Systems and processes that once helped insurers improve their efficiency can now become stumbling blocks that stifle innovation and competitiveness.

Many big insurers are investing heavily in digital technology to fend off new entrants to their markets and seize emerging business opportunities. All too often, however, these companies struggle to achieve their objectives. They don’t get the returns they expect from their spending on digital innovation.

Why is this? Sometimes insurers fail to implement the correct digital strategies or they don’t allocate sufficient resources. More often, however, carriers don’t change their operating models to support their digital ambitions. Systems and processes that improved the efficiency of organizations in the past can now become stumbling blocks that stifle innovation and competitiveness.

Insurers must ensure that their operating models are closely aligned with their digital business strategies. If they’re out of kilter, these companies will battle to realize the benefits of digital transformation. The promise of greater innovation, speed and flexibility will remain elusive.

Our cross-industry research found that more than 80 percent of executives recognize that an advanced operating model contributes to the strategic growth of an organization. However, only 22 percent say their operating model is helping them put strategic growth initiatives into action.

To close the gap between their digital business strategy and their legacy operating model, insurers need to take a hard look at some of their key activities. By overhauling these important aspects of their businesses, they can significantly improve the effectiveness of their digital strategies.


Organization: Success in the digital environment requires agility and speed. The organizational structures of many insurers are too cumbersome. They’re a drag on the performance of these companies. We found that only 15 percent of organizations that are market incumbents, with a long history in their industries, believe their operating models give them the agility they need to quickly respond to changing market conditions and thereby remain competitive. Traditional insurers, and other market incumbents, need to revamp their organizational structures to accelerate product releases, recruitment, legal approvals and the allocation of funds. Where rapid, extensive changes to an operating model might be too disruptive for an organization it can create a digital hub. This operates separately from the organization’s legacy structures and provides rapid and flexible support for its digital business activities.

Incentives: Conventional remuneration and incentives often put the brake on digital innovation. Executives and key employees are frequently unwilling to take risks or invest in long-term innovation for fear of jeopardizing their performance bonuses. CEOs need to take the lead and ensure that incentives are aligned with their digital business strategies. This may require changing performance measures, revising expectations and introducing new rewards. Adjustments should be ongoing to accommodate further changes in the operating model that might be required to support new digital initiatives.

In my next blog post I’ll discuss other areas of their businesses that insurers need to address to get their operating model in sync with their digital strategies. Until then, take a look at these links. I think you’ll find them useful.

Mind the gap: Can your digital operating model support your digital strategy?

Five steps to digital success in insurance.

Is your operating model holding you back from growth?

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