The insurance industry is facing a very uncertain future today. While its role in some lines of business is supported by legislation or tax advantages, more and more consumers in the developed markets are questioning the need for historically complex products that are perceived as neither fit for purpose nor value for money. Emerging markets with their large and rapidly growing affluent sectors provide some relief to this gloomy outlook, but the ability of established insurers to “own” this growing market is unclear.
Insurance is one of the last sectors to reinvent itself by throwing away the historical baggage and adapting to the new realities of the current society and economy. Manufacturers long ago retooled production lines using automation, high levels of process rigor, and quality assurance to bring new levels of customer satisfaction. Most of the leading telecommunications providers are unrecognizable from the state-owned infrastructure and heavy line operators of the past.
It is true that insurers have adopted new trends such as outsourcing, offshoring, and the divesture of “unattractive” books of business, but these rarely touch the root of the challenge. Insurers have become overly complex, and a root-and-branch simplification is required.
The legacy issue is all too often assumed to be a technology challenge, but processes play just as large a role, as do the outmoded approaches to customer service, product development, and marketing. As an insurance executive recently observed, “Probably more than 30% of our activity adds no value -- we could probably just stop doing it and no one would mind.” Shareholders most certainly wouldn't. In today’s hyper-competitive market with low yields, soft markets, and high rates of claims, an insurer that could simplify its business by 30% would quickly be rewarded by the markets.
Through primary research and sourcing, Wipro has collated an extensive repository of insurance metrics that demonstrate a remarkable difference between the best and worst in class in the various dimensions of finance, operations, and customer management. This in itself is unsurprising; however, when analyzed in the context of transformation programs there is little correlation. Indeed no insurer is consistently in the upper quartile.
Wipro believes that it is the absence of a simplification thread, across transformation programs and continuous improvement initiatives, that is the major blocker to achieving this consistent level of business performance.
Traditional change programs to try and address these challenges are all too often conceived with a narrow view of the challenge rather than a holistic approach. Insurers are change-capacity constrained, but by taking that point view they miss the potential synergies -- and, more importantly, the conflicts -- that will arise.
Policy administration systems are replaced without considering a broader product rationalization program. Claims systems are implemented without a fundamental re-think of the underlying processes: Old processes are executed faster, but is the customer or the insurer any better off?
Mark has more than twenty years of experience in the financial services sector across a wide range of disciplines including large scale transformation, operating model design, customer management and business intelligence. He works in Wipro's Insurance Consultancy practice ... View Full Bio