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Rise to the Challenge of IT and Business Process Transformation in the Insurance Industry

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by Robert Chapman

A significant part of an insurance company’s operations consists of back office processes that have been brought together through the acquisition of legacy books of business, differing client needs and an evolving regulatory environment. About 80% of insurers’ back office processes are similar to each other. The remaining 20% vary widely and can be very specific to the operation of a particular insurance company. The lack of a common operating model undoubtedly hinders companies from lowering the cost of operations and presents a significant business challenge given the difficulty of improving net book value, overall revenues and the clients’ experience in current market conditions.

To lower operational costs, many insurance companies have undertaken significant investment in both IT and business process transformation. Consider the following Top 5 ideas that will help you meet the challenges of embarking on this transformation journey.

1. Transformation is not only about outsourcing. Transformation is about developing your target operating model, potentially incorporating changes to IT systems, technology, process, resourcing and behavior, in addition to considering alternative sourcing models. Outsourcing may or may not be the chosen sourcing approach at the end of a transformation.

2. Come to “a single version of the truth” before implementing the business case for transformation. Work to define the target operating model for all business units, and ensure the benefits of the change are understood to obtain buy-in from all parts of the business. The view at the group level will be strategic. The perspective from the business unit, the IT organization and the key business functional areas is about the implementation of change. Each part of the organization, particularly the revenue generating engine, needs to understand the importance of “a single version of the truth” to realize the benefits of the target operating model (be it centralization of services, de-duplication of processes, rationalization of IT or integration of further books of business).

3. Avoid running multiple transformation programs as this adds to the complexity of delivery. Many programs take on a life of their own, make demands on limited management bandwidth and lead to budget overruns or even incomplete transformation of the business. Remember that transformation is a journey, not a destination, and insurance organizations need to restrict themselves to achievable, non-competing transformation programs to avoid failure.

4. Tap different skillsets across the life of the transformation. Be sure to understand what skillsets are needed for each phase of the transformation. The organizational skillsets required at the start of a transformation to facilitate change will be different from those needed as the transformation phases evolve and as the desired target operating model is achieved.

5. One size does not fit all. Each open book is different, and the “one size approach” may not work if you are addressing elements as diverse as the pricing of non-standard services (particularly for open books) or the reduction of the cost to service clients with different needs. Re-calibrate the effort required for transformation of each open book. Transformation in the insurance industry requires process expertise in the procedures and complexities of an insurance organization.

Though navigating the risks and complexities of transformation can be challenging, ISG can provide you with the proven experience, objective advice, knowledge and data to achieve success. Contact Rob Chapman or Yadu Singh to learn more.

About the author

Rob works with senior executives in enterprises across the UK, Ireland and the Netherlands to deliver operational and transformational plans. This includes conducting business process and IT outsourcing supplier and vendor assessments, developing target operating models and implementing of governance and sourcing strategies that underpin the business case for change. He has led significant outsourcing transactions in Banking, Insurance, and the public sector to assess and implement sourcing strategies, design shared services and deploy Service Integration and Management (SIAM) governance programs for complex multi-towered transactions. Robert has 25 years of experience in the IT industry, including time with EDS/HP, Computershare and Unisys before joining ISG.