First published in Insurance Day on 8th April 2020.
The pressure on companies to fast-track their digital transformation requires a new approach where ambitious but practical, decisions are prioritised over more cautious strategies.
Who would have predicted a time when the Lloyd’s and London markets would have to physically close their doors on the insurance world? Yet here we are.
The true impact of this international crisis will be laid bare over the coming months, but one certainty is the traditional operating model of a market based on face-to-face interactions is having to be quickly replaced with far more flexible ways of working.
Insurance is an essential industry that underpins global trade. It is critical insurers are equipped with the necessary tools to continue to operate effectively while their offices are being forced to close and their people are dealing with emergency situations.
The past couple of years have seen many a debate about the merits of digitalisation. While it was acknowledged we had a responsibility to our successors within the insurance community to move on, it is also clear this is now a moot point.
As mentioned by Swiss Re’s Patrizia Kern talking at the International Union of Maritime Insurance conference about digitalisation of the market recently: “The only decision organisations need to make is whether they want to be at the front of the starting grid or start further back in the pit lane.”
This can seem a formidable task for those businesses without a digital strategy – but not an impossible one.
Given the digital interest has turned into a digital imperative, what practical steps can businesses take now to implement a digital strategy?
I recently spoke to an insurer that had spent time mapping a two-year “roadmap to digital”, only to be told it now needed to achieve it in two weeks. This mandate requires a new approach, where bold and quick decisions are prioritised over more cautious strategies.
Although a digital strategy can take months, if not years, to formulate under “normal” circumstances, it is truly amazing what can be achieved when faced with an unprecedented situation. If you have been considering embarking on a digital strategy then stop considering and start acting.
Be ambitious: start with the end in mind and focus on an executable plan with short-term wins. Do not shy away from the ambitious goal. Think about what the optimum digital environment would look like. Consider the bigger picture and recognise thinking big and being ambitious with your plan does not necessarily mean your initial steps need to be complex or challenging.
Being strategic, rather than tactical, means you will avoid the quick-fix solutions that may look very easy to implement but can be somewhat limited in what they can deliver long-term. This should be about choosing solutions that provide the fundamental building blocks that will help you to achieve your end goal.
There are two distinct elements when we consider digitalisation: efficiency and effectiveness. The insurance market is incredibly effective; a new risk can be “walked through” the doors of Lloyd’s priced, bound, syndicated and regulated. If the risk crystalises, the capital will be there.
However, the combined ratios and operating costs of recent years are demonstrating this process is not efficient. So, organisations like us are focused on digital solutions that make the decisions on pricing and portfolio management more effective. Companies such as Whitespace, The Institutes RiskBlock Alliance and Insurwave are helping to make the process of writing policies much more efficient.
The belief is if we can write the best business at an appropriate price and do this with a digital interaction between parties, the market will not only survive, it will positively thrive.
A second element of effectiveness – and by that, I mean capital effectiveness – is more about risk selection, the analytics and the pricing of risk both from a carrier perspective (that is, the placement of those risks) and from the broker perspective (the quality of the risks). What is also now emerging is digitalisation and the effectiveness of capital from a reinsurance perspective.
A unified view of risk
In all scenarios, what is needed today is for a “remote underwriting team” to have a digital environment where business can be submitted, shared among the team, commented on and priced appropriately. Companies that have this today will surely be reaping the rewards of their investment.
Technologies such as Zoom have proved to be a great substitute for face-to-face interactions. Arguably, the world may never return to the earlier “normal” and a hybrid digital/analogue market is likely to emerge.
We have all had to exercise our contingency plans and face up to the reality of a “lockdown”. Equally important is the recognition of key person dependencies and pockets of expertise in the organisation. There is a phrase “if only we all knew what all of us know”. In these times, we are required to take an objective view of where these pockets of “tribal knowledge” exist in our companies.
By codifying and sharing knowledge and experience in a digital platform, we take the first steps in addressing this shortfall. Whether this be a policy management system or a bespoke pricing model, it is important the organisation has a way of sharing information and developing a robust and unified view of risk.
In its simplest form, your digital environment could be a set of data that you can easily share across your organisation to enable the business to have a unified conversation.
Never has there been a strong enough reason to implement a new way of working within the insurance market – until now. Necessity is the mother of invention and the maturity of the technology that is now available today provides a new sense of possibility. This will undoubtedly allow rays of sunshine to break through the dark clouds that surround us.