It’s now or neverChange Directors within the insurance industry highlight the urgent need to strengthen and optimise the way change is identified and delivered

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The insurance industry is being buffeted by an unprecedented combination of destabilising and disruptive forces.

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Until now, change has been largely directed at meeting regulatory demands. Today, however, digitally savvy consumers are forcing insurers to respond to their diverse needs with relevant, personalised and flexible products, services and advice.

Building a business to meet those requirements in a flat market calls for new approaches to delivering change – and these approaches must bring innovation to the fore as a key driver of success.

With the industry at a critical point in its evolution, the investments, decisions and strategies being developed today will play a crucial role in determining the future growth and prosperity of every participating business. To gauge how insurers are assessing the changes that are required, and the capabilities they need to make those changes, Accenture recently spoke to an expert group of Change and Programme Directors at leading UK insurers and brokers.

Summarised here, the results of these conversations point to an urgent need for very different skills and abilities than those which these executives possess today. While roughly half of these Change Directors considered regulatory change to be an ongoing imperative, virtually all of them said that their top priority was transforming current business models to address long-term market requirements and consumer needs.

However, there was also evidence of a real demand for aggressive cost reduction (that will require significant changes in operations and company culture), with the majority of Change Directors identifying operating expense management as an ongoing priority. This tension is causing headaches for executives as they try to steer a path to success.

It’s a classic dilemma: how can insurers do more with less? They need to deliver greater agility and flexibility to respond to fast-changing customer needs. At the same time, they have to operate within an increasingly cash-constrained and low-growth environment.

With change now inevitable, what key capabilities do Change Directors identify as being fundamental to their future success?

Digital and analytics talent gapsEverything’s digital. That was a key message to emerge from the consultation, with many Change Directors highlighting analytics in particular as a clear source of competitive advantage.

The majority of the group pointed to digital and analytics skills as being key areas for development over the next three years. There is already significant demand and competition for these abilities, which is being met by buying in (or sourcing) talent from third-party organisations. From now on, these skills will be key to unlocking a greater share of the customer wallet. Insurers will be following in the path of banks and retailers, who were early adopters when it came to building the relevant capabilities at pace and scale.

At the same time – and reflecting the ongoing focus on cost and efficiency – there was widespread agreement among Change Directors regarding the importance of developing planning and programme skills and, albeit to a slightly lesser extent, improving the capacity to support business-critical programmes.

...new digital ambitions, calls for a ‘fail fast, learn quickly’ mindset that is customer-led.

Pioneering innovation

Improving agility

Developing new sourcing models for change delivery

Centralising change expertise

Closing the digital & analytics talent gaps

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Greater centralisation of change expertiseChange Directors are looking to centralise their change delivery capabilities. Over the next three years, more than two thirds of the experts that Accenture spoke to indicated they were planning to move from a decentralised business-unit-led approach to a more centrally sourced and managed change capability.

The results of our conversations around this topic point to a key driver behind this particular shift: virtually all of the Change Directors accepted the need for change resources to become value creators and innovation pioneers within the business. By working as integrated teams, with dedicated and specialist skills, they will be best-placed to accelerate organisational transformation through greater collaboration, rather than through siloed engagement.

Many of the Change Directors also reported having a genuine desire to shift the emphasis away from reliance on generalists and towards teams comprised of subject matter experts (SMEs) with deep knowledge of key areas of transformation. In fact, the vast majority of leading firms are looking to develop SMEs internally across key areas of transformation.

New sourcing models for change deliveryChange delivery models in insurance are also evolving rapidly. Our research shows that firms are exploring the use of managed services and offshoring as more cost-effective paths to creating successful change results – tapping into well-developed and rich skills to accelerate the required change.

Almost all of the experts we consulted spoke about the need to move away from fixed team structures towards more flexible approaches, with the vast majority pointing to managed change delivery services as their preferred model for this. Managed services provide immediate access to focused skills, and at scale. But they also offer all the flexibility that insurers need to balance business transformation objectives with value-driven outcomes – including new partnerships that will be needed to meet future change portfolios.

As insurers move towards more hybrid models of change delivery, it will be important to deploy the optimal mix of in-house expertise and efficient offshore resources. Most Change Directors recognise this trend, and report that they expect to combine centralised change capabilities with localised resources, most likely because this will best equip them to respond rapidly to market developments and business needs.

Overall, it’s clear that Change Directors will have to become even more skilful at balancing across locations and skill bases – continuously assessing performance and value for money, while carefully monitoring current and future portfolios to ensure a ‘best fit’, integrated approach.

Improving agilityJust as the business must be alive to the new challenges and opportunities generated by an increasingly digital market, the IT function needs to rethink its fundamental operating model.

Above all else, it has to meet the critical imperative of working closely with the business, becoming quicker in its responses and much more agile in its delivery. This was acknowledged by the vast majority of Change Directors in the group, with many also commenting on the growing trend for IT change to be led and owned by the business, rather than driven by technology.

Given the legacy technology landscape and the dominance, to date, of ‘waterfall’ change methodologies, it makes sense that improving the agility and responsiveness of the IT function is now a priority; if fact, for some of those who we spoke to, this was at the top of their transformation agenda.

The push to agile, together with insurers’ new digital ambitions, calls for a ‘fail fast, learn quickly’ mindset that is customer-led. This will be challenging for many insurers, given their traditional heartland of waterfall IT delivery and high propensity to avoid embracing new ways of working. Stakeholders don’t know what the final outcome will be because these are often based on changing business demands and feedback from customers and business cases become is more complex. Therefore, compared to waterfall change approaches, it’s much harder to predict what needs to be spent. Insurers will need to master this, though caution is advised – the pursuit of agility should not be used to justify unstructured and unplanned change.

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Radical repositioning of change deliveryChange Directors clearly understand the scale of the transformation that lies ahead. Their long-term priority is to radically change how they work, rather than to make incremental improvements to their current approach.

Their key goals include developing an organisation that can adapt swiftly to meet changing business needs, and becoming recognised as a core capability for delivering measurable value rather than being ‘order takers’.

Change Directors are keenly aware that they face some formidable barriers on their journey towards these goals. Crucially, over two-thirds of them said that they currently lack the skills required to deliver change successfully. This is due, in large part, to insurance companies’ historical evolution, which has left them with a layer of change-resistant and process-centric personnel for whom the prospect of change is both unwelcome and daunting. Coupled with huge pressures on operational expenses, this has resulted in a level of unprecedented risk aversion and caution.

To address this legacy, Change Directors are revamping the workforce to build new ‘innovation-ready’ cultures. As they do this, they are leveraging advances in technology (such as robotic process automation) that need to be integrated

with traditional skills and capabilities. Managing this interface between old and new will be a priority from now on.

In support of greater innovation, around half of the experts we spoke to identified the need for greater coordination across business lines and geographies. A similar proportion suggested that, without this, their organisations would struggle to improve market share and responsiveness to consumer demands. For the immediate future, this challenge can be met through a two-speed approach to delivery – combining agile front-end approaches with back-end waterfall change methodologies.

So what does this mean for insurers?It’s now or never. The race has started and insurers are accelerating their change agenda. To meet their challenging goals within a demanding time frame, leading firms are making key investments in new change capabilities.

They are radically adjusting their delivery models and accessing new talent pools to service large transformation requirements. Those whose strategies are responsive to the ever-changing markets, and whose execution is both agile and decisive, will gain a competitive advantage that will ensure sustained growth and prosperity.

It’s now or never. The race has started and insurers are accelerating their change agenda.

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Contact UsWill Davies Managing Director, Insurance w.davies@accenture.com +44 (0) 7867 143 656

Neil Daniels Managing Director, Financial Services neil.daniels@accenture.com +44 (0) 7957 386 080