In the previous blog in this series, I discussed the importance for insurers to transform into a living business that adapts to evolving customer needs. To do this, and to develop more effective and efficient distribution models, insurers need to address some specific requirements.

In particular, they need to take five key steps:

1. Develop a well-articulated agenda for both current and future operations, incorporating a disruptive growth strategy.  Insurers may need separate distribution models for the ongoing business and for the new strategy.  The new operation will need to manage innovation differently from the legacy business, with different criteria for funding, different standards for partnerships, and different metrics for success and failure.  The insurer should also have a strategic plan to reincorporate the new operation with the core business.

2. Offer living services that adapt in real time to the changing customer context.  The insurer should be prepared to provide the customer with ‘living services’ that draw information from the IoT, the cloud, and real-time analytics to adapt in real-time to fulfill the needs of consumers’ everyday lives. These services will learn and evolve, helping insurers offer interesting, valuable and meaningful services to their customers. To do this, insurers will need to increase the level of interaction with customers, gain access to data on their behaviors, and make tailored offers specific to their customers’ lived experiences, whether for their transportation, their homes, or their health. This requires a strong data infrastructure and governance along with advanced skills in areas including micro-segmentation, machine learning and predictive model development. 

3. Acquire the ability to accelerate and scale outcome-focused and dynamic execution.  The insurer should develop a high degree of agility, reflected in the ability to rapidly recognize and respond to trends, and to check continuously on the alignment of services with customer needs. This calls for the insurer to identify and build needed capabilities, integrating closely with back and middle offices to support new and continuing initiatives.  The insurer will also need an effective and sustainable innovation management program, marked by a willingness to run pilot programs, learn from them, make needed corrections and scale up rapidly once the missing systems are in place.

4. Design a partnership strategy with the ability to connect into broader ecosystems to multiply desired impacts.  Insurers will need to define what constitutes a ‘win/win’ partnership.  For example, insurers pursuing the Everyday Risk Coach model will need the capacity to gather customer data through partnerships with participants in the IoT, such as home safety service providers or makers of health and lifestyle tracking devices.  The partnership strategy also calls for a platform strategy, as the insurer needs to determine whether it will orchestrate its own ecosystem or ‘plug and play’ into others’ ecosystems, for example by embedding itself within another organization’s distribution network.

5. Focus on people traits, shift culture, and activate (and measure) change.  In addition to technological capabilities, product and distribution strategy and the partner ecosystem, insurers will also need new approaches to attracting, retaining and developing talented teams.  New distribution will mean new jobs and new competencies.  Insurers should be looking to fresh sources of talent and innovation – through investments in Insurtech startups, or by gaining access to talent through ecosystem partnerships – and to new ways of cultivating needed skills internally.  Above all, leadership should send clear signals that change is under way and that creative approaches will be welcomed, not discouraged.

In the next blog in this series, I will look at some of the challenges insurers face in developing new distribution models while simultaneously maintaining the core business.

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