Insurance transformation in a post-COVID-19 world - Getting it right first time - A Business Agility White Paper - Business ...
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A Business Agility White Paper
Insurance
transformation in a
post-COVID-19 world
Getting it right first time
Insurance Transformation
This paper has been written to highlight possible scenarios in a Post-
Regardless of what COVID-19 world. Specifically looking at insurance transformation
disruption is being and the ready state many leaders in insurance will want to be
experienced, leaders in. The paper will explore the reasons behind drivers, the now-
need to strike a apparent challenges, and the likely solutions on the horizon.
balance. Getting
through the storm is Insurance Transformation
one step, the following Pre-COVID-19, the drivers for modernisation in the insurance
steps need to be sector were obvious: agility, resilience, consistency, customer-first
about resilience and initiatives, on-demand expectations, competitive advantage and
recovery (closely regulatory compliance – all are compelling reasons for change.
followed by growth).
The insurance market understands that in order to survive, it needs
to adapt to change, meet new regulatory requirements, meet
changing audience demands, and compete with more efficient
international rivals. However, progress towards this goal has
arguably been slow. Modernisation for an entire sector demands
that a diverse set of insurers, reinsurers, brokers and managing
agents all work to the same standards and roll out new systems
without disrupting current business.
However, gargantuan though the effort might be, the firms at the
vanguard of this transformation would have been experiencing real
competitive advantage. This is because, crucially, modernisation
isn’t just a way for insurers to meet the requirements outlined
above – it’s also something that can save substantial costs, not to
mention help deliver a better quality of service to their customers.But then COVID-19 hit
Modernisation is a major opportunity. However, COVID-19 happened, and we now find ourselves in a state
where the brakes have been applied to certain endeavours.
Either a transformation programme was in flight, in the pipeline or pending board approval. However, in
a very short time frame, significant decisions needed to be made regarding those programmes – do they
press ahead, or do they go on hold?
4 Conserving capital is key as this disruption is taking a toll on investments and there will be significant
volume of claims regarding business interruption.
Many impacts became clear.
Immediate effects:
• The financial markets crashing reduces assets especially in equity investments
• Falling bond yields reduce investment income
• Solvency issues could result from a shrinking balance sheet
• Delayed premium payments and client insolvencies may further add pressure
Mid-term insurance market impact:
• Continued push for higher premium rates as insurers try to compensate for impacted assets and liabilities
• Reduced client base
• More M&A activity among insurers
• Reduced capacity for certain Lines of Business
With significant disruption being endured and more likely to come, halting expenditure on non-essential
programmes is completely understandable. However, at what point does a modernisation programme tip
from ‘essential’ to ‘non-essential’? Regardless of what disruption is being experienced, leaders need to
strike a balance. Getting through the storm is one step, the following steps need to be about resilience and
recovery (closely followed by growth).
In addition to evaluating essential and non-essential and as this is unlikely to be a V-shaped recovery,
insurance leaders need to be paying attention to how they plan to handle social and environmental
responsibilities.
business-agility.comOnly following an inevitable Business Impact Assessment (BIA), involving a thorough gap analysis to assess
the organisation’s readiness for continued operations, will insurers be able to create scenario-based models
for best and worst cases. These will provide an adequate range of outcomes for the business to consider.
For example, looking at key stakeholder groups and the risks identified for each, it should be possible to
identify possible operational, tactical and strategic financial outcomes for the next three, six or 12 months
and beyond.
After models and projections are understood, companies would then perform risk analyses against each
scenario. This will help build robust scenarios and enable the consideration of other potential risks — 5
including financial, strategic, operational and external — and the probability of occurrence.
It is at this point that significant decisions should have been made – retrenchment and reprioritisation.
Included in the analysis and evaluation, several modernisation initiatives will be under review and will need
scrutiny as to whether they should be shelved or continued (or potentially re-tooled).
It’s this scrutiny that needs to strike a balance between immediate and future business needs (including
digital enablement, re-platforming of payment mechanisms / a move to more secure faster transactional
payment processing and, crucially, resilience).
Business Agility Consulting LtdWhy are some insurance
companies in a better
position than others?
6
The march toward modernisation in the insurance sector in recent years is now bearing fruit.
Certain insurers are operating in a more digitally mature state and are therefore more resilient to disruption
of this nature.
The ability of modern systems to adapt and update insurance products compared to legacy systems can
be significant. For example, a travel product in modern policy administration system could be changed/
updated in a production system within a few days, whereas it could take a considerably longer amount of
time (and risk) in a legacy production system.
It means insurers are in a better position to withstand unexpected insured and investment losses.
Nevertheless, even in these ‘modern’ insurance houses, the impact of COVID-19 calls for constant caution
in case further action is needed for smooth functioning across the insurance sector.
Buzzword du jour ‘pivot’ is well worn and well used at the moment. The state of an insurer’s modernisation
programme isn’t just down to implementation, it’s also about culture. Can the company ‘pivot’ to meet and
overcome this? Is there desire and will there be sufficient motivation in the staff? Is there enough appetite
and a will to make changes?
Insurers that have a culture that adapts, as well as investment in digital capabilities, are those that are likely
to be better positioned in the short term to maintain a connection to distribution partners (e.g. brokers,
MGAs, Agents), who, in turn, are enabled to offer faster and more comprehensive services to their clients.
If this comes down to hearts and minds, with the right culture this can be a period of unprecedented
productive planning, training, and outreach. It is this ethos – one of adaptability - that will influence whether
an insurer forges ahead with its transformation programme (after all, if this isn’t the time to transform –
when is it?).
business-agility.comWhat form should
transformation programmes
take post-COVID 19?
7
With the digital communication platforms available, the technology
is there. The actual delivery – the hands-on implementation – is
How do you build resilience?
something that can continue, albeit after a review of functional
priorities and associated business benefits. Any stumbling blocks • Re-prioritising of objectives
that are likely to arise will be down to culture, communication and • Means testing against current ability
budget constraints. – tech, process, analysis needed
• Culture evaluation – is the will and
Those insurers that can weather this disruption and press ahead ability to pivot there?
with modernisation programmes – those are the companies that • Digital acceleration – diminish
physical presence/need (e.g.,
make the most gains.
online service, self-service, digital
wallet (VANS), AI use, RPA, legacy
In the short-term, capital will need to be conserved. Budgets
sunsetting, full cloud adoption,
will change and almost certainly there will be a review and
virtual claims assessment, smart
reprioritisation of features to be delivered in a transformation
claims, smart road, telematic, app-
programme. It is of paramount importance that insurers have the
driven – InsurTech partnerships to
best guidance for this reprioritisation – as this situation mandates bear fruit
new agile approaches (and attitudes).
This re-planning and re-prioritisation needs to be happening now.
Ultimately, culture, attitude, pragmatism and resilience will win out.
Business Agility Consulting LtdWhat will this disruption mean
for future delivery models?
8
The reality of this global disruption will force an adoption of some localisation, including resource. The
reliance on offshore delivery will remain as it is, but to a degree – programmes need to be cost-effective to
run, but this is where true Agile delivery will shine.
Onshore delivery will rise – albeit in a more digital/remote way. We will see the rise of the Distributed Agile
Methodology (please see page dedicated to Agile Delivery).
The major benefits of remote delivery (which we are already experiencing):
• increased productivity (certainly in ‘build’ phases)
• lowered expenses
• an overall changed structure to programme teams and ways of working
business-agility.comHow will delivery of
transformation programmes
change?
9
Geographic expansion and offshoring have made multi-site development the norm rather than the
exception. However, the disruption we are all experiencing is going to force a rethink of this.
Agile is an approach to project delivery that emphasises collaboration, communication and responding
to change. This is accomplished by being both incremental and iterative, breaking the project work and
timeline down to be more manageable. Project work is broken down into user stories, which are high-
level descriptions of functionality for specific users. These are meant to generate conversation rather than
provide exhaustive documentation. The timeline is broken down into repeated iterations where tangible
results are produced faster, in order to receive feedback and any needed change.
The delivery methods differ for large-scale insurance transformation programmes. They tend to rely on a
mix of co-location, near-shore and offshore delivery. The Scrum methodology recommends co-location
and involves a set of well-developed practices for innovation and programme delivery.
So how will this be affected in a post-COVID-19 world?
If programmes are to continue (and there is no reason to think that subject to some reprioritisation
they won’t), then delivery methods need to bend to fit the new world. This is where a Distributed Agile
Methodology comes in.
Distributed teams involve individuals or groups of individuals that are dispersed geographically but working
on the same project and/or team. One of the benefits of using distributed teams is the availability of talent.
The other easily understood benefit involves lower costs.
While there are benefits to distributed teams, there are potential challenges too. The primary cost involves
communication. The most effective form of communication is face-to-face where both verbal and non-
verbal communication is a possibility. This can be lost, or at least diminished, in distributed teams. Video
Business Agility Consulting Ltdcalls help enormously, but they can’t replace non-verbal communication interpreted in face-to-face comms.
However, these are certainly not insurmountable challenges.
The recommendation here is to judiciously select the right elements and blend two approaches. This is
dependent on government guidelines, but there should be scope to have some (reduced) face-to-face
working and delivery, potentially in a staggered approach with only core delivery team members and
stakeholders - then underpinned with distributed team techniques.
10
As mentioned earlier, culture must play a significant role in this. The technology is there, the commitment
to delivery is there – but the will and appetite for adapting to this needs to be there also.
The main areas of focus for Agile are the project work and the way to approach it. Communication is key
and is typically integrated into the way the project is approached. However, because teams are distributed,
communication needs to be more intentionally managed. Project work needs to be clearly defined and
communicated.
In Scrum, there are regularly scheduled meetings throughout the cycle, including daily status updates (the
daily stand-up). For many, these meetings are the most important of the day. These can be done virtually,
but there needs to be more management and consideration put into the communication.
Another decision for communication that comes with distributed teams is what form that it should take.
The team has different options, such as video conferencing, phone calls or chat functionality. A decision
needs to be taken to confirm which of these forms are acceptable for the different meetings and then make
sure that different teams are set up with the capability for each form of communication. The best results
are achieved by combining these options as appropriate, not mandating one form for all communications.
From a technical point of view there are many platforms to choose from – Microsoft Teams, Skype, Slack, the
old-fashioned phone! But this isn’t about the technology – this is about which channel for communication
is most appropriate. Again, culture plays a part.
Having highly motivated team members is going to be important. Remote team members are going to
have to be remarkably self-motivated, because they are going to have to work harder to communicate, stay
engaged, focused and productive. They won’t have the informal network of co-located team members to
fall back on. And in direct relation to this, the co-located team members are going to have to work harder,
too. They are going to have to make a special effort to engage their remote team members.
business-agility.comA high-performing team takes time and experience working together to develop trust, commitment, and
the mutual accountability needed to perform well together and to be transparent about the state of
delivery and the programme as a whole. In a distributed team delivery model, the “storming, forming,
norming and performing cycle” is approached differently – cultural differences/challenges need to be
understood and that extra step for reinforcement needs to be built-in.
11
Business Agility Consulting LtdConclusion
12
As we look towards the post-pandemic phase, the extraordinary measures currently warranted will need
to be unwound. Current actions by insurers may have long-lasting implications for the industry. Crucially,
the potential effect on the industry’s reputation and trustworthiness should be carefully considered. An exit
strategy for insurers that balance sound risk management practices with the need to treat customers fairly
will become necessary.
Part and parcel of this must be reflected in core initiatives; as it is these same initiatives that underpin the
business case for modernisation/transformation programmes.
It is a business imperative that insurers adapt. Where that motivation started with obeying the drivers for
modernisation, it needs to continue (in a slightly modified form).
It is possible to deliver a successful transformation programme without sacrificing consistency or quality
and without adding unnecessary complexity or straying from Scrum’s core principles. However, steady
hands are needed. Pragmatism and flexibility are a must, as is a highly motivated and experienced team.
About Business Agility
Business Agility is the leader in Guidewire development, configuration and integration services to both the
Specialty and General Insurance industries.
As Guidewire’s first ever implementation partner outside of North America, it implemented Guidewire’s first
European system in 2006. Since then, it has successfully engaged with clients all over the world, including the
first implementation in Russia, the first London Market implementations in the UK and Solution Assurance
projects in Japan.
For more information, go to www.business-agility.com
business-agility.com13 Business Agility Consulting Ltd
14
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01462 476 160
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