Digital adoption had been accelerating across every aspect of our lives. Then COVID kicked that into hyperdrive. Couple that with macro trends like climate change, shifts in consumer lifestyles, values, and demographics, and you have the makings of a perfect unpredictable storm of change. To survive this digitally supercharged storm over the next 3 years requires becoming a 2.0 Insurance company.
Insurance 2.0 – Heart, Soul, and Spirit
Leaders on the innovative edge of the insurance are anticipating those coming changes and proactively developing what is fast becoming Insurance 2.0. An industry born customer-centric. One that creates value by harnessing accelerating digital capabilities to meet customer expectations and provide value as wave upon wave of change crash into and build on each other. Insurance 2.0 embraces those waves and is becoming part of them.
At Its heart, it is highly personalized to the specific needs of the insured based on the context and environment they are living and operating within.
Its soul is designed to help customers holistically achieve the personal and business goals essential to their success while helping them by making risks understandable and transparent and by predicting, preventing, mitigating, and helping them recover from the risks that stand in their way.
Its spirit is digital. It is part of the digital ecosystems surrounding insureds. It interoperates with other ecosystem components to engage with customers and provide personalized value-added services that help insureds more effectively achieve their goals. And, it is guided by an agile test and learn culture and strategy that rewards innovation over the protection of the status quo.
The Digital Spirit
Insurance 2.0’s spirit is based on the continual evolution and innovation of digital technologies. It starts with Moore’s Law which is constantly improving performance while reducing the cost of digital components and the capabilities derived from them. It includes mobile and IoT devices that connect the physical and digital worlds. And, next-gen data and analytics.
Digital Solutions, API’s & Microservices, and the Platforms that support and leverage them are also key components. Each of these components is constantly evolving. And, as they bind with other components, they form platforms and ecosystems that are being continually enhanced. Part of that enhancement is making the ability to interoperate with them frictionless.
However, the most important part of the digital spirit of Insurance 2.0 isn’t these shiny objects. It’s the culture and the minds that see opportunities or challenges and ask what could be, and are willing to risk trying something new rather than stay complacent with what is.
4 Notices of Loss for Non 2.0 Companies
Insurers that are not willing to embrace Insurance 2.0 fully will find themselves losing ground quickly over the next 3 years. Here are the notices of loss they will receive that they are losing ground.
First will be a small but growing number of customers leaving them to go to carriers and brokers that engage those customers within the digital ecosystems in which they conduct their lives and businesses and that provide better experiences and value-added services.
The Second will be the inability to attract and retain employees that have the hunger, knowledge, and skills to build Insurance 2.0 companies.
The Third notice will be a steady decline in company value as growth, profits, and valuation decline compared to Insurance 2.0 companies.
The Fourth will be when the company is acquired for bargain-basement prices because they lack a competitive growth, profit, and digital infrastructure profile.
The Survivors Guide to Insurance 2.0
It isn’t too late to start. However, the point of no return is likely less than 12 months away. Depending on the digital state of your company you may choose to focus on different steps. These do not have to be done in tight sequential order.
Based on your team and company environment you can initiate work across multiple steps as long as there is coordination across them. Here are the steps:
Step One: Discovery
Build a comprehensive knowledge bank of the trends, relationships, and actions being taken in the market that have a direct impact on your company and business lines. Build a digital war room/knowledge base where you can visibly categorize and display these bits of information. There are plenty of charts out there that show how fast digital adoption is accelerating. There are also lots of news articles and presentations about what the digital leaders in insurance and InsurTech are doing. That includes the products and partnerships they are bringing to market and the digitally powered customer experiences and products they are launching. Additionally, it’s quite easy to find published reports about changing customer expectations and buying preferences. The ability to show and walk through that information with key execs and stakeholders visually is extremely powerful.
Step Two: Market Scenarios
Bring the information you gathered in Step One together in a focused presentation. Address the specific market you are in. Develop 2 – 3 scenarios about what the market environment will be as the trends and competitive moves already underway grow in market adoption and maturity over the next 3 years. Remember you are only seeing what is in the market today, not what’s under development. Three years from now the leaders will have dramatically refined, expanded, and innovated what they have in play today. Make sure you include, distribution, customer engagement, product and business models, and core processes.
Step Three: Competitive Benchmark
Compare your current state of digital readiness and the initiatives you have underway against those market scenarios. Identify 3 – 5 areas where you have the greatest strategic and competitive exposure. Then develop impact scenarios on your growth, profit, valuation, and employee recruitment and retention based on your current state of digital investment and readiness.
Step Four: Meet with Leading Technology Partners and Analysts
Leading technology firms, InsurTechs, and analysts have a much deeper and more current understanding of the initiative’s insurance leaders have underway. They can share some of this knowledge without compromising nondisclosures. They can also give you a better understanding of how to leverage state-of-the-art methodologies and tools to accelerate digital initiatives and transformation while reducing the cost and risk.
Today’s methodologies and tools can reduce time to market, and accelerate time to value. They can condense what might have taken 12 to 18 months several years ago to weeks. These leaders can also provide high-level assessments of what it will take from a time, resource, and budget standpoint to address the key areas you need to address competitively. Make sure this includes bringing your data and analytic capabilities into line with Insurance 2.0 requirements. That means the ability to not only leverage the data you have internally but also the ability to continually enhance your data and analytics by leveraging new sources. The ability to leverage multiple types of data in real-time data will be a key competitive differentiator. This ability will be fundamental to key initiatives across your value chain and to your future.
With this insight, you can refine your recommendations and develop a rough estimate of what it will take to implement some of the key initiatives you have identified.
Step Five: Recruit Executive Sponsors
Trying to change corporate culture and strategy from the bottom up rarely if ever works. You need to have the support of at least one senior exec or board member that can champion this to other key decision-makers.
The sponsors you want are the ones that can provide more than talk. They need to have enough standing and clout to secure funding and resources. They also need to be able to proactively support you in fending off status quo protectionists who work openly or behind the scenes to undermine the changes you need to make. Your sponsor also needs to proactively build failing forward, stage-gate implementation, MVP, and Agile concepts into your company’s strategy and culture.
Share with them what you have learned. Introduce them to some of the amazing companies and people you have met that are building 2.0 solutions and companies. Get their input on your recommendations and have them come with you when you start to reach out to other execs.
Step Six: Business Unit Buy-In
In many cases, we’ve seen innovation and transformation teams develop proof of concepts without getting buy-in from the business units. Then, they wonder why the business unit didn’t adopt and scale those POCs. Simple. They see it more as a threat or risk than a value add to their operation.
Start by sharing with them the business outlook you’ve put together. Have your exec sponsor as part of the discussion. Get the BUs input on the impact of the scenarios you’ve developed. Ask them how those would impact their ability to sustain a competitive advantage for your company under the current state of their digital investment. Then ask them for their input on the recommendations you have developed. Ask them to help you identify measurable business outcomes that they agree would make implementing a pilot worthwhile.
Refine your overall proposal with their input. Rinse and repeat with other business units.
Step Seven: Get Started On No Regrets Initiatives
There will always be some low-hanging fruit. These are initiatives that everyone agrees need to be done and that can be done quickly with little risk and at a relatively low cost. These should be defined and executed in an agile fashion. They should have clear measurable business contribution goals that the business units have agreed upon. They should also be designed to support the skill and cultural development the organization must undertake to remain competitive.
Step Eight: Make Heroes
Changing culture and building support and momentum for change requires making heroes. Heroes are made by the actions of your company’s most senior leaders. To make true heroes that can change culture requires more than just kind words. It requires a very public acknowledgment of what they did, why it is critical to the company’s future, and recognition of the internal and external challenges they had to overcome to achieve what they did.
Beyond that, the recognition should also come with public communication of what is next for the individual or team in terms of next steps and increased responsibility and budget. Take even the smallest wins from these initial projects and make a big deal out of them and the people and teams that helped make them happen. That sends a clear message to the guardians of the status quo. “This is the future of the company and management is fully behind it. Rather than stand in the way, help move it forward or find somewhere else to work.”
Step Nine: Building a 2.0 Business and Technical Architecture
Digital Ecosystems are here. They are growing dynamically in market and technical power, and capabilities. That means that the businesses that expect to survive and thrive within them need to embrace and be able to support continual dynamic change.
Within these ecosystems, there is a continual race to provide ever greater value to customers with ever greater efficiency. That means continually updating user engagement and experiences, distribution avenues, product and business models, and business processes as new more effective partners, solutions, and value-added components emerge.
As discussed earlier, everyone in the insurance value chain must become a value-added component within those ecosystems. That means business structure, models, and processes need to be continually revisioned as part of those dynamically changing ecosystems.
One of the biggest business changes will be shifting from a business line by business line, and product by product focus. The focus in Insurance 2.0 companies will be on creating and deriving value from providing a more integrated suite of products, experiences, and services to the end insured. That means measuring and rewarding the business teams based on aggregate revenue from the customer rather than just on individual products.
This requires a cloud-centric architecture. That doesn’t mean all the legacy solutions need to be in the cloud, although that would make life far easier. It does mean that the elements of the business that will be most subjected to dynamic change must be. The architecture must be one that relies on APIs and Microservices. Beyond that, it must be designed to leverage platforms that can support interoperable & interchangeable components across the entire insurance value chain and the customer experience.
Building an internal digital ecosystem with common platforms that span a parent company, its subsidiaries, the business units within those, and their core processes will become a key competitive differentiator. Having such an internal digital ecosystem will dramatically reduce the time and cost required to remain competitive in a 2.0 insurance market. That way learnings, partnerships, components, solutions, API’s and Microservices, Data & Analytics can now be shared quickly and easily across organizations. This approach has to be built into the future vision and strategy for the company.
Step Ten: Digital Transformation 2.0
Now it’s time for your company to become bold. You really won’t survive by just polishing the status quo. Not in this digitally fueled constantly changing and innovating market. Once you have a few successes under your belt and the support of the exec team, it’s time to up the game. You now have enough information and support to lay out a broader more innovative vision for transformation and kick off multiple projects underneath that umbrella. Find people and organizations across the company who were excited about this directional change. Work with them under the broader vision, to bring the ideas that they support into your 2.0 Transformation portfolio.
Remember, speed to value is critical here. Make sure those initiatives are small and can be done incrementally and will return clear business results that leadership will buy into. Leverage state-of-the-art methodologies and tools. Set expectations that these will be test-and-learn initiatives. Reward even those that don’t hit the ball out of the park as long as the learning from them benefits the company’s cultural, strategic, and technical growth.
Successful digital transformations follow the guidelines outlined above. They are guided by a vision, strategy, and priorities that are continually updated with market intelligence and the emergence of new technologies, partners, and solutions. They have multiple small initiatives going on across the company. Learnings are shared across groups and across the company. In these companies, management sees digital transformation as a continual state, not an endpoint. And, senior and middle management goals, KPIs, and compensation include supporting this ongoing work.
Let’s get on with it.
No, it’s not easy. However, it is doable. It can be done in bite-sized chunks that the organization is willing to buy off on and demonstrate value and organizational competence. A few projects here, some other projects there, and pretty soon you are building organizational momentum. You are becoming an Insurance 2.0 company.
Don’t wait. This train has left the station.
Ps: If you aren’t planning on retiring any time soon, and you are in a company that is unwilling or unable to embrace Insurance 2.0 in any meaningful way, it’s time to move to one that is.
Your thoughts and comments appreciated.