In early July, Onalytica published an article on Sustainability with a focus in the financial services sector. Comparing the WEF`s Global Risks Reports over the past 10 years, they highlight a stunning shift. We are confronted with the reality that Sustainability risks are Business, economy, and Societal risks. All industries are realizing this and the […]
TLDR Having the correct idea for underwriting, distributing, selling, adjusting, or scaling insurance may not be the right idea if the scheme is introduced or sold where the customer understands the plan but simply doesn’t accept it in cultural context. How and where one sells an idea in the connected global insurance industry might just be more important that what is being sold.
I had a great discussion with a very clever InsurTech company this week, Uncharted, a digital insurance sales facilitation and distribution entrant focused on health benefits and business SME markets (check out their website in the link- I won’t do their concept the justice they can). They are Singapore-based, building toward a global reach. The firm’s Chief Commercial Officer, Mark Painter, held my attention regarding how the firm was building its sales and distribution tools with the intention of giving carriers and brokers options and efficiencies from point of sale right through home office underwriting, binding and admin of data. Taking the teeth out of the unstructured data beast, so to say. Mark (who’s a pretty savvy finance and insurance guy now working alongside Uncharted’s founder, Nick Macey) recounted a recent experience in introducing the Uncharted system into a southeast Asia market carrier’s system, excitedly advising that significant sales admin improvement for the thousands of field agents will or had been gained for the carrier. That’s very cool.
But my follow-up question was: If the carrier’s products are traditionally sold by agents say, working off of scooters, meeting with small shopkeepers over tea, or noodles, and with the bound policy traditionally taking a few weeks to present to the insured, will an ‘instant’ policy innovation resonate with the known culture of doing business in the neighborhood? Will an app-based policy hold the same ‘worth’ to that analog customer? It might if the businessperson is comfortable with the growing use of digital ecosystems, it might not if the owner is not.
How the customer expects to transact business is the key- are you practicing innovation from the customer backwards?
Well this prompted a comparison discussion of what the firm is working with in Zimbabwe, where most residents/customers transact business through smart devices using EcoCash, a mobile payment platform hosted by local telco, Econet. In this instance EcoCash has an approximate 80% market use penetration, and as such adding services to the ecosystem is an accepted practice. A company looking to make inroads into the market would be wise to joint venture with or leverage the Econet ecosystem rather than try to make inroads through traditional agencies. However- once established in the market the firm would be better able to bridge to traditional insurance channels for more complex covers, riding the market awareness built through use of local, accepted practices. Know what and how the customer expects to transact business and go with that flow. It ofttimes does not matter how wonderful your product or service is if the customers simply are not accustomed to how you market. The correct answer is not always the best answer.
There are plenty of examples of companies ‘growing’ their insurance products organically through other business relationships built through understanding local needs. Take for example the relationship of ride sharing platform Go-Jek and one of its investor firms, Allianz X. The ride sharing startup was a target of Allianz’s investment, but Allianz also recognized with Go-Jek that the drivers needed insurance, and the two firms collaborated within the bounds of the business model and driver culture to make insurance available within the local reach of drivers. Don’t be surprised if a similar insurance partnership approach isn’t carried into east Africa’s burgeoning ride sharing environment as the pair of firms extends its reach with their investment into Uganda-based ride hailing entrant, SafeBoda (a timely share by you, Robert Collins ). Innovation and marketing developed from business and local culture needs.
There are many examples of firms developing insurance innovations, many successful and many not so much. The takeaway for the reader from this posting- the firms noted above are working to apply clever innovation based on good ideas, but also on integrating the ideas into what fits a respective market’s expectations, and what businesses and customers are accustomed to. Ground-breaking innovation might succeed by circumventing that of which a market is accustomed, but in most cases a firm’s best investment is understanding what the locals want and how they want it, and simply following their lead. Is your approach just a correct answer, or the right answer?
Just when I thought the Elephant that is insurance was fully accepted as an aggregation of many participants’ perspectives, along comes Digital Innovation, Digitization, and Data Culture discussions as another example of many parts making the whole. What makes effective digital innovation/integration for an industry or firm, is digitization the root of InsurTech, who in the firm should be taking the lead on evolving the firm into a digital world, all questions that crossed my media feed this week. On one day! And a big question- does digital transformation stand on its own as a business initiative, or is it simply one other activity that comprises a firm’s efforts to maintain or grow competitive advantage?
As for the academic approach to digital transformation, I’ll consider two authors of articles that make good points and have solid basis from which to speak. I contend that in some ways the authors are also subject to the potential narrow path of each of the vision-challenged men in the fable- a conceptual grasp primarily of what is immediate and not in consideration of whole issue. Through whose eyes are the issues being considered? Customers’? Staff? Leadership? The public?
While there as many definitions of digital transformation as there are discussions about it, this example is a pretty solid one:
“we define digital transformation as the integration of digital technology into all areas of a business resulting in fundamental changes to how businesses operate and how they deliver value to customers. Beyond that, it’s a cultural change that requires organizations to continually challenge the status quo, experiment often, and get comfortable with failure.” The Enterprisers Project
(Consider though, that even this description does not embrace transformation from the customer-backwards perspective.)
Areas or components that the authors suggest are needed or are present for effective digital transformation within an organization:
Good summaries, good advice, but are the bullet points actionable across the entire spectrum of insurance or banking businesses? What if the subject firm is brand new, tech-based, with no analog process ‘baggage’ to wrestle? The reality of digital transformation is that businesses need to consider the principle as part of being competitive within their respective industries, and in being responsive to what their customers need or expect. Transformation for the sake of being fashionable might be considered a fool’s chase.
Consider the challenges for the Nigerian insurance industry- very low insurance product penetration, and lower than average acceptance among the population regarding the need/purpose of insurance products. One hundred million potential insurance consumers, urban and extremely rural. Does digital transformation make as much sense for that insurance market, when the delivery to existing customers is meeting their needs, and expanding penetration to the balance of the population can be effected through smart devices (much higher penetration of smart devices than insurance) and InsurTech players? Are digital efforts potentially transformative to existing processes if the customers have no expectations of improvement? Would it be focus and funds not well spent? And if an industry is being built from ground up, there is little transformation to be had as any efforts are greenfield. The point- it’s competitive advantage and customer responsiveness that should drive transformation or not.
“Better question, one might say- who is responsible for maintaining (or gaining) competitive advantage for a respective insurance organization? Digital transformation has been continuous since the advent of electronic data processing; it simply has a rallying cry now called ‘InsurTech’. Customers may not know how (what methods) they want their insurance products delivered, but they do know what is important to them. Keeping that pulse drives how the firm needs to maintain its edge, and then applying process, admin, or tech innovation to keep that edge will direct the firm in who/how/when/and with whom any transformation is needed. What if a firm’s culture, processes, staff, and delivery are driving growth and profitability now, should there be a transformation just to be fashionable? Good business practices should drive any change, and by extension strategy at the senior level, tactics at operational levels, and all levels keeping track of how customers and staff are maintaining comfort with operations. “
(However, if there’s an urge to be fashionable, innovate/transform from the customer backwards.)
Digital transformation is as fashionable a concept as is InsurTech, and needs to be approached within business context. There is no question that if transformation is undertaken prudent businesses should follow a framework as suggested by Messrs. Marous and Fuentes. But before jumping into the fashionable approach, is any transformation being undertaken as a standalone concept, or as part of a firm’s competitive or growth strategy? Have to consider the entire beast, not just one facet or part. And as my fine colleague who knows of such things, Karl Heinz Passler, states, Stop Confusing InsurTech With Digitalisation.
Digital transformation makes sense where it makes sense, and when undertaken, it makes sense to consider what all the organization’s stakeholders need.