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5 THINGS INSURANCE COMPANIES NEED TO DO TO SURVIVE IN A DIGITAL WORLD

The Insurance industry is undergoing a dramatic and necessary disruption.  This disruption serves two purposes, one, to allow insurance to be offered at a microlevel and to a market that was hitherto underserved and two, to ensure that the customer is more intimately engaged.  A few weeks ago I looked at how technology is disrupting the Insurance industry in Africa and how micro insurance promises to save Africa. If you missed it, read it here.

In this piece, we want to suggest five ways an incumbent in the Insurance industry can change and survive. We will be using the example of the Kenyan market, one of the most vibrant in the African continent.

1.     Develop a digital strategy

In doing this, lies the evolution of the strategy. We have seen it evolve from a static plan covering multiple years, to a flexible plan that adapts to a changing environment. Today, there is a rising demand for more strategic thinkers across organizations, as opposed to only in the boardroom. 

As a term, digital strategy went from primarily being about marketing using digital tools to depicting a term that spoke about disruption of old, entrenched business models. This is the stuff of Uber disrupting Taxi associations, Instagram disrupting film and photography, Netflix disrupting movie rental, and the list goes on.

How Software is eating the world. Source: disruptors.mx

In Kenya, M-Pesa disrupted traditional banking by digitizing money and creating a trusted system where people and businesses can distribute money in exchange for goods and services. From a virtual branchless bank, M-Pesa has grown into a virtual megamarket with buyers and sellers peddling goods and services of every kind. 

For Kenyans this digital world is no longer a channel, but a transformative force that is creating completely new behaviors and opportunities.

Today more people in Kenya are turning to digital communities and stores be it Jumuia, OLX or Facebook. This digital world is allowing users to self-select their experiences, thus allowing businesses to gain feedback and build relationships.

Any Insurance company that wants to survive and thrive has to develop a digital strategy. What is a digital strategy? Three definitions could point us to the right course of action. A digital strategy is:

a)    a  process of identifying, articulating and executing digital opportunities that will increase an organization’s competitive advantage. (Digitalstrategyconference.com)
b)    a plan that aims to accomplish something with the benefit of digital tools.
c)     the who, what, when and where of listening and responding to customers, bridging brand experience, iterating offerings and collecting and activating customers relationships in order to accomplish an actionable and measurable objective.  (Bud Caddell)

2.     Define and understand your Digital capital

We are ushering in a digital capital economy. Winners in this era will not be determined by cheap labor or ordinary capital both of which are being squeezed by automation. Instead, the future will be for those who can innovate, develop new products, services and business models repeatedly at the speed that the customer demands.   

To achieve this feat, we start to talk about digital capital meaning not just the tangible assets that most incumbents are acquiring like servers, networks and basic software, but also the intangibles assets like the organizational redesigns that can be realized with the right skill and mix of employees to better engage and satisfy the customers. The complementary business processes, work practices, patents, brand equity and even culture, ensure an enhanced digital experience for users.

Most insurance companies in Kenya lack intangible assets or they are only skin-deep. This needs to change. These intangible assets, if well understood and clearly defined, can allow the incumbent to feel secure outsourcing certain functionalities to supply chain partners thus drive down operational costs while allowing them to rapidly respond to client needs.

3. A digital transformation is not an IT transformation

IT Transformations are traditionally massively complex and highly disruptive to long-standing business processes and their end-users; they can also span years and cost a ton of money. Success is normally low. They fail because of lack of involvement, weak support from top management and unclear business objectives. (Source Strategy&)

Sourced from corbusllc.wordpress.com

IT transformation is comprehensive change to an IT organization that cuts across its processes, technologies, culture, and sourcing and delivery models that enables continuous step change improvements in business capabilities supported by significantly stronger IT capabilities at lower unit costs (Source KPMG).

Digital transformation on the other hand is customer facing, demand or revenue generating. Digital transformation demands more at the pace of the market and customer expectations rather than at the upgrade cycles of IT Vendors.

Digital Transformation drives or can drive IT transformation and not the other way round.

IT Transformation is about Operation Expenditure (OPEX) control measures and increasing operational efficiency and optimization.

Digital Transformation is about using fast digital technologies such as analytics, mobility, social media and smart embedded devices to change customer relationships, internal processes, and value propositions.

Because these fast technologies operate at the speed of thought with a potential to turn the incumbent’s tangible assets into liabilities, it is essential for the incumbent to embrace shorter cycles in taking a product or a service from idea to deployment. For this to become a reality, collaboration and horizontal integration is essential within an organization.


4. Avoid the following transformation traps

Source MIT Sloan Embracing Digital Technology
Make sure you have a leader with the right temperament and experience to take charge of the digital transformation. Most insurance companies have few leaders having and offering a vision or a road map to digital transformation. 

The leader must be able to rally the support of all employees across the enterprise. Remember that urgency is an imperative; not acting soon enough could put the business in peril. According to an Altimeter Survey, the Chief Marketing Officer (CMO) is the most likely executive to champion digital transformation efforts, mainly because their role focuses on customer engagement.



Manage the attitudes of older or technophobic workers especially if they are in management and educate them on technology: Trends, disruptions occurring and future strategies.


The presence of legacy systems that have already cost the organization a lot of money in investment and are too complex to update should be reviewed and a careful analysis done on how to replace them with minimum disruption. In this situation, make sure management has complete transparency in the costs involved in indecision.

5. Finally, have a change checklist

Develop a checklist that defines the steps to Digital Transformation for your Insurance Company. There are many in the wild, I prefer the one below  adapted from Altimeter’s Digital Transformation Report.

It focuses on three areas: Leadership, the Customer Experience and the team you constitute to make this transformation a success.

Have a leader and articulate the vision

1.     Document the factors disrupting the market. Generate a business case that will help make this clear to management.
2.     Develop a SWOT analysis that assesses your current position for transformation.
3.     Develop a vision statement on how the digital transformation will look like in the end, the benefits it will accrue, current clients or new clients it will be able to serve.
4.     Seek an executive sponsor who becomes the leading champion, he must buy into the vision and be willing to rally support across the organization.
5.     Constantly educate the executive sponsor and make sure they are effectively communicating the vision for digital transformation throughout the length of the project and across the organization.

Create a digital customer experience
Sample Customer Journey

1.     Map the customer journey and the digital customer journey, as they exist currently. Interview stakeholders and learn the opportunities and challenges that exist among them.  
2.     Understand the differences between current and digital customers’ journeys. Identify any unique variations
3.     Chart a sample journey around the right experiences for the right customers based on channel and screen
4.     Note the gaps that exist and which investments are lacking and need to be made.
5.     Assess the processes, policies and systems currently in place that prevent success in engaging digital customers and lay out a plan to overcome them
6.     Review the ultimate customer journey every half-year and adopt investments to realize a better digital customer experience strategies.

Digital transformation Team 
 
1.     Create a cross-functional transformation team ideally from every function in the organization.
2.     Develop a RACI model for the cross-functional group and an ongoing collaboration schedule and reporting process. This allows prioritization and delegation of projects.
3.     Build a strategic alliance with the IT Department (this must be a cross functional team).
4.     Form a data collection and insights team as part of the digital transformation workgroup. Create role(s) necessary to collect, analyze, and tell a story through data.
5.     Measure impact of transformation at the enterprise level and at each touch point to document progress and benefits. Establish a reporting process to the workgroup and ultimately to stakeholder groups.
6.     Develop a training regimen to bridge the gap between existing and required expertise for transformation processes and technologies.
With that, I wish you success in your digital transformation journey.


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