Insurance: how competition from insurtechs is influencing major groups

Major insurance companies that have been established for decades are now facing increasingly serious, disruptive competition from insurance tech companies. These start-ups are attracting more and more clients by offering a new client experience based on innovative products and services, and faster, more flexible processing of applications and claims.


Focused on partnerships with start-ups and sometimes excubation of projects, the approach taken in recent years by major players highlights their failure to innovate by themselves, given their unsuitable internal processes.


Yet regardless of their size, complexity or hierarchical model, companies must place clients at the heart of their operations and offer them the best possible experience, by innovating opportunistically and even continually.


What impact are current operating models having on client orientation and innovation?

The standardization of different activities in major groups (IT, marketing, sales, etc.) has certainly optimized processes but also created silos between the different functions, limited collaboration between different areas of expertise and prevented many back-office clients from having an end-client focus.


For example, the IT department has optimized its costs and operations, acting as an internal support function with a rather industrialized way of operating, sometimes as a company within a company. But over the years, it has lost its agility, end-client focus and ability to collaborate with other business functions to drive innovation. At a time when the role of technology has switched from boosting productivity to enabling differentiation and even disruption, this positioning is no longer appropriate and has even become an obstacle to corporate reinvention.


Many entities have been impacted by siloization and sometimes top-down management and operating models (processes, individual objectives, etc.) that fail to encourage risk taking, creativity and experimentation.


In fact, many employees find themselves distanced from the reality of client concerns and satisfaction.


This is the opposite to many innovative, disruptive start-ups, including insurtechs, where there is no real intermediary between employees and clients apart from the digital channel. Teams are made up of different experts, and their everyday focus is on maximizing clients’ satisfaction and making life easier for them. Some incumbent groups have recognized the need to evolve and embarked on the journey. But where should they start?


Is agility the answer to all evils?

Inspired by the ways start-ups work, the agile business model is based on close-knit, agile and multifunctional “feature teams.”

In reorganizing teams by area of expertise or digital channel and giving them the skills to manage them throughout their life cycle, this model breaks up the silos between functions to achieve agility across the organization, focusing employees on the end-client experience and day-to-day innovation.

Made popular a few years ago by Spotify’s organization and work culture, this model is increasingly prized by major insurance companies (e.g. AXA and ING) as a way to approach the agility and innovative capacity of a start-up in spite of their size.


A simple organizational change?

Organizations that have operated for decades with a completely different, standardized model need to support this organizational change with a shift in operational model and corporate culture:

  • Update core management processes, particularly project portfolio management, introducing a light, iterative model that favors experimentation over heavy projects with predefined parameters, and client satisfaction over rigid adherence to specifications or initial objectives
  • Set up a support strategy to help employees adopt the new management and working methods based on collective autonomy, a culture of client satisfaction, iterative development, experimentation, etc.
  • Provide specific support to help managers, the cornerstone of any transformation, evolve their posture or role toward coaching or expertise

However, this model is not applicable to the entire company. Many of the non-differentiating activities/functions, such as accounting or IT infrastructure management, must continue to take the opposite route: mutualization, industrialization or even outsourcing. This allows the company to better focus on its clients and core business. It does not mean simply transforming part of the company into an agile, client-facing model, but managing two different but complementary worlds.


Finally, there is no silver bullet: companies can draw inspiration from management publications and case studies but they must find their own models and ways to achieve them. To do so, they need to consider the risk of market disruption, as well as their history, internal culture, strategy and potential for transformation.


First published in FinTech Mag