53% of insurance industry executives anticipate moderate or massive digital disruption in the next 12 months, says a study conducted by Russell Reynolds Associates. The industry’s response has been varied: exploring new business models, organizational structures, cultural initiatives and technologies.
The largest firms are embedding digital talent into their most senior ranks. They are overhauling their digital workplaces. Many are absorbing elements of start-up culture in order to adapt more readily to changing market dynamics, while simultaneously attempting to retain the stability and reliability of their service. They are exploring how data can be used to provide customers with bespoke service on massive scale.
As digital reshapes business as we know it, these tactics represent some of the bright spots in the evolution of the world’s insurance giants.
1. Governance: digital leadership in the upper echelons
Berkshire Hathaway, parent company to GEICO, has cultivated a board of directors with rich digital experience. Board member credentials include Microsoft, Yahoo!, Comcast, Double-Click, Pixar and LegalZoom. If “every company is becoming a software company,” Berkshire Hathaway is in particularly good hands with this digital dream team at its helm.
Bill Gates sits on the Board of Berkshire Hathaway
French multinational, AXA, has embraced a collaborative approach to up-leveling their digital savvy through a reverse mentoring program. “Digital natives,” many of them young, are paired with the company’s senior executives to explore well-adopted and emergent digital concepts. AXA recognizes that digital transformation requires a fundamental change in mindset across the organization and a need to break down deeply entrenched habits and silos. The reverse mentoring program went viral, rapidly attracting over 1000 participants from across the company. Their belief is that it is extremely effective in bridging generational divides and reorienting perspectives on the nature of the business in the digital age.
Allianz, opted to institute a Chief Digital Officer in 2016. Solmaz Altın holds the ultimate responsibility for the company’s digital transformation efforts – his current focus is on reshaping the customer journey, investing in start-ups to surface new business models and fostering a culture that is more adaptive to the rapid pace of technological change.
Met Life has also recently announced their ambitions in digital transformation – opting to bestow leadership of the process to Martin Lippert, Executive Vice President, Global Technology & Operations. The digital agenda is supported across MetLife’s leadership team and the effort will touch every department.
2. Making digital business central to organizational strategy
Oliver Bäte, CEO of Allianz, gave the keynote speech at CeBIT 2016 highlighting the company’s commitment to digital transformation.
He stressed the significance of the shift from mass production to mass personalization: “Flexibility used to be the opposite of efficiency and that is the paradigm that is disappearing because you can offer a very efficient solution at very low cost. It’s something very difficult to learn for us, particularly in our industry, who are used to standardize and standardize and standardize in order to bring cost down.”
Digital has decreased the cost of switching from one provider to the next. Insurance companies must continuously benchmark the quality of their offering as compared to the next-best alternative. Rather than being a service mandated to customers by regulators, customer-centricity must be top of mind.
Allianz is moving from making digital a consideration on top of existing processes, to the mechanism that drives the core process. Everything else is built upon it.
Bäte called for common platforms, common designs for processes, common product definitions as a necessity for building and scaling next-generation insurance solutions.
He argued that the pace of change is such that relying on the internal knowledge of the firm is insufficient to remaining competitive. Instead, he believes that deepened collaboration through partnerships and VC-style investments will provide the necessary juice to the company’s digital metabolism.
3. Reformulating products and services for the connected customer
In his book, The Digital Transformation Playbook: Rethink Your Business for the Digital Age, David Rogers discusses the impact of digital on the supply chain. The insurance industry is largely supported through relationships with agents. He argues, “insurance companies are extremely beholden to the intermediary, their agents and this dependency hampers them in many markets when responding to consumers' increasing desire for self-service and online shopping and purchasing options.” He observed that companies like GEICO and Allstate, are increasingly designed to service customers directly through digital channels. The supply chain is disintermediated and the value is, in-part, passed on to the customer.
AXA believes in more personal, more mobile service that better anticipates customer needs. Thomas Buberl, the new CEO of AXA reinforced their focus on digital business models:
“There is a question over whether we should increase the size of the franchise, or should we put focus on transforming the business model for a digital future,” he said. “I think that digital should be our focus.”
The company is exploring a variety of opportunities to reinvent itself and its products. It does not believe in one big bet, instead the innovation process is perceived like a school of fish – with many individual strategies being continuously tested and refined. Some examples of the breadth of their attempts include AXA Drive Coach, AXA Connected Home, AXA Health Keeper Platform – Connected Health, AXA BlaBlaCar Partnership and many others.
Allianz believes that connected devices will give way to a health care paradigm that is more remote and more preventative.
4. Digital workplace revisited
We’ve all got email. Knowledge workers have had access to a desktop PC for decades. Mobile is widely adopted. Most have access to some form of intranet.
In 2016, who doesn’t have a digital workplace?
We all do. But they certainly aren’t created equal.
This year, the World Economic Forum, explored the idea that humanity is currently undergoing a fourth industrial revolution thanks to a confluence of digital technologies, biological innovations and evolving social constructs. Economist and Forum founder Klaus Schwab explains “when compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.”
As the outlook on business becomes increasingly hard to predict, a digital workplace designed around learning, innovation and adaptability will prove important for ensuring the continued resilience and relevance of the firm.
Chinese insurance company, Ping An, has introduced a large-scale pilot mobile-learning program, intended to up-level not just employees but 200-plus partner companies.
MetLife implemented a social, video-based innovation platform, One Voice, intended to explore and disseminate ideas as well as identify the company’s leadership talent.
AIA Group introduced a series of productivity tools intended on bridging company’s 14,000 employees and augmenting the company’s innovation capacity. Their social network, “Wave”, is designed to share ideas and best practices in a way that overcomes cultural and language barriers. It is also highly supportive of small-team collaboration.
5. Encouraging innovation through start-up tactics
Many of the world’s largest insurers have founded innovation oriented labs and investment programs.
Munich Re has opened an innovation lab in Beijing with the intention of scouting for Asian partners that might offer disruptive perspectives on the business. They are exploring fresh approaches to digitization of the sales channel, risk management and loss prevention. Through the lab, they hope to nurture relationships with start-ups and well-established digital businesses such as Alibaba.]
AXA set up their innovation lab in Silicon Valley. The lab serves as a base for exploring relationships with entrepreneurs and engineers and as a means of exporting knowledge and culture to the broader AXA employee-base across the globe.
Allianz’ Digital Labs doesn’t limit opportunity by geography. Through their website, they have opened an invitation to early stage companies, students and innovators to propose improvements and initiatives across 4 categories – big data, mobile, social media and sponsorships. Allianz X operates more like a venture capital firm, aiming to identify, build and scale new business models in the InsurTech space.