Transformation in the insurance sector – a glimpse at the scale of the challenge

transformation in the insurance sector


Adam Hembury is COO, Innovation and Transformation Director at Gunbury Limited: business, operations and technology consulting across financial and professional services. For this blog, Adam has kindly shared his views on transformation in the insurance sector, discussed the challenges faced and given some home-truths!


Having worked across financial and professional services, I continue to be both surprised and intrigued by the potential for change across the insurance industry, as well as the enormity of the task, whichever part of the industry you sit in.  To be fair, the insurance industry covers a diverse spectrum, from the highly competitive personal lines sector, where margins are tight and regulatory pressures high, through to the business carried out in the hallowed halls of Lloyds of London, where ways of doing business have changed little for decades.  Yet as an industry, change has been slow coming, and many insurance businesses are struggling with legacy systems, clunky processes and out-dated operating models. These strategic issues then spawn significant transformation programmes underpinned by large technology spends.  Yet in an industry that is relatively immature in the delivery of change, this creates a massive challenge – how to manage and deliver the transformations in a way that avoids the usual pitfalls of escalating costs and a failure to realise the benefits.


So, I hope to provide a brief overview of some of the industry challenges and provides a few age-old truths we need to be reminded of concerning delivering change.


What is driving the need for transformation?


The case for whole-scale change is probably most acute in the Property and Casualty arena and, in particular, motor and home.  Fiercely competitive markets, where traditionally the insurance companies lose money on new customers and look to build profitability off customer inertia on renewal.  However, with the FSA’s review of ‘dual’ pricing, the pricing differential between new and existing customers may well diminish.  Coupled with ever-increasing price competition, insurance providers will need to focus on three key areas: customer retention, data analytics and pricing, to create innovative products that exploit market opportunities and continued driving out of operational costs through automation, self-serve and digitisation.


In the realms of commercial and speciality insurance, the pressures may not be quite as intense, however, the same three focus areas are driving significant change – customer-centricity, the sophistication of products and pricing, and operational efficiency.  The investments required to deliver change are often much larger, but my experience in these sectors is that despite large IT functions and change teams, they struggle with the same delivery disciplines and challenges described above.


Each one of these key areas requires a complex mixture of change across technology, data, processes, roles and capabilities, governance and organisation. However, many insurance businesses are faced with the need to be driving change in all three areas at the same time.  Without exceptional leadership and change expertise, this could well lead to taking on more change than the business can handle, which often manifests itself in cost and time over-runs, management exasperation, and failure to deliver.

And the home-truths you mentioned?


Delivering meaningful change is tough, often because the big investment in money, time and effort is in technology, and increasingly in data, yet the actual value is not delivered by the technology or the data, rather by changes to the way the business operates and uses the technology and data to deliver value to customers.  All too often the complexity of the technology and data implementation starts to take over the programme and the leadership attention, such that the real business change is de-prioritised, and a good chunk of the real value is lost.  In a slow-moving industry with decent margins, this is not ideal, but in the competitive, margin-driven world of insurance where the speed of change is accelerating, this is a recipe for disaster.


What are the typical challenges?


An indecent rush to start the project, with insufficient clarity and business ownership on setting out the strategic aims and the core outcomes, as well as robust challenge to limit the scope to the essentials rather than trying to build the perfect solution with all of the ‘bells and whistles’.


Too many different programmes going on at the same time, usually due to a lack of strong portfolio planning and decision-making to identify the priorities and the sequencing roadmaps that best support the overall strategic objectives.


Over-optimistic timelines and budgets, especially in the technology and data areas, leading to implementation delays, de-scoping, additional budget and other critical programmes being delayed.


Insufficient engagement and ownership from the business, in the design of the technology and data solutions, as well as in designing the new processes, roles, responsibilities, operating model, decision accountabilities, and in the testing and roll-out approach.


A programme ownership and governance approach that maintains transparency and honesty.  Sounds simple yet it is remarkably easy to find yourself in a position where you start to promise delivery against increasingly impossible timelines, especially as key relationships with stakeholders come under stress.


The above issues are present in all change initiatives, but here I am looking at major projects or programmes that are significantly changing the way a business operates.  For example, if a motor insurer is implementing a new cloud-based, sophisticated pricing tool with a view to compete in the aggregator markets, then the entire business needs to increase its speed of operation to match the 24/7 nature of the market – real-time data and algorithms to support quotes, automated policy administration and documentation, increased system resilience and emergency response times. This will require, in addition to the technology and data solutions, redesigned processes, roles, governance structures, new reporting metrics and a roll-out an approach that helps the overall business move to a new way of working, as it will not just happen by chance.  These programmes must be set up, managed and measured on the overall business outcomes and benefits, which is why these are business programmes supported by IT, not IT projects with a bit of business input.

What would be your takeaway, Adam?


This article is not offering any new insight into the issues set out above, as most professionals have seen these challenges. The insight is that despite our accumulated knowledge and experience, these issues arise again and again. Why? Because the issue is rarely about the technology itself, it is about the business fully and relentlessly taking ownership of the transformation programme, rather than letting IT do their thing, and the ability of the leadership of the programme and the business to bring their expertise to bear in a constructive and open environment. To do that all parties need to trust that the right expertise has been recruited, is operating effectively as a team, and that when difficulties arise, honesty, transparency and collaboration will make the best decisions for the business.  Transformation is never easy, and is certainly not an individual sport, as it succeeds or fails on the joint commitment to deliver the business outcome.


Thanks to Adam for sharing his views on transformation in the insurance sector. Adam has written a series of articles in the Transformation in the Insurance Sector, including:

How data analytics is transforming the insurance sector.

Typical challenges in getting new technology and data to work.

How innovative is the insurance sector?



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