Insurance executives are acutely aware of the need to imbue their company with digital and analytics capabilities. They know why they need to pursue digital capabilities, and most of them have also started figuring out what they need to do, but how to do so—that’s the rub. Do they embark on a sweeping digital transformation from the top down? Develop digital or analytics use case pilots that build into a tidal wave of change? Pursue a new digital attacker business model? Do they start with the customer journey? Or build the foundational technology platform? There’s no one true path, and that’s what leaves so many insurers mired in the process.
Last week, we welcomed more than 35 senior business and digital leaders from 20 leading life and property and casualty (P&C) carriers to the annual McKinsey North America Insurance Digital Leaders Forum (IDLF). The lively conversations during the full day of plenary sessions, panels, and breakout sessions all returned to the how of digital and analytics.
Four key takeaways emerged.
Spend $1 for $1
Digital and analytics are useful resources only when deployed well. Every $1 spent on digital and analytics requires an investment of $1 or more in “last mile” efforts—talent, capabilities, operating model adjustments, deployment, and, crucially, change management—to realize the impact. Of course, these efforts come with their own challenges. What type of team do you need for these efforts? How do you sequence the efforts? When and how do you involve the front line in decision making? What constraints are you facing, and how do you adjust the model to overcome them?
To answer such questions, insurers must embrace a perspective that puts the business problems they face front and center, rather than using technologies and solutions to drive their approach. More importantly, given the challenge organizations face in operationalizing digital and analytics, insurers that think proactively about change management as a key enabler will avoid unnecessary rework and back-filling.
Focus on future of work
To that end, traditional skills and ways of working will not get insurers very far in the digital journey. Many insurers are candid in their admission that they do not have a comprehensive understanding of the skills and roles required in the future—but few are doing something about this. Indeed, making this transition does not come naturally to incumbent organizations given the legacy hangover, and leaders admit that formalizing the future of work through changes to incentives, performance management, carrier progression, and the like are all very new territory. But while preparing for the future of talent is an ongoing struggle in every industry, it’s an absolutely crucial consideration as insurers prepare to attack digital and analytics. Working in interdisciplinary teams is requisite for digital transformations given the unique skills and problem-solving methods that each member brings to the group to complement one another.
Eat the digital elephant one bite at a time
A digital transformation can be an overwhelming prospect—an elephant of an effort. That’s often because insurers go at it as one big project rather than chunking it out into staged solutions. This doesn’t mean insurers should meander through an organic approach to use cases that hopefully assembles into a full-fledged operation. Instead, insurers are interested in building digital, data, and analytics strategies that are guided by the priority of business domains and driven by business value at stake. This big-picture approach allows insurers to elevate the conversation beyond specific use cases, which typically provide subscale value and fragment deployment of talent and capabilities, preventing organizations from truly maximizing return on investment.
Best-in-class efforts are extremely instructive in understanding where to get started and how to sequence to maximize value. For example, in pursuing large data transformations, using business priorities and the critical use cases within it to inform the sequence of data domains to be transformed will avoid what we typically see—data lakes becoming data swamps.
Obtain “platinum” sponsorship
Incumbents’ data, domain knowledge, and operational maturity (especially in distribution and underwriting) should be sources of unfair advantage. However, digital transformation efforts often do not get needed capital and talent and are dragged down by bureaucracy. As such, strong, activist sponsorship at the top is almost universally recognized as the single biggest determinant of a successful digital transformation.
Insurers’ aspirations are sky-high. They’re sorting out how to get there. It’s not about throwing money at the problem; it’s about better understanding the opportunity. Learning from other companies is a crucial piece of the puzzle.
We thank those who attended the forum and look forward to continuing the conversation.