Asia Insurance Review recently co-hosted a breakfast roundtable with DXC Technology where its Chief Technology Officer, Global Insurance Business, Brian Wallace, discussed the theme of “Raising your Digital Insurance IQ” with an audience of regional executives. It became apparent that insurance companies are in a race to transform into more agile organisations so as to consume and be consumable in today’s sharing economy.
Insurance companies have largely similar strategies when it comes to a digital plan and so it boils down to effective execution, said Mr Brian Wallace, who engages insurance clients the world over on digital transformation and disruption as CTO for Global Insurance Business at DXC Technology.
“Almost everyone in every region is executing more or less the same strategy so it is about the speed of execution, and picking the right thing at the right time and doing it really well,” he said.
Three crucial signposts
Mr Wallace said insurers need to identify where they are on the road to digital transformation, while identifying three crucial signposts for those on the journey.
1) Customer experience and engagement
The first relates to user experience and engagement, which is an area insurers are increasingly trying to outdo one another.
While pricing matters to some extent, insurers do not want to play the commodity game and hence, many choose to compete on customer experience.
“The basic proposition that if something goes wrong we will write you a cheque, is something that customers can get from your competitors, banks or grocery stores. So companies are instead positioning themselves around wellness, well-being, prevention…and some are beginning to engage customers on a daily basis.
“Typically, someone buys a life policy at 20 and with some luck they wouldn’t need it till 90, so in those 70 years your customer can easily be picked off by others.”
2) Understanding the customer
Customers are more empowered today than ever before and the world of insurance is shifting from product-centricity to customer-centricity.
“While it is an easy concept to utter, it is hard to do, especially for insurers who are structured in silos in terms of their organisations and products.”
But in order to be customer-led, insurers need to offer solutions that are relevant and timely. In that regard, customer analytics, artificial intelligence and machine learning become more crucial.
3) Consumption
The shift in customer power also means that the old company-centric way of doing business is becoming less effective.
Traditionally, insurers often developed in-house IT systems, often with large and capital-intensive efforts. A new view is emerging, one that requires insurers to rethink their relationships with the customers and how they engage with them – including the option to source more innovative services from outside the enterprise.
By adopting an “outside-in” approach and looking beyond their own operations and data sources, insurers can offer a richer degree of customer engagement by segmenting their markets and pricing their risks better, among others.
“It is the whole notion of consumption from being the creators of capability to integrators and aggregators, and how do we plug ourselves into that API (application programming interface) as part of a service economy, as well as how do we consume from it,” said Mr Wallace.
Culture
Consumer culture
The insurance industry has proven to be very resilient over the decades and has been selective in what new trends it chooses to adopt.
But the advanced consumer mindset today has pushed insurers to transform themselves, with the insurance industry swept up in the wave of change.
“The external culture is a major driver of change but internally, we still have a very difficult transformation ahead of us. We’re still an inside-out industry, we focus on ourselves, our systems, our products and our silos.”
“So we have to completely turn ourselves upside down and become an outside-in company and everything has to be about the customer – how easy is it to engage and do business with us is what is going to drive the transformational change.”
Corporate culture
So how best to effect this transformation that impacts the entire value chain?
As effecting change en-masse is just too big, companies could adopt an “experiment, learn and iterate” mindset, said Mr Wallace.
“The whole notion of being agile is about recognising that by the time we figured out the requirements and build and test something, the world has moved on and we’d have made a US$10 million mistake. We need to start making $100,000 mistakes and building off from that. So what’s required is that kind of agility to try stuff and see what works and what doesn’t, what we can take into a different context and wrap a different model around it.”
“So find that part of your organisation that wants to be innovative and allow them to find something that is successful and change the culture through experimentation and success. That is what I see will work rather than a massive change management programme.”
Working with new partners
The InsurTech world can be a valuable partner as insurers seek to transform, but the latter’s lack of agility often makes it difficult for insurance companies and start-ups to work meaningfully together.
For instance, start-ups can come unstuck very early on when getting clearance from the legal departments of insurance companies.
“They can find it difficult to get past the legal contracts and also keep their IP for example, so the culture of the organisation is important.”
“And if they get past the legal people, a start-up needs to start generating a revenue stream within weeks or months, while the insurer is thinking of implementing the project over the next 18 months or putting it into the following year’s budget, by which time the start-up would probably be dead.”
Mr Terrence Cummings, Head of AIA Vitality attests to the challenge of implementing new ideas in large insurance companies. He recalled when AIA tried to embed the “Vitality” programme after a strategic joint venture with South African insurer Discovery, thus combining AIA’s 80-year history of life insurance in Asia with Discovery’s wellness-based expertise to design protection products linked with wellness incentives.
“It was well-supported by both CEOs and housed within our headquarters but even then, it was viewed as something of a third-party. Getting through AIA bureaucracy was incredibly difficult, but when we eventually made Vitality into a unit of AIA, that’s when we made good progress in the last few years.
“So imagine the obstacles a true third-party InsurTech faces in trying to get something done in a giant incumbent insurer – unless it’s a niche thing that involves only a small number of people. But to introduce something truly transformational is very daunting,” he said.
Mr Wallace believes technology companies like DXC Technology could play a role in bridging some of the gaps between insurers and InsurTechs, through a tripartite approach.
“Instead of selling to the insurance companies, I tell the InsurTech why don’t you come and sell to me since I’m creating a digital platform and looking for InsurTechs that I can plug into on my platform. Plus, I do business with all these insurance guys so I have access to them and you don’t have to worry about losing your IP…so I think IT providers, start-ups and insurance companies can work successfully together.”
Mr Wallace concluded that insurance companies have to develop new core capabilities and ideas to better understand and engage with their customers, while being agile enough to consume and work with others via the concept of APIs. A
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