Transforming a traditional insurance business: Is it even possible?

Posted on: Jul19, 2019 by Franck Coisnon

The insurance market is in the midst of the biggest shake-up in its history thanks to three major forces acting in unison: changes in society, technological advancement, and regulatory changes. With such disruption come the disruptors: the InsurTechs chipping away at market share and the GAFAs [Google, Amazon, Facebook, Alibaba] —global, digital-first enterprises with exciting new business models and a ready-made customer base.

So it’s timely that Atos has released a whitepaper entitled ‘The Digital Business Continuum: Enabling Organizations to Thrive Amidst Disruption’. Highlighting what disruption really means it suggests,

“We have seen the “rise of the platform economy”, with many of these new business models deriving value by brokering and orchestrating people, services and data.’

For evidence of this in insurance, you only have to look at the headlines. For example, the news that Amazon, JP Morgan, and Berkshire Hathaway are entering the US healthcare market together.

But if this is just the start of things to come then where does that leave traditional insurance companies?

Surely industry transformation on this scale requires a response: Organizational transformation that will yield new partner ecosystems and significant improvements in product/service delivery, operational excellence, and customer experience. Yet to be successful (and not just a last-ditch attempt to rescue an ailing operating model) what should organizational transformation actually look like?

To answer this question you have to take a step back and look at the state of the insurance market today:

  • It’s complicated—products are hard to understand and legacy systems stifle innovation.
  • It’s conservative—focused on the long-term with customer experience a secondary concern.
  • It’s conflicted—companies recognize the need to change but are not able to do so.

This last point is crucial. Unable to change (thanks to legacy systems, a high cost base, organizational bias towards products not customers and traditional cultures), insurers are destined to lose out to more flexible rivals. Yet one-shot digital transformation will not suffice. That’s because regulations are repeatedly updated, technology is constantly advancing, and societal change marches on unimpeded.

Quoting the lack of success with one-shot transformation, the Atos whitepaper goes on to say, ‘widespread desire to transform digitally was set against a backdrop of failure, with 84% of companies not managing to achieve the expected benefits.’

So back to the key question, ‘If organizational transformation is to be successful, what should it look like?’

Thankfully, the Digital Business Continuum paper provides us with a framework for transformation, including some hyper-relevant starting points.

Bearing in mind the particular characteristics of the insurance market above, changing the whole culture of an organization will take time. Perhaps too much time. But read the section on Organization Structure in the Atos whitepaper and what stands out are two starting points that seem as though they were written for traditional insurers:

1. Incubators and spin-offs

To provide the level of autonomy a business needs to innovate, ‘it may be necessary to “spin-off” a completely independent company… The reverse is also true: one way for larger organizations to bring disruption and innovation into their business is by working with smaller companies. This can be through incubators and engagement programs (like the Atos FinTech program) and also through carefully selected mergers or acquisitions.’ Such moves will support the transition to a “fail-fast” culture that is essential in every innovation process.

2. Community, crowd and the gig economy

Organizations committed to continual change benefit from bringing in extra resources as and when they need them. This could be “as simple as a pool of passionate end-users who are willing to test and provide feedback about alpha or beta versions of a product”. It could be crowd-sourcing contests. Or it could be harnessing the gig economy for short-term innovation assignments.

So there are opportunities to change. These starting points are much more likely to give insurers initial improvements in innovation, efficiency, and customer experience. They also provide the springboard for a much wider organizational transformation.

What this demonstrates is that, as the nature of the industry transforms, so should the way we think about transformation itself. It is not a one-off exercise. Amazon has proven that markets are there to be disrupted again and again. If there is one thing the Digital Business Continuum teaches us, it’s that you can transform a traditional insurance company if you allow that transformation to take place again and again.

Download the The Digital Business Continuum – White Paper

Watch the White Paper teaser video

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About Franck Coisnon
Group Industry Director and member of the Scientific Community
With more than 15 years in the Financial Services sector, Franck is an industry expert with a special emphasis on Insurance. He has led several transformation programs as a management consultant in both business process improvement and risk management areas. Within the Financial Services market he is leading the solutions for Application Transformation, Robotic Process Automation and Insurance. In these areas, he is responsible for thought leadership, Go-to-market strategy, teaming with partners and developing solutions sales. His overarching objective is to support Financial Services companies to achieve successful digital transformation through deep business expertise, Fintech technology insights and consultative selling.

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