Many insurance carriers love insurtech because it can help them to become more operational excellent. A growing number realise that this is not sufficient and that they should deploy insurtech to reinvent the way they engage with customers as well. Leveraging what insurtech enable, combining even more operational excellence with a next level of consumer engagement, is not a gradual development, but requires insurance carriers to develop new talents. Leveraging insurtech is basically a new competence to most organizations. Furthermore, it is not easy. It transcends channels, products and departments. It is about working methods but also about changing decades of routines and beliefs, about the company culture. And last but not least, to know how to deliver it is the real challenge. To quote Morpheus, the character in The Matrix, “There's a difference between knowing the path and walking the path.” We distinguish ten talents that are more important than ever to leverage insurtech for new ways of customer engagement.
1. CUSTOMER OBSESSION. HANG OUT WITH THEM
A different level of customer obsession is required. Because new technologies redefine new behaviour we need to know a lot more. All sorts of connected devices offer insurance carriers the unprecedented entry in the lives of customers, and all sorts of possibilities to help them on all kinds of occasions.
To capture this opportunity insurers have to have much better knowledge of the impact of connected on the wishes, expectations and behaviour of consumers regarding financial services. Insurers have to understand even better what requirements new customer engagement strategies have to meet. Which ways are best to maintain a dialogue with the customers, increase the contact frequency and be of value all the time; to develop pull platforms and keep interesting over time. Contextual thinking. Which events or themes cause customers to go looking for content? In what way can banks and insurers best help them with that? What part can banks and insurers play in their lives? Which role will be accepted by the customer?
They have to know better than they do now what customers expect from them when it comes to the use of data. How they weigh privacy against convenience and added value. What reciprocity is expected, and where the absolute limits are. How insurers can familiarize customers with the use of data.
This is not about briefing a customer research agency. Insurers need to immerse in the life of customers. Hang out with them, observe them.
2. LEADING EDGE DATA ANALYTICAL SKILLS. TURNING DATA INTO WINNING PROPOSITIONS
A key challenge for insurance carriers is building new capabilities to take full advantage of the data they collect from connected devices, pull platforms and smart phones. Unfortunately, the enormous amount of data insurers preserve makes them think that there is a lot of knowledge. But all too often it's just a lot of data, used for risk assessment and pricing and for targeted marketing. In reality, most insurers have not yet succeeded to translate all that data into new customer propositions with new advantages. All these new data streams only become interesting when new innovative propositions and revenue streams can be based on them. By translating the data into actionable insights and new offerings, and next getting these new products and services to market quickly and efficiently.
Most insurers are simply not creative and enterprising enough to get the most from data; neither for the customer, nor the company itself. They need to step up the plate.
3. BUILDING RELATIONS. THE VALUE POPOSITION HAS TO BE ALIVE AND PERSONAL
Building relationships is a core competence. Relationships with customers, with partners that are part of the same ecosystem, and with insurtechs.
Developing customer relationships is a competence most insurers have outsourced in the last 100 years to brokers and other distribution partners such as banks. These talents have to be restored but on to of that also translated to digital. Building relations, as it is in real life. With whom do we want a relationship, who would we pass on? And what kind of relationship? How do we develop that relationship? Not instant selling, but nurturing a relationship. How do we give our best?
Insurers have to deal with several new aspects. They have to live up to what consumers have grown accustomed to in the mobile world: perpetual updates and improvement, new functionalities and capabilities. Being ‘always part of life’ inherently means that products and services have to be alive and personal. New products and services should take that into account from the conceptual stage on. There should be longevity in it. Any concept should be able to sense how consumer needs are changing over time and adapt seamlessly. There should be a more or less constant stream of upgrades and iterations that anticipate the endless consumer desire for the continuous product renewal and innovation, to be able to keep motivating customers over a longer period of time.
Apart from relationships with customers, other relationships have to be developed and maintained; with all kinds of parties that play a part in the ecosystem, or in the customer's context. And with insurtechs that innovate a part of servicing for a insurer, insurtechs who come up with new ideas based on the data and infrastructure of the insurance carrier, and so on. Building relationships is a core competence.
4. OPEN MIND. ROOM FOR UNSUPERVISED LEARNING
New entrants venture to question the industry conventions. Established insurance carriers should do that too. As our colleague Eduard de Wilde (VODW) puts it: “If you want to play the game, you need to change the rules.” It’s all about questioning eroded conventions regarding customer expectations, positioning, the business model, the products and services, the role of the broker, the importance of channels. Don't start out conforming to conventions, but actively look for ways to break them. Keep an open mind.
The high rate of the developments around us demands that we have to deal with uncertainty. You have to let it happen. Among insurers, that is against their nature. This is where we can learn from adjacent and quite similar industries such as banking. MobilePay, Danske Bank’s mobile payment solution, is now used by almost every Dane. But Mark Wraa-Hansen (Danske Bank) says: “If you listen to the MobilePay success story you may think we had it all figured out, but we definitely didn’t. Of course we had made a business case, but it didn’t stick at all. We outperformed on a lot of parameters, but at first we did not make any money. However, with MobilePay we created a huge user base and it enabled us to build an ecosystem. And there is a lot of money in that ecosystem. The business case is quite different to when we started. It is actually better looking ahead than what we thought initially. There is just a lot of stuff that you cannot foresee. It turns out that MobilePay is ‘first reach, then rich’. For a bank this sounds very risky.”
It's about empathy, flexibility, and improvisational skills. There should also be some ‘open ending’, room for unsupervised learning, to use whatever is derived from the data and learning experiences to take the next step – to continuously match changing needs. We are shifting from product to constantly evolving services.
5. AGILITY. IMPROVE THE ‘TIME TO DECISIONS’
This is where we need to distinguish agility in adapting to change and an agile way of working within organizations. They are both related yet different. An often heard reason for digital transformation is that it speeds up the time to market. That's true, of course. Time to market of small banks is six months. Large banks need twice this time. By the way, that is not unique for financial institutions. It takes fast mover Proctor & Gamble about 300 days to go from a new product idea to a supermarket shelf.
But in many large organizations, not the time to market, but the ‘time to decisions’ is the main problem. Decision-making takes ages. And it’s losing possible profit opportunities, because a possible profit is bigger when you can bring it to market earlier, and benefit from it longer. This way, you lose momentum. The longer you wait, the less relevant the idea will become.”
Agility will become the standard. Who would have thought that Spotify would eventually be more renowned as an organization model than as a music service?
6. EXPERIMENTATION. WHEN IT’S PERFECT IT’S TOO LATE.
Fostering the opportunities that new technologies offer requires experimentation. We never could have guessed all the things that the internet has made possible, let alone what smart phones have made possible. It's just as hard to foresee what can be done with for instance connected devices. Insurers need to use techniques such as the ‘lean methodology’ to experiment with new ideas and processes, constantly tweaking these with fast feedback loops. Of course, that is also a culture issue. The challenge is to get people to be more ambitious. Again insurers can learn from the banking sector. At DBS Bank they have changed the word ‘no’ to ‘let’s experiment’. But it definitely can be done, even on a massive scale.
Part of agile working and experimentation is thinking in terms of minimal viable products, and improving these on the go. Mark Wraa-Hansen (Danske Bank): “We actually launched MobilePay before it was finished. People told us “don’t launch this until you have solved this or that”. Of course it made us insecure. But we just didn’t want to lose the first mover advantage. We’re building a plane while it flies. But when it’s perfect it’s too late.”
7. CREATIVITY. HIRE STARNGE ANIMALS.
Collecting and modelling data is one thing; translating it to new concepts, new ideas for features in pull platforms, new dialogues with customers, or new added value is quite another. In building advanced data analytics skills, financial institutions suffer from some sort of anaemia when it comes to this particular kind of creativity. Put customer experience design in the hands of design experts, not with co-workers who have been working in insurance carrier for ages. Hire strange animals, who feel comfortable asking the questions nobody else dares to ask. People with completely different background - from the gaming industry, e-retail, to for instance even online gambling.
8. ORCHESTRATION. RESPECT ALL NODES. COOPERATION AND COMPROMISE
Orchestration is required at different levels: to get the most out of agile teams, to break down silos and to create an ecosystem where every party has its added value. Terms such as ecosystems and marketplaces suggest that these form and function more or less autonomously. That is not quite the case. Theo Bouts (Allianz): "A key function in smart ecosystems is orchestration. And the most important factor for success in orchestration is a genuine belief in the significance of connectivity, and to be prepared to live by it. There is a shift in roles between insurer, consumer and distribution partner. That means that you have to understand and respect the needs of all nodes in the network, for example customers and distribution partners. And that you keep granting access to nodes that may not be of value to you, but to the ecosystem as a whole. This part of orchestration requires a certain level of maturity, but also a different mind-set. If all is well, parties in an ecosystem are all convinced that value is added for the net- work, and for each of the parties. Because of that there can be no room for practices such as hard selling techniques. Orchestration requires specific talents: content, people and process skills. When you think of a ‘network’, you may conclude that ‘process skills’ is the most important talent to establish an ecosystem, and to continue to give it new impulses. I think that the other two, content and people, are much more important. If you want to successfully play the part of an orchestrator, you have to master content 100%. Cooperation and, if necessary, compromise, have to be in your blood.”
9. GATHERING THE RIGHT PEOPLE. CHANGE THE DNA
The previous eight talents make clear that leveraging insurtech to the max is perhaps one of the most difficult challenges a company faces, primarily because it often requires the company to change deeply rooted corporate cultures. It's not about drawing up a new organigram, but to gather people around you that feel comfortable with agile working, dare to take responsibility, are willing to keep an open mind, with the right skills – for instance data creativity – who can handle a certain level of uncertainty, who enjoy developing relationships with other parties, and who are obsessed with customers.
Often people with these talents can already be found inside the insurer, they only have to be found, and empowered. But it's not like the traits we just summed up are present in the genes of every financial institution. It has taken quite some time before insurers invested substantial amounts of money in innovation. Peter Maas, professor of insurance management at Sankt Gallen University in Switzerland argues that this is caused by the DNA of the whole insurance industry. The core of the business model of insurance is to look backward at risk figures. It is not about painting future horizons, customer obsession and building relationships. Innovation and customer engagement is unnatural.
10. LEADERSHIP. GET INTO THE TRENCHES TO INSTILL CHANGE
The people at the top are the most important agents of change. So, to really get the most out of what insurtechs have to offer, what is required are motivated board members who love customers. Furthermore, it requires a vision that sees new engagement strategies, informed by new technologies, as the primary source of differentiation and profit.
The IT infrastructure is often an important hindrance to renewing and challenging the existing business. But in our experience the management culture may be an even larger barrier. The more management layers, the more bureaucratic processes, and the more politics come into play. More agile working calls for resistance, especially by the most powerful part of the organization, the middle management. Which turkey votes for Christmas?
Everything stands or falls with C-level having sufficient strength and power to break this, while getting the remaining management layers to give the vision their unconditional support. When it fails, it's really because of poor change management capabilities. When change fails, it is often because of horizontal leadership: leaders who don’t know the details, who are taught to delegate, who don’t have the necessary content depth in digital transformation. To really bring about change, leaders must make time to get into the trenches themselves to instil change.
Interested to read more?
Check our latest book ‘Reinventing Customer Engagement. The next level of digital transformation for banks and insurers’ (LID Publishing, 2017) at http://amzn.to/2yT00Jk and www.reinventingcustomerengagement.com