Editor's Note: Find the first two parts of this series
Having a clear sense of purpose is only a first step. To most organizations, the bigger challenge will be to activate the purpose and deliver truly transformative change. Broad-based organizational change isn’t easy, but an articulated sense of purpose gives insurers a powerful tool for driving through resistance to change.
There are several strategies, depending on the pace and level of change required. One is to use the voice of the customer as the driving force to challenge entrenched organizational thinking. This will help inspire new views of core value propositions, fundamental relationships or specific products and operations. The voice of the customer can be a catalyst for both finding purpose and driving transformation via step-by-step change programs.
Insurers must listen to their customers and internal stakeholders, watch how they interact with products and services, and involve them in the change process. Carriers and their agents touch customers through marketing, sales, onboarding, claims and other ongoing services.
Already, some carriers are showing how close attention to the voice of the customer can yield substantial benefits. A regional carrier in the US has developed a single product to protect almost anything consumers want to insure – homes, vehicles, jewelry and other personal items. From the point of view of customers, they now have only one policy, one bill and one agent for all their needs.
The incubator approach is another method for purpose-driven transformation. It allows legacy insurance providers to work in ways that mimic start-ups by establishing teams to address specific problems and build specific experiences. In these protected problem-solving or ideation environments (internal think tanks or labs, for instance), failure is a welcome means to foster innovation. The approach lays the foundation for designing and testing solutions for ultimate scaling across the enterprise.
Finally, legacy insurers may also foster change and embrace new thinking by partnering with or acquiring start-ups and adopting their disruptive ways. Entrepreneurs from these start-ups are often millennials, with a fail-fast mindset and an abundance of fresh ideas. One such collaboration involved the start-up creating software to help carriers take better advantage of data from wearable devices (a common component in pay-as-you-go insurance business models).
The “make or buy” decision
Partnering with these kinds of businesses allows more established insurance providers to leverage the assets of a start-up to develop improved products and services while still relying on strong customer relationships built by the existing brand. For example, an innovative digital broker provides a complete digital solution targeted to the needs of small businesses. By partnering with this broker, legacy carriers get faster access to digital technology that might take them a long time to develop themselves.
Given that there are hundreds of insurance-oriented fintech companies (not all of which will succeed), assessing the partnership opportunities is no small task. However, some insurance companies are working on their own to disrupt their age-old ways. Typically, that work involves digitizing manual, paper-based business processes or expanding the use of digital channels across the business. Some reluctance to partner with start-ups remains, as some insurers hold tight to the idea that they can build the same products and tools in-house. The “make or buy” decision relative to technology is likely to be a common issue for insurers considering purpose-driven transformation.
The legacy insurance companies of today still have one major competitive advantage in the marketplace: consumer trust of their established brands. The vast majority of consumers are more comfortable with insurance policies from known entities rather than from smaller, newer companies.
But these market positions are not fixed, and there is some evidence of change. The 2014 EY Global Consumer Insurance Survey found that customers are willing to provide information to carriers if they get something of value in return. The nontraditional players in the insurance market seem to grasp the idea, even if legacy carriers have demonstrated success in the area, too. One of the largest US carriers provides a solution around the purpose of helping insurers lead longer and healthier lives. Specifically, the carrier offers discounts and loyalty benefits to life insurance customers in exchange for information about their lifestyle and exercise activities that is delivered via wearable devices.
The bottom line: the time is now for purpose-driven transformation
Given the market and regulatory megatrends that are reshaping the insurance industry, insurers can and should view purpose-driven transformation as a catalyst for badly needed and long-overdue change. An extraordinary number of transformation programs are already underway, many of them approaching “big dig” proportions or “moonshot” scale. Defining a clear purpose to link these programs and creating rich experiences to operationalize the purpose are essential to maximizing returns on these large-scale investments.
Further, from the perspective of customers, agents and partners, purpose gives them a clear and compelling sense of why they are engaging with one insurance company versus another. In the end, strengthening that sense of engagement and loyalty will enable first-moving and early-adopting insurers to advance their market positions through purpose-driven transformation.
Melanie Henderson and Jeff Scheerhorn are executive directors, and Carolin Axelsson is a senior manager, for EY.
