Winning insurers will emphasise high performing teamwork and forge deeper partnerships with trusted providers in responding to the challenges of a complex and dynamic operating environment. Mr David O’Brien of SCOR Global Life, Asia Pacific gives examples on good teamwork delivering great solutions to problems faced by their clients.
It is a truism that good teamwork is critical to success for most organisations. In this article, I reflect on some experiences from our business on the growing importance of effective cross functional collaboration. This has been critical to success in delivering meaningful insights for our customers so that we can respond positively to meet the shared challenges of growing profitably and sustainably in a highly competitive environment.
Lots of challenges in Asian markets
The organisation model for many insurers and reinsurers has traditionally been rooted in the formation of distinct functional teams – actuarial, underwriting, IT, legal, marketing, administration and so on.
Cooperation across teams has taken second priority, with varying success for the teams in working on shared challenges, depending on the priorities and tone set by the leadership team and the performance incentives arising for teams to work well together. Where a market is mature and in stable state, this “old school” functional model of teams can work well.
There are not too many insurance businesses operating in a steady state in Asia, with uncertain economic development, high competition, rapid regulatory change unfolding in terms of increased consumer protection, higher and more complex regulatory capital regimes, and enhanced enterprise risk management approaches that need to be quickly embedded in the business.
All this in an environment where skilled insurance professionals are in short supply and gearing up staffing to cope with the change agenda is neither financially nor practically feasible.
Good news – Possible to do more with less
As challenging market conditions are likely remain with us for the medium term, there can be a high price tag for failing to deal well with complex enterprise wide challenges, whether in terms of lost market share, unexpected capital funding strains, or overwhelmed teams struggling to cope with competing agendas.
The good news is that it is possible to do more with less, through careful formation of cross functional teams, and deliberately outsourcing to trusted external partners more of the work that has traditionally been retained within the organisation. The following example illustrates the point.
Steering the profitability of a health insurance portfolio in Malaysia without sacrificing management’s commitments to continue to deliver top line growth During 2014, we worked closely with a Malaysian insurer whose health portfolio had grown quickly but is now facing some warning signs of deteriorating profitability.
Our health product line team leader, Mr Poh Foo SEE, agreed an initial plan with our client to review the portfolio experience and look to identify some possible drivers which could be addressed to steer profitability while maintaining overall competitiveness of the product offering.
SCOR Global Life’s project team included actuarial analysts to validate the data and perform statistical analysis, a medical underwriter experienced in health insurance business, and an experienced actuary to manage the project and oversee the technical analysis.
The review took place over three months, with several iterations with our client, to refine and test our conclusions (see Chart below).
Unsurprisingly, we found multiple possible drivers for Loss Ratio deterioration. The low hanging fruit was to look at variation in loss ratio by group, and this insight quickly yielded some ideas on refining pricing at renewal, to rebalance the portfolio. Nothing too revolutionary though so far in our approach.
The more complicated analysis phase looked at spend by condition, by service provider and by plan type. This also broke down Loss ratio into utilisation (claim frequency) and average claim amount (severity), targeting anomalies within the data set and relative to our understanding of market norms.
This yielded some specific insights into potential over-billing issues by a provider, potential fraud issues committed by certain insureds, and opportunity for some benefit redesign to avoid claims inflation pushing premiums beyond the target window identified by the marketing team. This phase of analysis takes some time to do properly and benefits from a team approach. Data analysis has to be connected to the market situation to derive practical solutions.
This is just one example.
We find the same data driven team based problem solving works well in other situations, including:
• Improving the sales effectiveness of a direct distribution segment in Japan while keeping external stakeholders on board with a changed approach to doing business.
• Designing and pricing an innovative product in Korea that takes account of regulatory requirements, marketing channel needs and satisfies profitability and risk appetite constraint.
The philosophy that steers our approach is simple to articulate, tougher to deliver on. We look to work with our clients to solve their risk challenges, through open communication and the application of relevant specialist knowledge and expertise of our team that yields a timely, practical solution.
Organisation model evolution – Away from functional silos towards a customer centric team
Our team in Asia is heavily skewed to actuarial, structured finance, medical underwriting and claims handling specialists. These are the fundamental technical skills that have to be in place as the foundation (see Chart above).
We make sure though to organise our office into product lines and by market rather than by functional discipline. This ensures a more holistic response can be delivered to our clients’ challenges and helps to ensure the mindset of our team is open to viewpoints beyond their immediate discipline.
As communication technology improves, the ability to form effective virtual teams pulling together the contributions of specialists across multiple locations is opening up additional possibility for even more flexibility on how we organise. A topic for next time.
Mr David O’Brien is Head of SCOR Global Life, Asia Pacific.