The talk is out there: Insurance industry leaders have often spoken of transforming operations to embrace disruptive advances including big data, other new technology and related customer service initiatives. Relatively few companies, however, have actually put those words into action.
What’s more, many insurers said they’re not getting enough bang for the buck after putting transformative plans in place. Some also lack the ability to drive transformation at the level they need to compete, KPMG said in its new global transformation study.
Part of the reason for the dissatisfaction may come from the fact that insurers aren’t typically accustomed to widespread change and, as a result, may not be very adept at making the changes they need, KPMG said.
“Insurance organizations are, on the whole, rather good at tweaking, monitoring and improving their business and operating models,” KPMG U.K.’s William Pritchett said in the report. “But when it comes to enterprise-wide strategic change—the type that truly leads to companies being reinvented—it takes a much broader view and a much more strategic approach than most insurers have needed for past initiatives.”
Just 8 percent said they’ve completed several major business transformation initiatives within the past two years, according to the study. Another 33 percent said they’ve completed at least one major transformative business initiative during that period.
Approximately 27 percent said they’ve started implementing business transformation plans within the last two years. About 14 percent have just begun assessing their need for a business transformation plan, and 16 percent are in the process of planning a business transformation initiative.
For those that have completed their business transformations, 57 percent said the end result was either not ideal or far from it. About 37 percent said revamped operations were “between ideal and not ideal” in terms of the transformative effect. Only 5 percent said the finished product was “close to the ideal.”
According to KPMG, many insurers said they’re “fairly confident” that they can change their operating models, but most said they don’t have some of the basic “management and transformation” skills needed to maximize the transformation process.
About 47 percent of survey respondents said they could organize their transformation ideas into a number of workable, independent initiatives; 42 percent said they didn’t have the management capacity needed to reach the goals of their transformation strategy.
The Keys: Management, Tech Abilities
Soula Courlas, with KPMG in Canada, said in the report that “insurers need to be able to look across the organization to understand all of the interdependencies and then bring a robust change management capability” in order to achieve true business reinvention. By doing so (Courlas calls this a “portfolio view of your transformation”), insurers can try things in multiple areas at the same time in order to find the most effective mix.
Beyond management capabilities, however, comes technical skill, and the KPMG report notes that some insurers lack this even as they try to engage transformative change in how their companies operate. The consultancy’s report quotes Mark Inkster, chief digital officer at AEGON’s Asian operations, as saying that companies many need to bring in experts in areas such as search engine marketing or web analytics in order to get the job done. Some work in other parts of the insurance industry, and others are in unrelated fields.
Obstacles Also Opportunities
Of course, transformation isn’t easy. Insurers said they see regulatory changes, disruptive technology on its own or in other companies, startups and venture capitalists, changing customer demographics, and even traditional competitors as threatening their ability to achieve the business transformations they need to compete. These same elements, however, can serve as influential sources of both insight and business transformation trends, insurers acknowledged.
For companies working to pursue transformative business plan changes, KPMG offers a number of recommendations, including: assess customer preferences; think differently; be willing to disrupt an existing model; move quickly; and learn from others.
The study, conducted by KPMG International, surveyed 380 financial services executives in early 2016, of which 20 percent were from the insurance/reinsurance sector. “Empowered for the Future: Insurance Reinvented” is the report’s full title.
About 61 percent of respondents came from insurance firms with $5 billion to $49.9 billion in assets under management; 39 percent came from insurance operations with $50 billion or more in assets under management. KPMG said that 62 percent of insurance respondents were C-suite executives reflecting areas including IT/technology, sales/marketing, human resources, finance and operations. Just under half came from Europe, with 33 percent in the Americas and 19 percent in Asia Pacific, KPMG said.