Driving Operational Efficiency

Historically, the entire insurance industry in Asia was sales led, throwing bodies and overtime at the back office to handle the manufacturing strain, whilst customer centricity was almost an afterthought. As salary costs grew, companies sought to incrementally automate and innovate with tools such as Image and workflow, auto underwriting engines and straight through processing.? We felt we were making progress….

But with the advent of insure-tech, many organisations hired non-industry experts, establishing “Garages” or “hubs” outside of manufacturing to ideate around digital insurance. The cultural separation and in some cases lack of insurance experience resulted in significant spend that was largely disconnected from the needs of the business and as a result most were quickly de-funded, written off, closed down or merged into the manufacturing.

Since then, we have seen a second wave of consulting / CIO led ideation this time inside the manufacturing unit across our industry. This has been more consulting / supply led, selling new tech and new ideas rather than proven innovation to insurance employees, willing to be insure-tech innovators whilst on the payroll. This may be a harsh statement but as a result, we now have more headcount in operations than before, significant capex and cost creep across the manufacturing platform, much without clear impact.? We heard recently from several COO/CIO that they are now under pressure to deliver on prior managements promises and this is causing significant internal tensions.

As the pendulum swings back across our industry to a more financially disciplined approach to customer centricity, what does the future hold for ideation and innovation within the Life insurance space?

Some thoughts and opinions below for your consideration.

New Target Operating Model – Separating ideation from implementing innovation. Several firms are looking to pivot back to a more centralised ringfenced and transparent ideation “Lab” model, pooling all the resources that have until recently been distributed throughout manufacturing. The current view is that moving to a centralised demand led ideation “resource pool” will better prioritise ideation spend whilst ensuring accountability efficient delivery of projects with sponsors in manufacturing who are accountable and incentivised to improve results.

Back to fundamentals – We are seeing a clear desire to re-establish strong governance around operational efficiency and effectiveness based on management accounting performance metrics, balanced with customer NPS. From Digital availability, Digital usage etc, to more management accounting metrics such as cost of availability, cost of usage. Baselines and targets on Cost per transaction, productivity per headcount etc are re-appearing with a focus on driving the bottom line. Several companies are working on this with a view to leverage them as C suite Annual Bonus KPI’s for 2024. This re-metricising of the back office should align the culture in the various department's towards improving on customer service whilst also satisfying the operational efficiency targets of the organisation.

From Supply to Demand led innovation As the industry refocuses on bottom up manufacturing performance metrics, we are likely to see a shift from ideation/revolution to innovation/evolution. A return to problem statements, proven tech and incremental improvements to a target end state. These solutions will be more assessed on cost benefit and agnostic of underlying tech, leveraging what's proven to be successful elsewhere – Gone will be the focus and buzz around whether its Blockchain, AI, Metaverse, or pen and paper, the decisions to proceed will be more financially driven.

?

From Bleeding Edge to Fast Follower – Unlike distribution agreements, where capex secures a competitive advantage, in operational ideation and innovation it does not. Some companies are now looking to be fast followers of those insurers with huge budgets, rather than trying to compete at the bleeding edge. I was reminded of this recently when I sat in a meeting with a cash strapped Head of Digital Strategy at an insurance company – He opened the discussion with the management consultants with a simple statement and questions. This is the problem I’m looking to solve, what have you done to solve it ? who have you done it for and what was the impact ? The meeting ended quickly.? I think we will see more of this going forward.

We expect to see “ideation consultant” continuing to support organisations keen to remain at the cutting edge whilst there will be a growing demand for “innovation consultants” who have proven experience supporting those insurers happy to be fast followers.