Solution Partner Views
Too Big to Fail? Insurers Don't Want to Find Out
Attending the Insurance Disrupted event hosted by the Silicon Valley Innovation Center last November, I was stunned to hear a panelist`s answer to the question, “What will it take to get C-level managers to begin to understand the need for change?” The answer given: “Fear of catastrophic loss.”
Pondering that response, I questioned if the insurance industry had learned anything from Kodak or Blockbuster. Perhaps Kodak didn`t realize the threat of digital technology soon enough and Blockbuster failed to respond to new streaming delivery channels. Their customers changed not just what they bought, but how they bought. Both companies were big, but not too big to fail. While both companies are still around, they are no longer the household names they once were.
These days our insurance industry is evolving in ways that seemed improbable just a few years ago. Every insurer is challenged to find creative ways to manage the demands a completely new business environment populated by different policyholder expectations and new non-traditional competitors. Failure to overcome these challenges may find more than a few insurers going the way of Kodak and Blockbuster, regardless of how big they are today.
Some tier one insurers, like Allstate and American Family Insurance, have incorporated acquisitions as a key component of their strategy. Others are trying to address the challenges through in-house development and procurement of commercially available technologies. Smaller insurers, while often having the flexibility to better manage change, are challenged by the necessity to adapt to the new environment fast enough to survive and level the playing field. Unfortunately, others have yet to even recognize the threat. As a result, it seems clear that the industry will look considerably different in the near future.
Insurers need to let go of ‘business as usual,` embrace change as a new way of life, and reinvent themselves as agents of change. That`s all easier said than done when many insurers are still solidly rooted in the old way of doing things.
Old Gray Haired Guys…and Gals
While speaking at an IASA EDGE Conference, industry journalist Brian P. Sullivan commented, “If you are a young insurance executive and your boardroom is full of old, gray-haired guys you need to find a new job.” While old gray-haired guys like me could take offense, Sullivan`s point is well taken in that most insurance companies are not positioned culturally to accept rapid change. That doesn`t bode well for those companies` futures.
I heard a similar concern at the Insurance Disrupted event mentioned earlier. In a breakout session a young vice president from a tier one insurer expressed frustration with the difficulty he had in getting his senior management to consider changes that would position the company to meet the demands of the changing world.
Yet another anecdote to illustrate the problem comes from a recent conversation I had with a C-level person at a large regional carrier about how to better engage with policyholders of all ages via print, web, and mobile. When after a few minutes he indicated that these enhancements wouldn`t apply to his organization, I inquired as to why he felt that way. He commented that he`d be retiring next year and didn`t want to start changing things. Hopefully this isn`t the norm in the industry as his outlook certainly didn`t seem to portend a bright future for his company.
If a carrier is waiting for senior management to retire or for when catastrophic loss is knocking at the door, neither is a good plan for the future. Insurers just can`t afford to wait any longer and need to be proactive rather than reactive.
Let`s face it, change is risky and scary. But it`s absolutely necessary given the unsettling pace of the current, and worsening, modern market insurers have to contend with.
A Starting Point for Change
Once a carrier finally accepts the inevitable need for change in order to remain viable, the next challenge is the question of where to begin. While there are any number of starting points, one key recommendation that I would make is to put yourself in the customers` shoes. This may well have been the critical tactic that Kodak and Blockbuster missed that ultimately led to their struggles.
While many insurers have busily been transforming and modernizing the back office operations, the customers have never needed or wanted to know what`s going on behind the scenes. What`s being done internally in an insurance organization should be transparent to the customer regardless of how automated or manual the process is.
The blinding flash of the obvious is that profitably getting and keeping customers is going to make or break any business, so what customers see and experience will determine how they view the organization. Determining the customer touchpoints and identifying those that are most frequent are a good place to begin. What are the day-to-day interactions customers have with the organization and how can you make them better? A simple question, with a complex answer. Policyholder communications come in many forms from hardcopy, to digital and mobile, to in-person interaction whether via phone, email, or face-to-face.
You can`t tackle every touchpoint at once, so start with a few critical and frequent customer communications. Address them on an enterprise level and ensure it is a collaborative effort involving all the stakeholders both inside and outside the organization. It might make sense to see if customer and agent focus groups can help identify the vital few communications to start with. Customers and agents are critical to the change effort and must be considered.
Will overwhelming change occur overnight? Of course not, but building on small successes and learning to make collaborative, enterprise decisions will define the best practices to expand the change effort to every aspect of the business.
While Kodak may have been researching and developing better film and Blockbuster was expanding its number of retail locations, they might not have been keeping tabs on how their respective markets were evolving and what was most important to their customers. Insurers can learn a great deal about where to change from these examples. Just walk in the customer`s shoes to determine what`s most important and begin there.