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There is a famous saying, widely attributed to Einstein: “Everything must be made as simple as possible, but not one bit simpler.”

No matter who said it first, the idea it expresses is powerfully relevant across the life insurance industry today. Complexity is rising for life insurers on multiple fronts, from policy administration to internal operations. Things simply take too long and cost too much to maintain. Left unchecked, this complexity could leave carriers hobbled at a time when organizational agility is more important than ever, as consumers continue to question the value of life insurance products. While the causes of falling life insurance sales are many, complexity plays two important roles in this bigger story.

First, complexity impedes growth and the ability to execute. More than ever, insurers need to transform and grow their core business to drive investment capacity and to generate the fuel for growth, as they look to innovate and evolve their strategies. Second, complexity hinders standardization, which is required to unlock the benefits of automation—a crucial tool for insurers looking to shrink operating costs and improve the customer experience.

This makes understanding the drivers of complexity a matter of great interest for life insurers.

Accenture’s analysis of the industry suggests that there are four fundamental drivers:

1. Digital disruption: “Digital” is transforming large portions of the entire insurance industry. There are significant rewards for insurers who adapt efficiently. But, in the short term, the transition to all things digital is adding complexity..
2. Changing customer expectations: Customer expectations for a good experience are transcending industry boundaries—a pheomenon we call “liquid expectations.” Increasingly, when someone uses Amazon or Uber, they expect the same personalized experience where ever they go. These expectations are increasingly driving the agenda of many life insurers.
3. Segment and channel expansion: Complexity is growing as life insurers add new customer segments and channels are added. Each has its own unique personality and operational needs.
4. A widening array of products: Aligning and integrating distribution across an ever-widening array of products is a complex job. Carriers are also creating complexity as they increasingly leverage the partner ecosystem to enhance their offerings with value-added services.

Of course, this is not to say that all complexity is detrimental for life insurers. Simplifying for the sake of simplifying is dangerous. Yet carriers must take pains to distinguish between good complexity, which creates operational efficiencies and variety valued by customers, and bad complexity, which creates variety that customers don’t care about and reduces organizational agility and efficiency in exchange for no benefit.

Life insurers that minimize bad complexity while maximizing good complexity—that conquer their complexity, so to speak—share certain attributes. They control how many products and services they offer. They evaluate whether new offerings are worth the complexity they’ll introduce. They minimize complexity in their internal operations. And, finally, they focus relentlessly on offering the “right” level of complexity to meet customer requirements.

Controlling complexity will make life insurers more efficient today and position them to grow tomorrow. Next time, we’ll take a look at how they can measure and manage their complexity.