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Apr 2021

Hitchhiker's guide to digital transformation

Source: Asia Insurance Review | Mar 2021

Arsh MainiYogish ShenoyAvinash Bonu
Successful digital transformation in insurance does not happen by accident as Candela LabsMessrs Arsh Maini, Yogish Shenoy and Avinash Bonu explain.
 
 
A September 2019 Forbes article starts with the sentence: ‘A staggering 70% of digital transformations fail’.
As practitioners, with battle scars from the digital frontline and with experience of 30 plus digital transformation programmes in insurance, we attempt to capture our learnings. We hope this will help avoid some of the minefields.
 
Background
The insurance industry is changing like never before. The onslaught of new-age InsurTechs and changing customer preferences, further exacerbated by the pandemic, are pushing insurers to transform themselves or risk losing out in the increasingly competitive market. It would not be far-fetched to say that the ‘Nextflixes of insurance’ are out there (or in the process of being put together) to push the Blockbusters out of business.
 
Customer expectations – including expectations of perfect-fit products, low and personalised premiums commensurate with their risks, and of proactive and frictionless service have increased exponentially. In 2017 we asked insurance customers how they define good service from their insurer – and every example we got was from a new-age tech driven service provider (Uber, Amazon, Netflix), not one from insurance.
 
Meeting these expectations requires success digital transformation. Reaching this goal however will require significant changes to existing structures, capabilities, processes, performance measures and incentives.
 
Here are our top five success enablers for digital transformation. 
  1. Enabled by technology, led by business. A strong and clear business case is a must
  • The complexity and magnitude of digital transformation requires a clear long-term vision. A vision and a roadmap with strong buy-in from business leaders across functions. Our experience is that building this across the board buy-in is perhaps the most difficult and often overlooked element. 
  • The most successful programmes that we have worked on were led by business leaders who could forcefully outline a business case and lead the change for internal and external (customers, agents, brokers, partners) stakeholders. 
  • Digital transformation will inevitably be a programme spanning multiple dimensions, including: Innovation and differentiation against competitors (current and new/expected competition); customer and employee experience; automation and efficiencies; and data and analytics. These dimensions and the overarching business case that binds them together can successfully guide multiple initiatives across the value chain – and enable digital at scale.
  • Finally, each initiative must be led by its own set of business metrics (aligned to the overall vision and business goals). As an example, when we embarked on Agent App for a life carrier, the primary success metrics were agent adoption and increase in average sales per month for the agents that adopted the app. Parameters such as how soon and how well the app was delivered were important enablers, but were not the driving factors to measure success.
  1. Take a customer-journey view to transforming individual areas. Involve stakeholders early in the process
  • Transformation programmes should be built around the customer-journey. Approaches like design thinking are helpful in understanding gaps in customer experience in order to design end-to-end journeys aligned to customer needs. We have often seen sub-optimal results when an inside-out approach of organisational functions and structures dictate customer experience.
  • Involving stakeholders early in the process is critical. As an example, when designing an agent/financial adviser app for an insurer, we started by conducting a survey and met with over 100 financial advisers across four countries. There were some initial naysayers who believed this process was too cumbersome and that they already knew which features/functionalities should be built. The research process upended this initial view. Agents told us clearly what they wanted to see: Not just a strong electronic point of sales app with remote-selling capabilities, but also the functionality for them to be able to service their customers. We also took away another important learning through that exercise. Agents wanted to know what the end point was, and once they knew that, they were perfectly happy to accept and work with incremental releases. Transparent and frequent communication is as important as technology and features themselves.
  • As with any digital and automation programmes, current state processes have superfluous steps that can be eliminated. It is typically not technology, but the embedded current way of doing things that gets in the way.
  • Finally, self-service can be used quite powerfully to reduce process steps and load, and customers today are often happy to take on some of these tasks on an app or a portal. 
  1. Agile is not a choice, and agile is not just about periodic release cycles
  • Agile programmes are central to teams being able to push the boundaries and deliver true innovation. However, it is important to ensure that teams do not lose focus of the big picture and get caught up in just the next 30-day release.
  • Training – for both business and operations teams – is important. Do not assume that agile can be naturally picked up and learnt on the job. 
  • Link agile programmes to benefits and outcomes and deprioritise features that add less value. The 80:20 principle is critical to success.
  1. Data analytics is not a 0/1 decision
  • Rich and holistic data - coupled with modern rules and AI based systems - provide significant opportunities across the value chain and beyond. Unfortunately, many data-led initiatives stall when the initial proof of concept shows the lack of adequate and quality data getting in the way of results. 
While AI/ML is a game changer, the process has to start with small steps that set out what (and how) data will be collected and stored. Individual initiatives (for example, claims automation) should include a data track that feeds into the overall goals for rules and AI/ML based decision support and automation.
  1. Strong technology foundations and overall architecture go a long way in delivering the promise of digital transformation.
  • Tech building blocks of a digital insurer might look surprisingly similar to those in the traditional model. There are, however, two challenges that must be addressed:
    • The ability to adopt new technologies with ease and certainty, and add or replace existing blocks. 
    • The ability to integrate and be a part of a larger digital ecosystem.
  • Being a part of a larger ecosystem and integrating with partners is one of the promises and benefits of digital transformation. Transformation programmes should have clear guidance and plans on how to make this possible. Here are some critical elements we have come to rely on to deliver this promise:
    • BYOX: BYOX (bring your own ‘any tech’ or X) is the ability to plug in any with vendor/partner’s technology stack. We recommend choosing technology that allows BYOX through the use of open standards and demonstrable integration layers, then to provide a level of future proofing.
    • APIs: This is one area where industry-wide standards and initiatives are important and perhaps inevitable. Choosing a technical architecture which enables seamless APIs based integrations is an important step in this direction. 
    • Cloud: The benefits of moving to the cloud are quite clear. The question really is in what areas and how quickly. A 
 
Mr Arsh Maini is chief executive, Mr Yogish Shenoy chief architect and Mr Avinash Bonu head of product with Candela Labs.
 
 

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