Although the word ‘transformation’ was being bandied about the London insurance market well before the pandemic hit, few could have imagined the scale of change that the industry would be forced to implement in a few short months following the first wave of COVID-19. But even after the huge technological, operational and cultural changes that flowed from this seismic event became embedded in the ‘new reality’ of everyday society, the need for the insurance industry to continue transforming has remained.
However, while maturing insurance sector organisations have a deep understanding of, and appetite for, their clients’ operational risks, many are highly risk-averse when it comes to re-engineering their own structures, processes – and cultures. Perhaps the margins in a hard market are eroding so every business decision has a potential threat to the bottom line
London’s legacy problem
The continuing relevance of the London insurance market is a perennial topic of debate, but for difficult and specialist risks London still has a global reputation for its depth of capacity and expertise.
However, the insurance sector - and London in particular- still has an unenviable reputation for over-reliance on legacy processes and infrastructure. It is after all a centuries-long business with complexities like no other sector.
There is a significant amount of optimization and re-engineering that could be carried out which would not only benefit London market businesses and make them more cost effective, but would also drive some organisational maturity.
And it’s not just legacy infrastructure and processes that require change –legacy thinking needs to be addressed, through overcoming resistance to change from senior employees who may be too set in their ways.
One of the major cultural and existential issues for the London market is an ageing workforce with a significant proportion of senior people who are fast approaching retirement. The issue of legacy thinking will change over time as those people retire, but there is still the risk of a divide between the strategic aims of the board and senior executives and the day-to-day priorities of the ‘boots on the ground’.
Going lean isn’t always good
With various regulatory challenges in the pipeline for London market businesses, we have seen many multi-year programmes running that involve executive changes and improvements to operational processes to make businesses more efficient. While solutions such as business process outsourcing (BPO) can be very effective operationally, they can generate cultural issues around engaging and empowering your people.
Organisations that rely too heavily on outsourcing will struggle to mature their business because the service providers they've outsourced to are unlikely to re-engineer their processes and decrease their headcount in response to the growth of their client’s business. If you run an overly outsourced business for too long, therefore, it becomes harder to remain agile and to continue growing. At some point, you have to invest more in the business and retain more of your key people and key processes at the centre so you can optimise into the future.
Investing in your team
Cultural change is about how you get people to communicate and collaborate more openly and effectively. If the people in an organisation know why it is changing, they are more likely to be on board with that change.
The key to getting the best out of your employees in this post-COVID new reality goes back to investment – not only in education and training but also in giving employees the bandwidth they need to keep providing services to the business. With a high turnover in senior positions expected over the next decade, the industry will have to grasp the nettle of how to get incoming talent sufficiently well trained to replace the current leadership, while giving them sufficient bandwidth to innovate.
If, as an insurance sector CIO, you have just signed off on a significant, multi-year programme to provide a great new single source platform that will dramatically improve your team’s user experience, that can be a fantastic boost to recruitment and retention. But you also have to factor in the investment in training your people to adopt that investment.
The methodology of change
Every company has a different ecosystem and a different business architecture. Successful companies may have a slightly better ecosystem and/or better people, but what defines their success is not just the ecosystem and the talent. It involves effective communication of the change message, empowering the right people, a cadence to the change process, and a willingness to stop and go back if the programme isn’t working.
First and foremost, the vision for change has to be clear and articulated in such a way that everybody understands it and believes in it. And of other basic principles of change - good governance, good process, good reporting– the element that most often fails is the user journey.
It’s important to define what the current user journey is and then consider what the user journey you are trying to put in place will look like, and what benefits it will bring to the individual and the organisation. So, you can optimise your business, attend Insurtech Insights, buy all the latest architecture, and bring in new ecosystems, but if the people working for you are not along for the journey, then all of these change programmes will amount to nothing.
The new reality for the insurance sector is not just about process improvement and operationalising performance. Businesses have to remain relevant to what they're offering in the market, and also to the people they have working for them.