Unlocking Value for the Insurance Industry

Unlocking Value for the Insurance Industry

Insurance is in the business of helping people and companies survive risks and rebuild lives and commerce. Leading insurance companies are increasingly focused on identifying and quantifying the potential impact of new business models, as the market evolves and becomes ever more hyper-competitive. As Bryan Falchuk highlights in his book, The Future of Insurance: From Disruption to Evolution, stated “The industry is now facing its own challenges of how best to embrace change as ‘Insurtech’ comes onto the scene.  New opportunities to serve insurance clients are arising through advanced technologies appearing across the economy.” Put in a strategic sense, and as Aegon noted in their recent annual report, “Aegon is focusing on digital transformation by… deepening our internal talent, we are working closely with promising technology-driven companies in our industry to tap into their knowledge and innovation capabilities in fintech and insurtech.” To combat the threat insurtech start-ups pose to the industry at large, additional stalwarts like Progressive, Willis Towers Watson, and Manulife, among many others, are relying evermore on digital transformation to empower their growth and relevance into the new economy. This shift in the industry and extreme focus on digital assets to support value creation is supported by several leading sources that highlight the current digital industry trends below.

Mr. Falchuk laid out a series of case studies that supported three key findings. Foremost, changing client needs are transforming the insurance industry. Yes, Insurtech competition is driving some of this need, but so too is the maturing of the Millennial and Gen Z populations who are consuming a larger share of insurance products. They simply have different demands than previous generations and they expect seamless digital experiences across channels. Second, insurance providers need to hone their distinctive capabilities. Too often we see insurance companies that lack focus on what they do exceptionally well and and/or lack commitment of the requisite resources to exploiting that competitive differentiation. For example, according to the Insurance Information Institute, the largest four insurance companies in the world, have 20% of combined Property and casualty market share. There is an ever-growing degree of competition in the murky competitive landscape, and it will take real focus to stand out, in a unique way, that matters to customers. Lastly, market power lies in improving the customer experience. Overwhelming focus on the customer experience will have the most immediate impact to a company’s growth. Business applications that support the customer experience are high priority areas for digitization.

Why is all this important? First, according to McKinsey, 70% of CEOs will prioritize customer experience in the next 12 months with the majority considering investments in core technology systems. Second, consumers are driving the need for digitized experiences. Accenture research states 90% of buyers have revealed a preference for self-management of existing policies. Third, fraud and cybercrime are driving the need for AI and other technologies to combat the $47B drag on their customer’s wallets. Lastly, Insurtech companies are driving the need for legacy providers to adapt and adapt quickly to both survive and thrive in the new economy. Price Waterhouse Cooper notes that agile ways of working (with modern digital tools) allow for bringing new products and services to the market 2-4 times faster, while improving customer satisfaction scores by 10-25% and driving up productivity by up to 30%.

However, technology in and of itself should not be the driver of the transformation. People should. In fact, customers specifically should be leading the way for digital transformation. As Global CIO of Manulife, Shamus Weiland, stated, “The key to our modernization approach is to focus on serving our customers, rather than on the technology. We think first about what our customers need and then investigate how technology can best enable that. In that way, technology modernization becomes an iterative process of delivering greater value that is focused on our customers. Along the way, we make our systems more future proof, and we make our delivery more agile so we can bring new products to market faster.”

But where do you focus your digitization efforts? Gartner outlined the industry benchmarks for insurance digital. This highlights where insurance companies are along the digital modernization spectrum. Efforts are being made to in both customer facing processes as well as back-office operations, and employee well-being. Where does your company rank along the spectrum? Prioritizing the areas of most need, or that have the largest uplift in business value for both the company and customers is one way to triage the areas of need.

Jonathan Silverman, Director, Insurance Industry Solutions at Microsoft stated in his blog Re-envisioning the insurance industry with the use of intelligent tech, "The innovation that we’re seeing currently—and will continue to observe in the years to come—is being driven by data and the tools that will enable data to be stored, collated, analyzed, and utilized. Business leaders are looking for innovative ways to become more efficient and create a better overall experience for their customers. The problem for insurers is they have too much data and don’t know how to make sense of it in meaningful ways for their customers.  Jonathon went on to state the problem statement most pressing insurers as, "with an inability to share metadata, reference data, master data, transactional data, and streaming data across multiple platforms in real-time, insurers were not able to provide accurate updates to their customers.” His recommendation is, "the right technology can help you improve customer satisfaction and acquisition, increase lead generation and brand value, boost underwriting efficiency, raise revenues, introduce new product lines, and reduce fraud."

Leading insurers are already taking the initiative to digital transformation across five key scenarios: deliver differentiated policyholder experiences, modernize core insurance systems, reimagine claims and underwriting processes, improve risk modeling and empower employees through teamwork. First, they are accelerating growth by infusing AI to create a differentiated customer experience. Second, they are moving to the cloud to reduce cost and organizational risk, and to create a platform for agile business. Next, leaders are reimagining key claims and underwriting processes to meet policy holder demands and unlocking new revenue streams. Lastly, they are deepening risk insights and complying with regulatory requirements by improving risk modeling with cloud speed and scale.

Listen to Microsoft customers describe it best. For example, Progressive has instituted a “Flo Bot” that has greatly improved the customer experience. “By using Microsoft [products]… we've been able to continue our own Progressive journey of digital innovation and do it in an agile, fast, and cost-effective way.” Matt White, Marketing Manager, Personal Lines Acquisition Experience, Progressive Insurance stated in this article. Or, as Luis Maurette, CRB Global Head of Sales and Client Management, Willis Towers Watson explained in this article, “We’re accelerating growth by running a reliable company and using Dynamics 365 and Power BI to make the right decisions to properly manage our business.” In addition, Shamus Weiland, Global Chief Information Officer, Manulife stated in this article, “[Microsoft] puts us on track to deliver ongoing improvements to our offerings, solidify our position as a digital leader in the industry, and bring our customers the best possible service.”

Additionally, here is a summary of some the business outcomes we have quantified with leading insurance companies and highlight the results we delivered in partnership.

Gartner has highlighted Microsoft Business Applications product suite as a “Leader,” so you can trust the technology we bring and industry expertise on how best to leverage it has never been higher.

But how do you get started? Human centered design thinking is the best way to collaborate in an inclusive way across all personas of the value chain: From Corporate leadership to Broker to Policyholder and every layer in-between. The methodology provides an iterative and collaborative way to align on a vision, reframe problem statements, design potential solutions, quantity business value and gain the appropriate engagement across various business groups and leadership that is necessary to drive transformative organizational change. Microsoft recommends the Catalyst methodology for value-led ideation and digital transformation across your business applications landscape.

Part of the IDEA framework is the Business Value Assessment. A Business Value Assessment (BVA) is a structured collaborative exercise aimed at quantifying the economic impact of improving specific performance measures of the client leveraging Microsoft Dynamics 365. A BVA always follows a very structured methodology that starts by identifying the most relevant “Benefit Measures” (value drivers) to be assessed in each customer-specific case, for the different business areas.

The customer is involved in the business case preparation from the first moment and has an active role in deciding the benefit measures and benchmarking measures to use and provides the key data/information to secure a reliable assessment.

If you and your organization are keen on learning more about how Microsoft can help you to unlock trapped value and accelerate your digital transformation efforts, please feel free to contact me directly.

Miles Sovell

Global Black Belt

Director Business Value Management

Financial Services Industry

Microsoft Corporation