Helping insurers navigate transformational change

As the insurance industry undergoes radical transformational change, insurers must navigate a rocky pathway to achieve success.

Legislative and regulatory changes fuelled by the findings of the financial services royal commission have been a catalyst for change broadly across the life and general insurance sectors.

Insurers also are going through mergers and acquisitions, divesting or acquiring divisions, and introducing new IT systems and applications at a rapid pace.

Experts at Sydney-based management and technology consultancy Frazer Walker say clear communication and an open-minded approach to transformational change programs are fundamental elements to ensure success and avoid unplanned budget or operational outcomes.

Frazer Walker Principal Consultants Mark Partridge and Glenn Vade have overseen transformational change programs at major Australian and New Zealand insurance companies and offer tips on how to achieve the best outcomes.

Glenn says it’s vital, when bringing two insurance companies or divisions together, to acknowledge that each has a different culture and the power ratio is never 50:50.

“Don’t go in with all guns blazing,” he says. “There may be existing landmines and an adversarial attitude could lead the people involved to not disclose them.”

His advice is to listen to personnel from both entities and consider the best outcome for the new entity. The solution may be a new IT system, rather than trying to merge two or pick the best from both.

Show empathy

When managing transformational change, don’t automatically discard old technology – it may just need a better interface. Show empathy, as that always works in your favour, and you’re more likely to gain information that can help you see any potential red flags and discover the optimum solution.

Glenn says it’s important for the IT team working on the merger to include representatives from both companies and for them to be purely dedicated to the transformational change program.

They need to be empowered to step away from focusing on their day-to-day jobs. “You need open-minded people who can see the bigger picture and focus on the best outcome for the new entity, not protecting their patch,” he says.

Unfortunately, business principals may have unrealistic expectations about the time required for transformational change, but the program team must conduct a full review to determine the best methodology to achieve the desired goals.

A dedicated team, overseen by an independent, external consultant, can speed the process. Glenn says people can be precious about systems for which they have personal accountability, whereas an external adviser has no conscious or unconscious bias, so can objectively present the pros and cons of each approach and provide options.

Be ruthless

Once all the facts are ascertained and the review completed, the team must be ruthless about making decisions that are in the best interests of the organisation going forward.

“The preferred option may not be the most palatable to some, but you reach a point where an executive-level decision is required,” Glenn says. “The three levers are time, money and quality and there’s always a trade-off. Do you invest more now to save time, or go with a lower-cost solution and deal with issues later?”

Glenn says data migration is one of the trickiest issues, particularly with two homegrown systems that may be incompatible. “Sometimes it’s better to jettison both systems and get something off the shelf so both data sets can be merged into the new one, using well designed and tested data staging areas.”

He also emphasises that stretching the transformation over too long a period risks an organisation being hamstrung by an inability to meet operational and client demands.

Using cloud technologies and software as a service (SaaS) has enabled cost savings, particularly when one or both parties has heavy legacy systems and ageing hardware. Complex software and hardware management then becomes the SaaS vendor’s responsibility.

Existing capabilities

Frazer Walker Principal Consultant Mark Partridge agrees but says the viability of SaaS and platform as a service (PaaS) depends on existing capabilities.

If the organisations are already using SaaS or PaaS, that can help to scale and expand the technology to support change delivery. But if SaaS and PaaS are foreign, more rudimentary tools may be required, with a subsequent loss of some of the benefits of SaaS and PaaS.

“PaaS and SaaS make it easier for projects within the change program to expand and collapse capacity to enable data and technology changes to occur more readily,” Mark says.

Shifting to PaaS/SaaS to leverage data has become commonplace in the insurance industry.

The legislative impacts of the financial services royal commission and other regulatory activities have focused attention on data retention and who can use the data from an ethical perspective. That has created an impetus for solutions like PaaS and SaaS.

Four priorities

Mark outlines four priorities for successful insurance company transformational change.

• Establish the program leadership and determine who are the key stakeholders
• Program organisation – establish the projects and activities required to execute the change
• Plan and prepare for delivering the change, then kick off the required projects and activities to achieve it
• Recognise that it may take several tranches to achieve the deliverables, so adjust the program structure according to the desired outcomes.

Mark identifies a key pitfall of failing to select the right leaders. “They need skin in the game and must be invested in the outcomes.”

His primary requirement is open communication. “Establish the strategy in a way the participants can clearly understand and interpret it. Consider how the transformational change program interacts with IT, risk management and other policies within the organisation.”

Mark is a great advocate for direct engagement with people impacted by the change, with messages tuned to different audiences’ specific needs. “Little things are not trivial; they can’t be dismissed. They’re not high-level outcomes, but still important. You need an impact analysis of the change management and sometimes third-party organisations, like HR consultants, to cover all the bases.”

Without standardisation of how the change occurs – particularly for high-volume and high-risk elements of the program – a fragmented, scattergun approach can result. “It’s difficult to manage if everyone is doing their own thing, in their own way. It’s important to set guidelines and guardrails,” Mark says.

Clarity of objectives

Upskilling and training can enable team participants to deliver to the program standards, because the methodologies for transformational change will vary considerably from how they work in their regular day-to-day roles.

Mark and Glenn agree it is important to start with the expectation that significant change will occur in what is being delivered, regardless of the clarity of the objectives up front.

“The program must be equipped to mobilise and remobilise to meet changed objectives,” Mark says.

Glenn emphasises the need for early recognition of challenges to the smooth passage of a transformational change program. “There’s a risk of running down non-existent rabbit holes but, if a red flag comes up, follow it. If you let it slide, it might be the ‘gotcha’ moment at the end that risks on-time, on-budget delivery.”

He urges insurers to adopt change readily. “Be disruptive. Insurance is changing rapidly and there’s the potential for many companies to be left behind.”

Insurers must get closer to the granular level of data analysis or they won’t survive.

Insurers need systems that can absorb, interpret and analyse their underlying data or their future in the industry is limited.

There are game-changing opportunities through using machine learning, artificial intelligence and other technologies to learn more about the data insurers hold and to enable it to build better business outcomes.

Insurers without a sound knowledge of how to implement transformational change will become the dinosaurs as the nimble disruptors use technology to their advantage.

However, it is important to remember that, while technology provides the tools to leverage change, people – the human factor – are at the heart of any change.