How insurance companies can assess their resilience

By Wolfgang Schmidt-Soelch and Patrick Dahmen

What was the response of large insurance companies to the disruption wrought by COVID-19? What can we learn from it? And how can organizations use this knowledge to navigate crises of the future? Wolfgang Schmidt-Soelch (a partner in the Heidrick & Struggles Zurich office and regional managing partner of the Financial Services Practice for Europe & Africa) and Patrick Dahmen (an INSEAD scholar in the area of change and transformation and senior advisor in the insurance industry) reveal the findings of their in-depth research.?

That’s why we’ve been engaged in detailed academic and empirical research undertaken with 44 C-level executives across 13 companies. And through 15 scaled measurements across resources, system orientation, culture and leadership, we have created a map that provides you with a valuable reading of where your organization stands on the resilience spectrum. Crucially, it also identifies your opportunities for improvement.

?The three key stages

Our map is based on the understanding that there are three key stages to resilience:

1) The anticipation phase, prior to the emergence of a crisis.

2) The coping or ‘bouncing back’ phase.

3) The adaptive phase, the opportunity to jump forward.

?We also looked at what the successful outcomes for a truly resilient company are. The first, most obvious one, is the financial outcome – the extent to which revenues and earnings are protected in the coping stage, and then grow in the bouncing back phase. Then we have non-financial performance indicators such as service levels or employee and partner engagement. And then there are wider recognition outcomes such as whether a company’s culture shows an increase in its self-esteem or self-confidence, or makes reputational gains with the broader public.

Organizational map for reviewing and improving resilience

The dots represent the average reply of the companies in this survey.

The resilience map

So where does your organization sit on this map? What are the levers you need to pull to increase your resilience in a world that continues to face extensive disruption? And even if you’re scoring high, are there areas of potential improvement?

One key takeaway from our research was the that the stronger an organization’s community is in terms of aligned autonomy, the better it will be at bouncing back. The chief transformation officer of a South African insurer told us: “I was most impressed by the response to the crisis – that moment when it became real, the galvanization and the united alignment behind our purpose. People took up new roles to live up to our purpose.”

However, in some cases, that very ability to bounce back thanks to a strong community orientation can also stifle a business’s ability to bounce forward, because a community committed to remaining united can be resistant to change. To emerge from a crisis with a competitive advantage, companies have to take risks and accept that nothing will be as it was before. The companies who say ‘yes, we have this community but we’re also venturing into uncharted waters, and we’re going to try new things such as launching new innovative products, acquiring companies or completely reorganising ourselves’ tend to bounce forward strongest.

The COO of a US insurer told us: “The pandemic was a ticket to heaven for us. We led with vision and were very bold in our investments during the pandemic. Thanks to our very open and engaging culture, we could do this.”

Decentralization and flexibility

There were other over-arching themes. Companies that decentralized their decision making and encouraged greater flexibility proved more resilient because they were faster to act.

As the COO of a US insurer told us: “The successful management of the crisis was to a large degree due to the choice and flexibility we gave to our employees.”

Remain true to your purpose

The most resilient companies in our research were also strongly focused on a united purpose that helped to guide their employees and distribution partners through the toughest times of the crisis. The CHRO of a US insurer told us: “We focused on our North Star of creating ‘employee safety’ – this helped us to be ahead of the curve.”

Look beyond your own horizons

Our research found that the more internally focused an insurance company is, the less likely it is to pick up on rapidly emerging warnings – such as the initial alarms and implications attached to the onset of COVID-19 in late 2019 and early 2020. By contrast, companies with a strong external focus, perhaps through their sales and distribution networks, tend to be better at spotting early signals of economic and social disruption, and therefore react faster.

Leadership and diversity

Courageous leadership is essential to resilience and the style of leadership that shone through in our research was characterised by creating a collective purpose and building a sense of community while encouraging diversity. The CEO of an African insurer told us: “Diversity of thought and experience strengthens our resilience. It gives us different perspectives to the business challenges.” And crucially, the most effective leaders also welcome the freedom of thought that ensures an organization doesn’t just bounce back but also bounces forward.

These findings are also consistent with the results of a Heidrick & Struggles survey of 500 CEOs from around the world. Nearly half of respondents in the financial services industry believe that a thriving culture enables resilience in times of crisis. Twenty-eight percent of financial services CEOs identify culture as a top three positive influence on financial success and 80% said their employees were mostly or entirely focused on applying the culture in their day to day work.