In today's rapidly-changing and increasingly competitive market, insurers are looking for every opportunity to improve their operational efficiency. Yet most insurance executives admit they are already falling far behind on their targets. What will it take to achieve operational excellence in today's insurance industry?
Ask any insurance executive about their operational efficiency efforts and you are sure to hear a long list of plans and ideas. In fact, according to a survey of insurance executives conducted by KPMG International and Accord, a global insurance industry standards-setting body, 94 percent of insurance execs say they are currently working on initiatives to improve operational efficiency.
Our view is that insurers need to approach their operational efficiency efforts with an emphasis on maximizing value rather than minimizing costs; operational efficiency programs should focus primarily on the creation of a leaner, more flexible organization with cost reduction seen as the consequence of action rather than the goal of the action.
Our member firms' collective experience working with leading insurers across virtually every sector, geography and size has enabled us to develop a robust framework that has shown to help insurers get their operational efficiency efforts back on track.
The framework focuses attention onto six key levers of operational excellence:
Achieving competitive levels of operational efficiency isn't easy. Years of product and geographic expansion, M&A, regulatory mandates and other factors have created layers of operational systems — many of which are either homegrown or heavily customized. Integrating these core systems into other, newer platforms remains a challenge.
Many insurers also seem to be struggling to know where to start. Not surprising: Today's insurers face a wide range of strategies and options for improving operational efficiency — from traditional cost take-out initiatives to emerging technology-based solutions like automation, cloud computing and sourcing. Prioritizing these options and aligning them against your long-term roadmap and current capabilities can be difficult.
That is why we often help our insurance clients take a more structured approach to delivering on their operational excellence journey — one that not only gets them to the optimal state, but then pushes further to encourage improvements to be self-sustaining.
It starts with articulating a vision for the organization that balances costs against customer expectations, digital requirements and efficiency. Through discovery and ideation, organizations are then able to identify important business patterns and co-create valuable solutions and growth opportunities. From there, we quickly move through to prototyping and prioritization. Then it's all about scaling up, sustaining and evolving the best and most valuable ideas.
Insurers may be falling behind on their operational efficiency targets. But today's technologies — things like big data, AI and machine learning — offer insurers a massive opportunity to not just drive out costs, but also achieve competitive advantage by delivering richer customer, agent and employee experiences.
Those insurers that have not yet achieved the benefits they are seeking from their operational efficiency journey may want to review their roadmap to ensure they are taking a long-term and strategic view that leverages all potential enablers that can help them reach their goals.
Achieving operational excellence in an era of digital disruption isn't easy. But it can be massively rewarding — for insurers, their employees, their customers and their shareholders.