Article Synopsis :
An array of challenging conditions, including emerging technology trends and rising customer expectations, are making traditional insurance business models unsustainable. As a result, massive and often near-continuous transformation efforts are becoming the ‘new normal’ in the industry.
In December 2016, Insurance Governance Leadership Network (IGLN) participants met in New York to share viewpoints on transformation specifically, and the role of boards in transformation efforts. This report, produced by EY in conjunction with Tapestry Networks, shares key insights from the meeting. A summary:
1. Historical business models are unsustainable, making transformation imperative.
All insurers are focused on similar outcomes, such as cost reduction, elimination of friction, improved customer service, and enhanced agility. Transformation projects should be aimed at tackling all of them simultaneously. Transformation isn’t about transforming technology, but transforming the organization.
2. Advancing technology, supported by strategy, culture, and talent, underpins transformation.
– Successful transformation requires:
- Strong digital strategy – guiding investments and decision making.
- A two-pronged approach to IT – supporting existing transaction systems and rapid technology upgrades. Speed is the ultimate hedge against changing market conditions.
- Improved business operations and customer experience – some groups are making massive investments in technology for back-, middle-, and front-office operations. Many involve internal “digital journey projects,” such as New York Life’s push to consolidate actuarial systems into a single finance model.
- Analytics – mining internal and external data sources for insights on everything from underwriting and product development to marketing and claims.
- A supportive organization with a culture encouraging growth – with talent development at the very heart of transformation.
3. As transformation takes root, boards are rethinking their approaches to governance.
– Ways in which boards can better support enterprises in transition include:
- Improve expertise, adding board members with expertise in technology, digital transformation, customer centricity and services.
- Bring in external perspectives, collaborating with external parties toward a brighter view and broader outlook.
- Create structures to elevate technology discussions, which have historically struggled to gain board-level attention.
- Take a holistic view of technology strategy and investment.
- Enhance transformation benchmarking and reporting to ensure progress is on the right track.
- Improve understanding of the risks specific to transformation. New technology is making transformation easier and more cost effective, but major organizational changes go way beyond technology.
Bottom line: As technology shifts from enabling to driving the business, boards are seeking a more strategic approach to investment across the enterprise and are adapting their governance tools to accommodate transformation.
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