As companies turn their attention to life after the COVID-19 crisis, much time is spent developing return plans based upon some relatable version of the past. However, given the significant uncertainties, a fixed plan for the future is unlikely to succeed. Instead, companies could adopt a change mindset and build a new “muscle”: an enterprise-wide ability to absorb uncertainty and incorporate lessons into their operating models quickly.
Our sector analysis suggests that, by accelerating seven big moves, insurers can set themselves up not only to get through these leaner times and absorb the uncertainty but also to thrive beyond them. These moves aren’t new, as most insurers are already implementing some combination of them, but previously, they were about driving a step-change in performance. Now they are about survival. Accelerating such moves means not only implementing them faster but also increasing the value captured from them.
Initiatives must be linked to the highest business value and customer impact at stake, with systematic follow-up in place to ensure that value is being realized incrementally.
1. Prioritize a digital-first approach for customers and intermediaries
Insurance executives have been acutely aware of the need to digitize both customer journeys and intermediary interactions for some time. The cost involved and lack of a clear transformation journey linked to business value have hindered progress. Now, however, leading players are moving decisively on their direct digital-sales channels while also boosting agent productivity through better digital tooling and customer self-service.
For example, a large, traditional insurer in Asia pragmatically redesigned its sales and renewal process for agents in weeks. It leveraged Zoom and its built-in recording function to connect to customers, used photos and screenshots of ID documents and screen sharing to complete documents jointly, and implemented a third-party application for e-signatures. Others have focused on upgrading their customer portals to ensure smooth servicing and claims processes.
When going digital, another important element is customer-focused experience design. A recent consumer survey in Spain found that digital access in insurance had increased by almost 30 percent since the pandemic began but that the level of customer satisfaction with digital delivery was the lowest, compared with all other sectors. The number-one reason given for this dissatisfaction was tools being hard to use.
As cost pressures mount and customers demand faster, real-time feedback, the approach to digitization also needs to be truly end to end. Insurers will fail to meet customer expectations if they focus solely on their digital interfaces. The automation of back-office processes—particularly those for underwriting, servicing and claims—should be prioritized alongside the customer-facing shop window.
2. Adopt advanced-analytics-based decision making
Increased digital adoption by customers and intermediaries means more data. Most insurers, however, aren’t doing enough to harness these data through advanced analytics, even though the benefits cut across all areas of the business—from lead generation and underwriting to customer service, risk management, and claims handling.
During a downturn, prioritizing digital and analytics transformation has two key advantages: it can help management teams understand their businesses better and can improve efficiencies. The past two recessions led to large upticks in fraudulent insurance claims and customer churn. Data and artificial intelligence provide opportunities to counter this through improved underwriting, pricing, fraud-detection, and collection practices.
Data-driven lead generation and digital marketing are becoming core capabilities for both direct and intermediated insurers to drive customer acquisition. Existing and new data can also be used to identify major customer pain points, seek out and capitalize on cross- and upselling opportunities, and uncover retention risks. These insights could spell the difference between success and failure for under-pressure insurers.
A note of caution: the story of digital and analytics transformations shows that collecting data is one thing and that using it intelligently to maximum advantage is quite another. A clear road map of well-sequenced, priority analytics-use cases and investments linked to maximum business value and customer experience is needed to prevent data lakes from becoming data swamps. There are many examples of global insurers optimizing their data and analytics programs in elements of the value chain. A recent example in a less-developed insurance market is Croatia osiguranje, which clearly defined and executed an analytics road map linked to business value that has enabled it to enjoy the benefits at scale.
3. Reinvent the operating model for speed and cost
In the search for greater speed and efficiency, companies may need to consider agile ways of working built around smaller, cross-functional teams with delegated maximal decision-making power. This is even more crucial during times of uncertainty, when there’s an urgent need to respond to volatility and rapid change. Agile transformations yield improved outcomes, but they often come unstuck because they don’t touch strategy, structure, people, process, and technology—or they try to do too much at once.
End-to-end pilots that cover entire business units or customer segments are crucial for unlocking the investment and business commitments needed while enabling a direct measurement of the value realized. For Allianz Turkey, a shift to an enterprise agile model in its motor-insurance business simplified the number of layers in the organization from seven to three, increasing both the number of doers in the organization and the pace of decision making. The company also saw a significant increase in speed, on-time and within-budget delivery, and motivation and empowerment across teams. It has subsequently scaled the transformation across its organization.
Companies that have experimented with agile could move in earnest from pilots and isolated trials to agile transformations that cover end-to-end businesses or entire organizations. Doing so will both drive speed of decision making and create a flatter, more cost-effective organization built around what is truly required to serve customers in this new digitally-enabled market. Aligning the objectives, road maps, and delivery of faster, agile teams and stability-focused IT teams will be core to ensuring success.
4. Strengthen cyber resilience and operational-risk defences
The unprecedented shift to remote working since the start of the COVID-19 pandemic has increased the risk of cyberattacks, as hackers look to exploit security vulnerabilities. Cybercrime was already a fast-growing threat before the crisis, with a leading cyber insurer putting the increase in ransomware-attack notifications against its clients in 2019 at 131 percent of 2018 levels. In the first quarter of 2020 alone, the number of ransomware attacks increased by 25 percent.
As work-from-home models become the new norm, and insurers move more of their operations online, the insurance industry will be in a constant race to stay one step ahead of cybercriminals. Companies could invest in their defences and manage the risk through better monitoring of collaboration tools, networks, and end points. Leading players are already undergoing detailed reviews, including white-hat penetration testing, as well as investing in fraud detection and other operational-risk areas. Those that have been slow to act on the threat will now have to follow suit.
5. Double down on talent, including through acquisition of other companies
As the pressure mounts to attract, recruit, and retain top digital talent and capabilities, insurers in Kenya may have to look beyond traditional talent pools.
The COVID-19 crisis has opened up new avenues for recruiting high-potential, flexible talent, while changing valuations may present opportunities for acquiring such skills through the acquisition of tech companies that were previously out of reach. In global markets, we are already seeing evidence of this, and there may be similar opportunities in Kenya. In addition, finding new ways to support talented employees through continued learning, using a structured approach to match talent to roles that create value, and effectively scanning the market for opportunities could help insurers leapfrog competitors when addressing scarce-talent gaps.
6. Develop an ecosystem approach through partnerships
Ecosystems are interconnected sets of services or products that allow users to fulfill a variety of needs in one seamless experience. They are built around consumer needs and can secure customer stickiness and brand loyalty, create points of differentiation, generate new leads, and reduce costs.
In a given ecosystem, insurers can play roles of either orchestration or participation. Prime examples of orchestrators are Discovery, which uses partnerships to integrate noninsurance services into the insurer’s realm, and Ping An China, which arranges its ecosystems using its own subsidiaries. Orchestration generally requires a significant outlay of capital and resources, so it isn’t a strategic option for all insurers. Some insurers simply participate in the existing ecosystems orchestrated by others, often gaining access to new sources of leads. Each role has its advantages, and in practice, the roles aren’t clear cut: a single insurer can play both roles at the same time across different ecosystems.
Consequently, many insurance executives are looking beyond industry borders to understand the growing opportunities and threats that come from new partners and competitors in the ecosystems relevant to them, from mobility to healthcare and beyond. They are also expanding their core businesses from aggregation to prevention, mitigation, and related services. Many insurers, however, still struggle to build the technological and organizational foundations, as well as the necessary partnerships, to generate value from their ecosystem approaches. Partnering allows insurers to offset any lack of internal capability in their quests to offer novel products and services.
Another trend, which began in Asia and continues to gather speed, is the rise of “super apps,” such as WeChat. In South Africa, several financial-services players are attempting to follow these approaches, often linking super apps to their reward programs. Discovery has built notable brand strength through its customer-rewards program and is using it to cross-sell a variety of other products, including a recently launched digital bank. First National Bank, Vodacom, and, more recently, Nedbank with Avo are following suit.
The opportunities presented by trends such as remote working, digital interactions, digital shopping, and digital health, which are being accelerated by the pandemic, offer insurers an opening to rethink the potential of even wider ecosystems and partnerships.
A clear action plan and mindset shift for building resilience
The COVID-19 pandemic and its associated recession haven’t changed the game but rather have brought forward—and created greater urgency around—the digitally-enabled future that we were already anticipating and that fintech disruptors have been creating. With customers more ready and willing to say goodbye to old ways of interacting and transacting, there is little point in developing return plans based on the old normal. Insurers should focus instead on developing new organizational abilities to operate within uncertainty, including being ready to change and pivot direction at pace, while also setting long-term plans based on structural shifts. Those insurers with an optimistic, solution-focused mindset that adapt to changing customer expectations and are willing to rethink traditional business models to harness the full promise of digital will be more likely to emerge from the current crisis in a strong position. The key will be to focus on customers and business value, not the COVID-19 pandemic, and to look beyond survival to long-term sustainability.
