver the changes required to compete effectively in an evolving global market.