Here in the United Kingdom, the weather has been pretty miserable recently, as insurers are all too aware. We’re looking for some long overdue clear skies. In that spirit, I’d like to look at how UK insurers can face up to the challenges I’ve identified in previous blogs. But I must emphasise that some innovative thinking is going to be required.
First, let me recap my argument. It’s simply that having adopted the new technologies and business strategies early on, UK insurers now find themselves facing a new industry disruption driven by a rapidly changing customer, competitor and technology landscape. It’s a market disruption that will require them to rethink their “advanced” business and technology models quite profoundly. In the face of this looming challenge, I see a worrying mixture of complacency and a sense of constraint.
The tried-and-trusted way of coming up with new thinking is to develop a strategy and vision, and then an execution plan (usually over several years) to achieve them. I’m starting to think that this approach simply won’t be fast or radical enough given the nature of the challenge. Customers have become used to speed, for one thing; and the new entrants everybody fears are starting with clean slates and none of the baggage, economic or otherwise.
Explore the concept of Big Bang Disruption and its influence on strategy.
The legacy problem—of mindset, of technology, of operating model—is a real one for insurers. They simply have to look beyond it and build new, flexible, agile organisations that are designed to deliver the sophisticated customer experiences (rather than simply good products) that customers are demanding. They will need to do so at a fraction of the cost, leveraging new technology architectures/ models like cloud computing. Many insurers I am talking to are looking for ways to ring-fence and optimise their existing businesses and infrastructure, and transfer as much of their existing data and ultimately customers onto the new one over time.
So rather than transformation, are we now entering the era of reinvention?
I am starting to think reinvention is both a sensible approach and one that’s feasible. It will need the right kind of leadership incentivised to drive the profound change that is needed. I think the technologies (applications, infrastructure services and tools) now exist to make this type of change a reality.
But, make no mistake: this is not for the faint-hearted. It’s going to take bold leadership and sustained commitment. Our survey suggests that multi-line insurers are planning on investing on average €51 million in digital transformation. Perhaps this is a controversial point of view, but for big insurers doesn’t this amount seem fairly small for such fundamental and important re-configuration?
To conclude, next time I’d like conclude by looking at the potential solutions a little more thoroughly.