Insurers have been trying to transform their organizations for decades. First it was to implement enterprise-wide systems. Then it was to respond to the internet. Now they are focused on digitization and customer-centricity. So why has so little changed?
Transformation is difficult, disruptive and time-consuming. And most of the time transformation initiatives fail to achieve their objectives. It’s no wonder that many insurance executives have banned the word from their vocabulary altogether.
Insurers understand the urgent need to reinvent themselves. The problem is that, to truly ‘reinvent’, they will need to make more fundamental changes to their business and how they operate than ever before. Success will not come from tweaking the status quo; insurers will need to change virtually every part of their business.
To learn more about the specific challenges and opportunities insurers face as they work to reinvent their businesses, KPMG International surveyed over 70 executives from the largest insurers around the world. We asked about their recent transformation initiatives, existing capabilities and biggest barriers to change.
While many insurers consider themselves to be ‘early adopters’ or even ‘innovators’, many admit they are failing to get the full value from their transformation initiatives. Only half of insurers polled believe they are capable of extracting and sustaining value from business transformation initiatives. Few are confident they are achieving full value from their change initiatives, and 57% admit that their transformation efforts to date have been less than ideal. Most tell us they lack some of the capabilities needed to drive change on the scale required.
The survey also revealed:
• 30% of insurers are assessing the need for, or planning, a major business transformation.
• 27% have started a major business transformation initiative in the last two years.
• 41% have completed one or more major business transformation initiatives in the last two years.
• 42% say lack of change management acumen is a barrier to successful transformation.
One huge perceived barrier to change is regulation. In fact, more than a third (37%) of respondents said the potential for regulatory change represented a major threat to achieving their transformation objectives.
In order to succeed, organizations need leaders who can collaborate inside and outside their organizations to create and implement new operating models that will enable future success. Around a third of respondents noted that they were watching organizations outside of the insurance sector, and those with disruptive technologies, in order to find inspiration to help them reinvent their organizations.
Insurance executives increasingly view technology as a catalyst for change: 47% said new mobile platforms and apps were forcing change in their business and creating new opportunities for transformation.
Tips for those looking to challenge
conventional thinking:
• Horizon scan what the world might look like in five to 10 years.
• Harness external thinking, ideas and inspiration.
• Be willing to disrupt your own business.
• Take time to evaluate customer preferences – don’t reinvent yourself into something customers no longer value.
• Consider new open-architecture technology that is adaptable to future business needs.
• Target investment to high-value areas aligned to signals of customer demand.
• Gone are the days of massive, multiyear transformation programs – leading organizations move with agility to deliver value quickly.
• Learn from others – partnerships and alliances are key to future success.
• Apply agile and dedicated leadership. Creating long-lasting value requires clear vision, courage, passion and strong executive support.
Successfully driving transformational change requires changing how line executives operate. Often it requires taking ideas, approaches and even talent from other sectors. Above all be bold. Inspiring innovation is tough.
Commercializing and maintaining the innovative edge is even tougher.
In a highly regulated sector, treating changes in regulation as a springboard to enhance the business for customers rather than something to be endured distinguishes players at the top of their game. The data suggests that many insurers may not yet have their eyes on the ultimate prize.
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