From targeting your desired roadmap to building and iterating on intelligent platforms, transforming in these five areas will enable insurers to better respond to digital disruption and evolving risk.

In my previous posts in this series, I talked about why the future of insurance belongs to living businesses and what opportunities are available for insurers willing to develop the traits of a living business. This week we’ll look at how insurers can go about transforming their organizations into living businesses.

Living businesses “pivot to the new”

Living businesses find a balance between nurturing their existing operations and exploring new sources of revenue. This process, which we call “pivoting to the new,” entails:

  • Investing in the transformation of the core business to reduce costs, drive growth, and realize trapped value.
  • Using funds generated in this way to launch innovative ventures that offer the prospect of new revenue streams.
  • Identifying the most promising of these initiatives, and then shifting focus and investment from the core to “the new,” scaling innovative ventures to the point where they become significant, sustainable income producers.

To attain this balance, organizations need to excel in five key areas.

Targeting

Insurers that want to become a living business must develop a value roadmap, including funding sources, to drive a balanced, value-focused growth strategy that prioritizes the portfolio of business and identifies new sources of value.

What is critical here is:

  • Deciding how much to invest in the core business, business adjacencies and new business models.
  • Identifying where and how to engage customers, partners and competitors.
  • Examining the possibility of opening new revenue streams by tapping into GAFA (Google, Amazon, Facebook, Apple) platforms to serve existing customers and prospect new ones. This could have the additional benefit of increasing customer interactions and generating the data needed to expand cross- and up-selling opportunities.

Experience teaches us that while it might be tempting for insurers to accelerate their progression by targeting futuristic growth opportunities, this is unlikely to be a successful strategy. I recommend they take a more logical, sequential approach, developing the capabilities to realize current opportunities first. Once these capabilities are scaled and sustainable, target ecosystems and new risk exposures to get to the next level.

Designing

Through living services, insurers can drive remarkable experiences and act on insights mined from customer and business analytics in real-time.

Insights can help insurers shift from pooling and pricing risk based only on historical data, to automatically assessing and pricing risk directly, individually and in real-time. Move beyond simply providing customers with insurance cover to also offering risk management solutions that address customers’ real goals—all underpinned by adaptive technologies and AI-driven interfaces that interact with customers and employees in more natural, human ways.

Lemonade, a New York start-up, uses AI, automation and behavioral science to settle renters’ and homeowners’ insurance claims quickly, simply and without human intervention. It currently holds the world record for the fastest claim payment—three seconds.

Building and iterating

Intelligent, flexible platforms enable insurers to prototype, deliver and scale innovative services focused on outcomes. This means drawing on a set of new cloud-based technologies that support strategic actions such as:

  • Opening and sharing application programming interfaces (APIs).
  • Adding robotics and AI capabilities.
  • Embracing radical security to reduce exposure to and defend against cyber-risks.
  • Using Agile to implement change and augment capabilities.

By fostering an iterative mindset, insurers can manage big data in ways that optimize the customer experience across digital and physical channels.

Consider the partnership of online Chinese retailer Alibaba, insurer Ping An and Internet service provider Tencent to create Zhong An Online Property & Casualty Insurance, the first online-only insurer in China. Zhong An has a multi-billion-dollar valuation and offers more than 300 products. It claims to have written 7.6 billion policies for over 535 million customers, 150 million of whom signed up in its first year. Roughly half its business comes from selling shipping return insurance to Alibaba customers.

Connecting

By joining diverse ecosystems and sharing visions, data, distribution channels and value across a broad alliance of partnerships within and beyond the industry, insurers can achieve a powerful multiplier effect and compelling customer experiences.

This key area is about developing a dynamic, open ecosystem enabled by APIs and a modern IT architecture. It’s also about exploring blockchain data connections and cloud technology to connect employees and partners with meaningful customer data, and ensuring that data moves seamlessly and securely across channels.

Many consumers, especially those in the Gen Y and Gen Z age groups, have a strong affinity for GAFA brands. Nearly one-third would switch to Google, Amazon or Facebook if they started to offer insurance services. Partnering with organizations like these could provide access to large pools of potential customers, and create an environment, services and experiences that are more appealing than what an insurer can do alone. Working together, they can create a formidable alliance to drive profitable growth.

Sustaining

A fluid organization, in which a flexible, blended workforce is empowered to keep customers at the core of all planning and execution requires:

  • Leadership that exhibits and continuously shapes the vital attributes of a living business.
  • A resilient, tightly integrated culture with built-in vitality that embraces change.
  • A workforce of the future that includes new skills and roles such as data scientists, freelance workers for scalability of specialist skills, intelligent automation (bots and robo-advisors) to augment people and processes.
  • Design thinking to continuously re-imagine products and services through the lens of the customer.

The most important part of sustainability is becoming an agile organization. Fostering innovation and entrepreneurial skills is critical to finding new, relevant ways of engaging with customers. Extending the talent pool beyond employees, contractors and consultants to include specialists in key technologies using crowdsourcing and on-demand sources will significantly enhance an insurer’s agility. So will using DevOps approaches to roll out IT systems that improve business flexibility.

By becoming a living business and transforming the organization in these five key areas, insurers will be better positioned to address evolving risk, bolster value-added services and give new markets access to their services in trustworthy, highly relevant ways. The time to look at this model is now, when digital disruption is putting the traditional business model under pressure and simultaneously creating exciting new opportunities.

To learn more, read “Insurance as a Living Business: Explosive Growth”

 

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