Business Transformation Office: Insurance Digital Strategy

As Insurance firms work to meet their Accounting compliance requirements, an incredible storm of market forces and opportunities are building up.

These ecosystem changes are force multipliers resulting in customer engagement, new revenue streams, exciting offerings, high quality distribution channels and competitive pricing. Inevitably there is going to be disruptions in business and operating models and a lot of it is already happening.

How do Insurance companies thrive and lead and not be led and disrupted?

There are 5 levers that are essential to engineer these outcomes:

1. Business Strategy

2. Operating Model

3. Architecture

4. Infrastructure

5. Data

Business Strategy

This is a race against time to be a Digital Business and will require a clear and orchestrated business strategy chartered at the leadership levels of the firm . The good news is that your business is already a participant in the digital ecosystem with your customers already on digital platforms - Alphabet, Facebook, Apple, Amazon, Microsoft and others. Digital Marketing and Technology strategies engaging these customer ecosystems are already a competitive advantage and it is likely that you have initiatives inflight to deliver on outcomes.

However, in the absence of a clear and well sponsored digital strategy, the rest of the organizational activities will lag creating cost pools, inefficient data pipelines, fragmented operating models and customer/channel engagement issues.

Operating Model

This is often the first thing that customers notice about an Insurance Firm and it presents itself in the customer telemetry. Take a look at the twitter feeds where customers express anguish about claim settlements. For every dollar spent in winning customer loyalty how much is lost to missed customer service and retention opportunities. Actuaries and Controllers calibrate their obligations to their operating models by leveraging end user computing capabilities to meet critical internal / external reporting requirements often without access to customer telemetry.

A responsive and engaged operating model is vital in a digital ecosystem

Architecture

A key architecture intersection in an Insurance firm is where business events enter the firm's business functions - Actuarial, Risk, Treasury, Accounting etc,. As an actuary puts it - "Will I get to see all my sub ledger data (Actuarial, risk and accounting events) and contract data (business events) in one place"

So what is a Sub Ledger in an Insurance Firm? Is it the underlying postings at the sub account level for the accounts in your general ledger? Does it include cash flows, reserves, asset liability management, customer segmented views of the business and so on?

Look at it another way - Who has business inputs to the firm's sub ledger architecture. What would a machine learning model that is designed to come up with the customer insight value of the sub ledger tell you? That a lot of the data is fragmented and delivered inefficiently and the same data exists in large tribes of end user computing.

Infrastructure

Insurance companies are seizing on the opportunities that new administration systems and cloud computing brings and sure enough Technology adoption in many areas are advancing.

Large data sourcing efforts to land business events data are providing access to big data capabilities and being rolled out to internal clients.

How will these repositories support large volume ingestion of data for supervised and unattended learning by machine code? Are the data models designed for integrated cross functional business interpretation? Are the definitions in these data universes digital definitions?

A lot of excellent work to create this capacity has begun in IT organizations and these efforts need to be orchestrated by Digital Architectures and Operating models

Data

Data is the Digital DNA of a business. It provides insights into your business way before the outcomes are experienced and can be modeled for predictive behavior.

Data is valuation of a business and it's use is reflected in the operating model and currently an invisible line on the balance sheet. If data is valued as in a digital platform like Facebook, Alphabet or Amazon, what would an Insurance firm valuation look like?

The monetization throughput opportunity of data in an insurance firm is significant and this will spawn more opportunities as more customer interaction move out of Insurance Platforms to digital customer ecosystems. Insurance firms will benefit from integrating into these ecosystems with their digital platforms.

Insurance is a complex business touching every aspect of modern society and yet carries a heritage of 100+ year product life cycles when you consider multiple generations of customer relationships.

We make the case that a Digital Business Architecture will deliver multi-fold benefits in customer retention, new offerings and innovative ways of delivering them on an integrated insurance platform that breaks down silos and release the firm's intelligent equity that the Actuarial, Finance and other functions have embedded over the years in a variety of working repositories

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Edison is a Business Transformation leader serving financial services industry clients.