Most carriers are still glued to their core activities.

Uncertainty and danger often paralyze people. The fear of encountering something even more threatening can stop people from taking any action. It’s the same with companies.

Industries around the world are having to confront the possible effects of digital disruption. While some bold organizations are rising to the challenge, many others are holding fast. At best, they’re waiting to better see how to respond. At worst, they don’t realize how much they need to change.

Big insurers have built their businesses on their ability to carefully weigh risks and to move with caution. Many are responding to the threat of digital disruption with such apprehension. They often remain glued to their existing core capabilities despite, perhaps, having piloted and launched a few digital initiatives.

The symptoms of such stasis are common (See illustration below). Business leaders often lack growth-focused mindsets, many employees are not sure whether they are part of the organization’s long-term plans and efforts to transform legacy systems are frustratingly slow. Furthermore, plans to grow core applications and introduce new technology into the organization are frequently stymied.

To successfully respond to the challenges of digital disruption, companies need to be proactive. They shouldn’t stall. Instead, they should start transforming themselves into what we term a “living business”. Such living businesses achieve sustained growth by continuously adapting to the evolving needs of their customers. They ensure that they remain totally relevant to their customers.

The path to becoming a living business is challenging. Our research shows that companies achieve the best results when they pivot their whole organization towards becoming a living business. This requires them to manage four key processes at the same time.

  • Transforming the core: Releasing capital by reducing costs through standardizing processes, shifting to shared services, migrating to cloud providers, and automating administration and customer engagement.
  • Growing the core: Improving profitability by gaining better insights into customer behavior and preferences, delivering personalized customer experiences, enhancing digital marketing and content management, and promoting data-driven decision-making throughout the organization.
  • Scaling the new: Accelerating the comprehensive roll-out of emerging digital businesses by devising new business models, introducing innovation architectures, securing ecosystem partnerships, engaging in venture-funding and acquisitions, and fostering agile, responsive workforces.
  • Making a wise pivot: Carefully transforming the organization into an agile living business by realigning management responsibilities, shifting the allocation of capital from core to new activities, decoupling digital resources, and encouraging key leaders to embrace constant change.

The wise pivot is at the heart of the transformation process (See illustration below). It ensures that an organization always has optimum resources to transform itself into a living business.

Some insurance executives might contest that implementing new business models and generating revenue from them is much more difficult in the mature industries, such as theirs, than in fast-growing, asset-light, sectors. This is undoubtedly correct.

However, some big European insurers are already making great strides in transforming themselves to become living businesses. The assistance units of Allianz and AXA as well as Generali’s Europ Assistance, for example, are growing much faster than their parent companies. They’re already big businesses. Allianz’s assistance unit, for instance, generated gross premium revenues of around €8,5 billion in the past financial year.

These three big insurers are successfully pivoting their business models and already display some of the characteristics of a living business. They’re each:

  • Transforming their core operations, most notably by moving from a focus on individual countries and a regional or global approach;
  • Growing their core businesses by expanding geographically;
  • Shifting resources from core activities to new businesses initiatives; and
  • Scaling up their ecosystem partnerships.

In my next blog post, I’ll discuss some other progressive insurers that are well on the way to becoming successful living businesses. In the meantime, take a look at these links. I think they’ll find them useful.

Disruption need not be an enigma

Insurance as a living business

Taking the agile transformation journey

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