Change Your Culture and Successful Digital Disruption Will Follow

According to the Insurance Information Institute, the first piece of insurance-related legislation in the United Kingdom was enacted in 1601. While specific elements of the distribution, underwriting and claims management processes have changed over the past 416 years, much of today’s industry and related practices have emerged from this legislation.
But with new Insurtechs entering the marketplace—changing the landscape of how traditional insurers engage with customers—much of what has worked for the past four centuries is becoming obsolete. As a result, and in order to remain relevant, legacy players must transform their traditional business processes to meet evolving customer expectations and needs.
It Starts at Home
Business processes and company culture are symbiotic in nature; one cannot be changed without adjusting the other. This is particularly true when one considers that many insurers are actively encouraging customers to share more of their personal data, yet paradoxically are failing to disrupt their current customer engagement model.
An internal cultural adjustment must be made to support the influx of new data. For many, the first step is to institutionalise the role of chief customer officer. Yet, according to research from PeopleTECH, only 11% of FTSE companies have a chief customer or equivalent officer and only 5% have someone with a customer-focused remit. Research indicates that the insurance industry is failing to meet even this low market average. To become truly customer centric in a modern digital environment, it will be essential to have a chief customer officer who is able to communicate the benefits to customers of sharing data, improve the customer experience and encourage others to get onboard.
But the chief customer officer is just the tip of the cultural change iceberg. When it comes to broader technology transformation projects at legacy insurers, firms must look outside their traditional leadership team—many of whom are older and often unknowingly stymied by institutional thinking—when identifying relevant project managers. Leaders, such as chief data scientists and chief digital officers, must be empowered in order to deliver successful transformation projects. Digital transformation cannot be someone’s second job. For many insurers, this will be a significant departure from current corporate culture and their business processes. Without these changes they will fail to compete in the future marketplace.
All or Nothing
When it comes to financial planning, most legacy insurers operate on a three- to five-year business plan. As more Insurtech start-ups enter the marketplace, however, many legacy insurance executives are beginning to realise that this approach is putting their organisation at a competitive disadvantage.
Why is this? Within their current business plans, most legacy U.K. insurers earmark less than two percent of turnover for technology. Legacy insurers are simply unable to offer the same competitive technological advantages, namely a digital-first and seamless customer experience, in comparison to the offerings of Insurtechs.
In order to remain relevant, legacy insurers must begin to take Insurtech start-ups more seriously, which means making significant financial investments to improve their own technological capabilities. For some insurers, this will involve making acquisitions to acquire the necessary technology or launching new, satellite digital business units, such as Munich Re’s Mundi Lab and Aviva’s Digital Garage. For others, particularly smaller insurers, it will mean partnering with third-party vendors that can layer on advanced features, including artificial intelligence and machine learning, to their existing enterprise system. Regardless of the solution, it is important for all traditional insurers to conduct a holistic review of their organisation and identify customer-facing friction points. Once the most pressing pain points are identified, executives can get to work investing in relevant technologies that will improve business processes and deliver the greatest return on investment. Only then will customer satisfaction and consumer advocacy match that of other more successful industries.
Delay at a Cost
According to data from Bain, most U.K. insurance customers are willing to share personal data with their insurers. When looking specifically at customers between the age of 25 and 34—a prime target of tech-based insurance start-ups—close to 80 percent indicate that they are either “open” or “selective sharers” of personal financial, health and other data with insurers.
Traditional insurers will need to incentivise and demonstrate value to customers that data share. Deeper customer data insights, combined with culture change and application, should create the perfect storm for the industry to deliver what it has been promising for over a decade. The market leaders for the future will be defined by their ability to exploit this fantastic opportunity.
Mark Broadhurst is vice president and head of insurance EMEA at Intellect SEEC. He can be contacted at mark.broadhurst@intellectdesign.com.