Scaling agility: A new operating model for insurers

Change remains the sole constant, and the continuously shifting demands and expectations of the masses have become the new norm. In the contemporary digital landscape, businesses that prioritize customers are at the forefront of the market. They emphasize the effectiveness of rapidly scaling their agility and swiftly adjusting their strategies. For the swiftly expanding insurance sector, agile development and digital ecosystems are now imperative.

However, clinging to outdated systems, holding onto the illusion of stability, following traditional waterfall methodologies, and sticking to age-old processes like risk modeling and pricing underwriting could potentially lead to the downfall of insurers who adopt a waiting approach. In contrast, customers who are equipped with digital tools now demand tailored experiences, which render traditionally inflexible, product-centric insurers ineffective.

To replace the laborious tasks of lengthy processes and hierarchical approvals when introducing new products in response to risks and demands, adopting a smart, swift, and flexible agile system is a prudent step to take in the dynamic insurance market. The customary strategic roadmaps, which are vulnerable to unforeseen disruptions, can be restructured and rejuvenated through an agile ecosystem. Such environments offer enhanced resilience, speed, and flexibility, leading to time and cost savings while consistently promoting improvements in customer satisfaction.

Factors for Implementing a Comprehensive Agile Ecosystem within an Organization:

Team Structure and Workforce Allocation: 

Is there a need to establish specialized sub-teams, appoint supervisors, and allocate resources to ensure efficient, high-quality, and prompt outcomes?

Real-time Analytical Solutions: 

Is it challenging to provide immediate analytical solutions based on priority, without being hindered by a lengthy sequence of handovers and delays in responses?

Organizational Complexity: 

Are there excessive layers or an overabundance of staff, leading to inefficiency, time wastage, unnecessary approval-seeking, and a loss of accountability concerning core business objectives?

People Management and Coordination:

Are poor people management, coordination issues, sluggish decision-making processes, and a lack of ownership negatively impacting overall results?

Pace, Technology, and Talent: 

Does the organization struggle to match the speed, possess adequate technological infrastructure, and retain the necessary talent to keep up with advancements in the insurtech sector?

Legacy Systems and Data Challenges: 

Is the organization burdened by outdated, isolated systems, as well as redundant and inaccurate data that hamper operational efficiency?

By addressing these critical points, an organization can lay the groundwork for successfully establishing a comprehensive agile ecosystem.

Insurance companies are currently navigating the process of finding an equilibrium between traditional work methods and the agile innovations highly praised in today’s landscape. The newest innovation making its way into the insurance industry, aiming to address these current challenges, involves blending agility and stability seamlessly, incorporating both simplicity and complexity.

In agile organizations, the number of handovers is reduced, and accountability is heightened. This empowers insurers to roll out new products or revise pricing models with up to fivefold increased speed. By fostering close collaboration between business and IT, these organizations expend less effort on achieving alignment, coordinating efforts, and preparing decisions.

Favorable Aspects of Scaling Agility:

Customer Focus: The insurance sector must prioritize customer needs, swiftly respond to uncertainties and demands, engage with customers, and promptly incorporate feedback. An agile ecosystem aligns seamlessly with the digital realm, ensuring a 24/7 omnichannel experience that caters to customer preferences.

Cross-Functional Agile Teams: Teams comprising experts from diverse domains operate under the leadership of a team leader, maintaining and enhancing products based on customer feedback. This approach enhances both customer journeys and sales outcomes.

Adaptability: Agile platforms embrace change and continually evolve, learn, and collaborate through iterative processes. Regular reviews and analysis drive future enhancements, with the product cycle divided into smaller iterations (sprints) to facilitate frequent deliverables.

Effective Agile Practices: The agile ecosystem incorporates efficient practices like Scrum, Kanban, and Lean, which aid in prioritizing tasks, managing interdependencies, and minimizing inefficiencies.

Frameworks for Scaling Agility: The availability of frameworks such as the Scaled Agile Framework (SAFe) and the Large-Scale Scrum (LeSS) Framework facilitates work coordination across multiple teams, enhances transparency, communication, and ensures alignment with business objectives.

Cost Savings: Tailoring insurance products enables precise pricing and underwriting, fostering growth while reducing costs. According to a McKinsey report, digitization in the insurance industry can lead to a 30 percent cost reduction.

Challenges in Implementation: Transitioning from a traditional model to an agile system is not without its challenges; it requires patience and gradual adjustments. Despite the significant benefits of scaling agility, certain issues warrant attention. These include time-intensive processes, the need for robust security systems, and difficulties during implementation, particularly in an industry accustomed to sensitive paperwork and entrenched legacy processes.

Key Takeaways:

Benefits of Agile Organizations: Agile organizations showcase enhanced operational efficiency, overall health, and improved financial outcomes. The integration of technology facilitates potent real-time analytics derived from transactional data, marking a significant transformation for the insurance sector. This shift provides an opportunity for some insurers to gain a competitive edge as pioneers.

The Power of Predictive Real-time Analysis: The adoption of impactful predictive real-time analysis stands as a transformative factor for insurers. This capability has the potential to reshape the industry. Employing an agile model to develop and deliver products allows insurers to deeply understand their customers, offering tailor-made solutions for both current and future clients, surpassing their expectations.

Success Story of a European Insurer: A European insurer’s adoption of the agile environment led to notable outcomes. This transition resulted in fewer hierarchical layers, a 30 percent reduction in management committees, and a 20 percent improvement in operational efficiency. Scaling agility empowers organizations to streamline governance, delay unnecessary steps, and enhance operational effectiveness.

Embracing Agile for Positive Outcomes: To achieve favorable results, insurers are urged to incorporate agile systems. This approach empowers organizations to prioritize achievable outcomes over perceived obstacles, reinforcing their ability to adapt and succeed in a rapidly evolving landscape.