Next Generation Insurance: Leading from the front.

Much has been written and read about in the past 2 decades on "core" competencies/ capabilities and how they are critical for a winning corporate strategy. Reviewing this new book published recently with much the same theme reminds me of the long journey ahead and how most financial services and insurance companies are still saddled with an onerous amount of operational baggage that is not suited for competing in the 21^st century.

The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Booz & Company's Paul Leinwand and Cesare Mainardi)

The emergence of mature service providers with global scale of operations and also in recent times state of the art proprietary platforms that is part of their value proposition significantly changes the value equation for insurance carriers. Most of the operational and systems infrastructure built in the last few decades were based on a paradigm that was centered around executing most of the operations in-house which actually distracts management attention from focusing sharply on core, differentiated capabilities.

For example, if a carrier chooses to compete and I mean really be better than competition (not just be comparable amongst a whole group of peers) based on their underwriting capabilities- they should focus significant organizational energies, financial resources and management bandwidth to continue to make that capability out-distance itself from the competition. Ditto for a carrier that may choose to be just on par from an underwriting standpoint but wants to excel in its distribution capabilities.

In the emerging ecosystem with very mature service providers and partners, insurance carriers need to focus on very select business capabilities that they can make truly distinctive and find the right partners to manage rest of their operations in a cost-effective manner - else, they risk losing ground on multiple fronts to different competitors who beat them on different fronts. Being average or slightly better than average on every front is a sure-fire way to being worse than average from a customer's standpoint and that final value proposition is all that matters when it comes to sustainable and profitable growth.

Posted by George Ignatius at 3:35 PM | Permalink | Comments (0) | TrackBacks (0)

Watch Siva Nandiwada, Associate Vice President - Insurance, Healthcare & Life Sciences (IHL), speak about how insurers use IT budgets for discretionary activities. The percentage of non-discretionary spends has increased in recent times. Siva suggests ways to overcome this challenge with engineering methods and operational efficiency

Posted by Siva Nandiwada at 11:44 AM | Permalink | Comments (0) | TrackBacks (0)

Most organizations struggle with finding the balance between reducing operational costs in the organization and the need to service customers better. How to measure the trade-off is not well understood and even then very rarely practiced- however, it forms the core of competitive behavior in a market that is now increasingly price conscious but poses the danger for major carriers in terms of losing customer loyalty as they strive to reduce costs across the board.

The value of customer focused operations is usually measured along the following lines and business case for the same is justified accordingly

-          Producer or customer demand for competitive service models that meet market expectations (example- self service capabilities) => table stakes, no real justification needed!

-          Customer Satisfaction surveys (example- Dalbar) in addition to benchmarking analysis at industry level => survive as a leading brand, marketing justification!

-          Cost of acquiring new customers vs. retaining existing customers and/ or cross-selling => sales cost based justification!

Continue reading "Cost Reduction AND Customer Focus" »

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The percentage of 17-year-olds with a driver's license dropped from 75% in 1978 to under 50% in 2008. Even if you go up two years, the drop is still significant, from more than 90% of 19-year-olds in 1978 being licensed drivers to only 77% of them 30 years later.

The reason for this shrinking of the pie seems to be a) movement towards urban areas with abundant public transportation and b) evolution of digital commerce.

With the rapid evolution of technologies, the second aspect above could only accelerate the change in consumer needs vis-a-vis protection. Auto manufacturers are already doing everything possible to get the demographic into a vehicle - ranging from making the vehicle equate to a "computer-on-wheels" to introducing "community cars" for the infrequent drivers.

The underlying question though is - will this trend influcen a change in the personal insurance products? Can the consumer demand an auto-insurance product that he/she pays for on a need-basis? Can the consumer demand a true "personal protection" product that will insure the individual regardless of the risk?

I guess the answer to all the questions above is Yes. It will be imperative for carriers to understand, engage, sell-to and service the new demographic in ways that they have never done before. How they will react and who emerges as a leader remains to be seen. There is no doubt, however, that it is time to get a lot more personal with the consumer base.

What do you think?

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The role of “business analyst” is getting more and more important as product/package companies are passing more control from IT to the hands of business users. Things like maintaining business rules, changing workflows or adding new fields on a screen - things that involved IT just few years back are now comfortably being done by business analysts. The toolset based products which can be changed via “configuration” through UI, rather than “customization” through code is helping the paradigm shift. The catch is very often it requires some IT skills like knowledge of XML or learning a scripting language which an ordinary business user (like an underwriter) may not be able to do. To make this happen a new set of “trained” business analysts are evolving who have good understanding of both business and IT. Let’s call them “Business Analyst 2.0”.

Continue reading "Business Analyst 2.0 and BAO - Business Analyst Office" »

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Continue reading "Value selling – strategic benefits typically trump financial measures…but should the latter continue to be a laggard?" »

Posted by George Ignatius at 11:27 AM | Permalink | Comments (0) | TrackBacks (0)

For an insurance company both Policyholders and Agents/Producers are equally important to top-line and bottom-line growth.  Even in this day and age, Producers continue to play a vital role in bringing together carriers and end customers.  Insurers are well aware of the importance of satisfied Producers — captives independents and others — in driving new revenue as well as in providing a competitive edge in the marketplace.   

It is true that market-relevant products and attractive compensation will favorably influence a Producer’s decision to contract with a carrier.  However the ‘ease of doing business’ - be it for initial contracting and appointment, tracking continuing education credits or license expiry or other administrative activities like maintaining biographical information, banking details etc. - will be a deciding factor in continuing a mutually beneficial relationship with the carrier.

Continue reading "Improving Producer Experience" »

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Continue reading "Do you have a goal for reducing the % of non-discretionary spend?" »

Posted by Siva Nandiwada at 11:25 AM | Permalink | Comments (0) | TrackBacks (0)

There has been a raging debate (on this blog as well as all major media outlets) on the right level of IT spending for carriers. While, generally speaking, the participants in this debate seem to be converging on the central theme of shifting to a ROI based prioritization and governance of IT spend, ruthless management of Total Cost will continue to be an imperative that impacts the ROI.

Most organizations have leveraged sourcing in some way or the other to optimize total costs. While sourcing is a strong lever, it is also important to assess the right sourcing strategy  in optimizing the total cost. Managed services models provide an excellent opportunity to manage cost structures while shifting to a variable cost model. Using managed sourcing in conjunction with other strategies (like Grid computing) can be very effective in managing total cost to address the variable demand.

We all know TC = FC + VC*Q. For the IT landscape Q (Production) is the same as demand for IT in an enterprise (both discretionary and non-discretionary). Functional areas that have potential significant variability in demand (or seasonality – for example processing claims in the hurricane season or a new product launch) can benefit from leveraging models that lower fixed cost (and allow to not plan infrastructure and systems for the peaks) and use variable but predictable (tied to business outcomes) costs.

Let’s take a look at a model for optimizing Total Cost

Continue reading "Sourcing Strategy to Optimize IT Spend" »

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Continue reading "What is the true discretionary spend in insurance companies?" »

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The noted futurist Ray Kurzweil continues to expound his vision of human immortality - though his 20-year timeframe for achieving it does not seem to have moved forward in the last 4 years. Given his commendable achievements and awards starting with his college days at MIT, his views continue to attract the attention of the world media with multiple reports in the past week.

Continue reading "Immortality- disagreeable future for Insurance industry?" »

Posted by George Ignatius at 11:19 AM | Permalink | Comments (0) | TrackBacks (0)

In the Insurance Industry, product design, claims, distribution, customer acquisition and policy administration figures on the top of the list of Insurance specific core processes. However in the Insurance processes value chain, each process has different cost-structure. Moreover, the impact that process has on the creating differentiated competitive advantage for the organization varies for each process.

Continue reading "Realigning spend priorities for Insurance processes" »

Posted by Sanjay Mohan at 4:10 AM | Permalink | Comments (1) | TrackBacks (0)

In an industry organization, 30-40% of processes and supporting infrastructure (technology, systems and human resources) are the same as any other organization in that industry. These processes are not a source of competitive advantage for any of these organizations. Insurance organizations are not the exception here. Moreover, if you look at the cost of these processes (including the underlying infrastructure of technology, systems and human resources), it becomes imperative for Insurance organizations to sharpen their focus on the 4 Ps for the source of differentiation – product, price, place (distribution) and promotion.

Continue reading "Shared services across industries – for the benefit of Insurance industry" »

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Continue reading "Finally, thawing of the discretionary spend freeze?" »

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