How To Tackle Digital Transformation In Asia’s Insurance Industry

by Marc Baloch

The global insurance industry is facing substantial disruption. Traditional business models are being challenged and the industry’s reluctance to embrace digital is opening the door to new competition from start-ups. Insurers need to make up for lost time in the race for digital supremacy. The problem in Asia is that traditional hierarchical corporate culture is thwarting enterprise-wide digitization.

Assess risk and act

It is important that insurance companies retain traditional strengths such as underwriting discipline and claim execution, but these must be integrated within a wider digital strategy. Sources of disruption are emerging across the insurance value chain, as articulated in McKinsey’s illuminating article ‘Making digital strategy a reality in insurance’.

New influences include behaviour-based pricing, peer-to-peer insurance models, estimate by photo and damage assessment by drone. Insurance companies that fail to react to these market forces will not be saved by regulation, but will be overtaken. 

Join the dots

Many insurance companies can point to isolated pockets of digital innovation that may even be world class and undoubtedly add value to their business. However, that’s not enough to compete effectively in today’s fast changing consumer environment. Digitization must embrace the entire organisation and meet the expectations of discerning consumers who are ‘doing digital’ every day, whether it’s for banking, travelling, shopping, healthcare or home management.

Insurance companies must live and breathe digital, with a joined-up approach that embraces everything from the customer journey, user experience and artificial intelligence to business processes, big data analytics and agent interactions.

No place for Chinese walls

While some Asian CEOs may have 20:20 digital vision, driving through an enterprise-wide digital strategy requires that barriers be broken down between functions, departments, channels and divisions. This approach does not usually sit well with Asian business culture, with its multiple layered command and control construct.

Gartner was probably the first to use the term ‘digital dragon’, referring to the impact of digital disruption - powerful if tamed and destructive if not. To deliver a powerful digital transformation strategy, Asian insurance companies need one critical ‘dragon slaying’ tactic: they need to empower a cross-functional team representing all strands of the business, with full backing from the board, that is not held back by internal barriers.   

Pace in lieu of patience

The growth of digital and e-commerce is beginning to change Asian organisational culture.   Businesses are still autocratic and employees seldom speak out against the status quo or express views that may be contrary to the corporate values of their employer. Instigating change is all about being patient, getting to know colleagues and building relationships that will facilitate innovation over a protracted period.

There is now a phenomenon called ‘Chairman Now’, a new guard of leadership that blends Asian and Western cultures to better align a global approach to local clients. This is healthy for the insurance industry but, while ‘guanxi’ (the emphasis on relationships and connections) is not in itself a hindrance, the speed at which organisations action change must accelerate.

Round peg, square hole

Creating an enterprise-wide digital team with enterprise-wide access is a necessary first step on the digital journey. It is also critical that the board understands and evangelises the digital agenda and that the architects and implementers of the strategy have the requisite experience and reference points to succeed.

That requires an unorthodox approach to executive search and the courage to make non-traditional appointments that really break the mould, such as candidates who have experience from sectors that are more sophisticated in terms of the customer interface and experience. Banks are gradually beginning to do this, partnering with search firms who understand the need for onboarding and integration, such that an incoming senior executive from Amazon or Google can adapt to an alien environment and deliver the desired return on investment.   

McKinsey’s research indicates that insurance companies in the top quartile for digital performance are achieving twice the growth rate of their less digitally advanced peers and delivering better profitability. Asian insurers need to take a close look, not just at their counterparts in other regions, but at the growing number of successful IT firms springing up across the Asian continent, firms that are going against the cultural grain to succeed.  Not only do organisational barriers need to be broken down, but structures need to be refashioned to encourage inter function and inter department collaboration and, ultimately, to facilitate the roll-out of far reaching digital roadmaps.