• Sander van der Meijs, Senior Manager |
  • Anouk Zevenbergen, Director |

An insurer’s guide to embracing the digital transformation

High-performing insurers recognise they need to get connected if they want to be successful in a digitally transformed world. Here’s how to get there.

Getting ready faster: An insurer's guide to embracing the digital transformation

Executives in the Dutch insurance industry are investing in future oriented initiatives to surf a perfect storm of converging market threats . And while Covid-19 appears to have limited immediate financial impact on the insurance industry, it has caused a fundamental shift in other areas. Customers' sudden focus on digital, for instance. Accelerators such this can drive digitization and insurers can leverage the momentum of this unstoppable force. In order to get 'connected', insurers focus transformative initiatives on improving customer experience, digitizing processes and customer interactions, as well as adding new services to extend the value chain. But there's more to be done. Here's what – and how.

Increasingly, insurers find themselves in a squeeze. On the one hand they need to perform and address today's challenges. On the other hand, they feel the urge to transform and prepare to be fit for the future. However, the daily grind of pushing down costs, increasing efficiency and serving customers consumes most of the attention.  All too often, this prevails over forward-looking transformative programmes, such as investing in new technologies, transforming their operating model and enabling a growth agenda.

As a result, very few insurers have so far taken bold moves. They usually take evolutionary steps to improving their current business or operating model, rather than working towards a bold, connected and digitally transformed vision.

Escaping the squeeze requires changing the operating model

Escaping this squeeze is nearly impossible, because it exists inside an operating model that was never built 'Connected'. So in order to escape from it, the operating model in which the squeeze exists needs to change. In other words, insurers need to become connected. This goes further than having a fancy app. It means connecting tomorrow's vision with today's reality, in order to drive a transformation towards the future while keeping today's performance on par. Fully 'connected' and digitally transformed firms...

  • …connect to customers with compelling value propositions, opportunities and interactions
  • …connect and empower employees to deliver on the customer promise
  • …connect front, middle and back offices to execute the customer growth agenda
  • …connect to an ecosystem of business partners to jointly deliver on commitments to customers

Becoming a connected insurer

Of course, becoming a connected insurer is easier said than done. To do so requires executives to examine the transformation trajectory from four angles, which all need to align:

  1. Purpose : What do you stand for?
  2. Business Model : Where do you play?
  3. Operating Model : How do you win?
  4. Free Capital Generation : How do you create value?


1. Use existing purpose as the foundation on which to build.
Use your existing well-crafted purpose to guide the choices your organization makes with regards to its business and operating model.

Many insurers have sharpened their purpose in recent years, defining what their firm believes in and the unique value delivered to their customers. Consistently translated, a purpose reveals a firm's 'character'. It will be recognized by customers and makes firms more distinctive.

2. Build enough flexibility into your business model to make it flexible enough to evolve
As an insurer your business model allows you to capture opportunities that appear, based on your purpose. However, optimizing your business model for one specific version of the future is risky. After all, your firm's future potential customer options, competitiveness, market, proposition, brand and significance of contribution are subject to the same six converging market forces that are causing your current headaches to begin with. Given the speed of change in environments and markets, firms should not bet on one new business model but build in the flexibility to accommodate further future (r)evolutions. Besides variations to their established insurance business model, this also resulted in new business models such as services and platforms.

3. Develop an operating model fit to execute whatever business model the future throws at it
New business models are expected to emerge and cannot be fully predicted. But you can make your operating model fit to execute whatever the future may require. To use a sports analogy: if you need to prepare for a sport but you don't know what ball sport you're going to play, you can still work on your basic fitness, coordination and flexibility.

It is essential is to take a very close look at your firm's value chain at this stage: Your point of contact with customers and intermediaries, your claims administration, your risk management and premium setting, your asset management. This exercise maps out where your firm excels, where external threats appear and indicates your current level of agility. It also highlights what your firm needs in order to deliver propositions efficiently and cost effectively, and what you need to manage clients through your core business processes.

This leads to investment opportunities and priorities, and may lead to strategic interventions. Examples include decomposing the value chain and outsourcing parts that are currently managed in-house in order to focus on excelling in core capabilities. A firm might, for instance, conclude it should focus on the actuarial part of its products by leveraging smart (AI) tools, data and actuarial expertise, while leaving customer contact to new entrants, investments to external asset managers rather than in-house ones, and premium collection to payment providers.

4: Use free capital generation (FCG) as a KPI for success and a driver for decision-making
Although not a standardized accountancy metric, FCG has gained in popularity and insurers have increasingly started reporting on it – often backed by investor demand. Investors are, after all, interested in potential dividends, and FCG is the excess amount of eligible own funds on top of a firm's target capitalisation.

In addition to transforming a firm's business model and operating model as mentioned above, management can pull a number of levers to affect FCG outcomes. They include mergers and acquisitions, tax optimization, balancing capital management, accounting model adjustments, elevating financing and asset mix optimization.

Translating the options and choices to the impact on FCG will support decision-making for the short term as well as for the longer term. This KPI can be used to measure the success of the transformation.

Reach out if you need help with your digital transformation

If you're looking to transform your insurance firm, reach out to Anouk Zevenbergen : +31 6 13 75 26 86 or Sander van der Meijs: +31 6 52 07 88 91, to discuss if we can help you.

Download the publication: Connected Insurer

For more insight on Connected Insurer, download our publication by clicking the link below.