Note to Insurers: ‘The Factory is the Product’
There’s a phrase Elon Musk has repeated many times; “the factory is the product”. His statement has implications that should not be ignored by any of the insurer if their roadmap includes innovation as an objective in their mid-term business development strategy.
According to Musk, Tesla’s primary mission is not to become the company that makes the best electric cars but to be the best company creating and managing the factories where its products are built.
By focusing on reducing costs and improving quality and prices, we are talking about a factory driven by two key factors: processes and people.
By aligning processes with a corporate culture that positively influences people (peopleware), a business can achieve a unique environment, impossible to replicate elsewhere, and which achieves a point of differentiation in your sector. This strategy clashes head-on with those that focus on product innovation. Focusing on product or market trends alone can be to the detriment of competitive traction. An organisation doing this runs the risk of creating products that are easy to copy and, above all, could generate inflated customer expectations by offering attractive products which are let down by poor management and processes.
If we apply the above concepts to the insurance sector, especially in the context of digital innovation, companies need to choose between focusing on the product (insurance), or on processes and cultural alignment. It seems clear that the latter can drive the efficient configuration of new products and the sales and after-sales processes they adopt for customers and intermediaries — in a 100% digital environment.
Product-focused insurance companies tend to implement “ad-hoc strategies”.
So what is an ‘ad-hoc’ strategy in the context of a digital environment? Let’s take, as an example, implementing a ’Customer Area’ based on self-service. Here only basic functionalities are offered. This includes basic product review, receipt payments and launching basic claims. However, this is insufficient when more complex functionality is required, such as changing the characteristics of an insured risk, adding supplements, approving policy renewals, managing a cancellation or adding new insured risks. Similarly, it is difficult to involve the brokerage network and the network of suppliers throughout the lifecycle of the processes that support management and make them real-time participants.
Innovating these processes requires companies to set themselves two major challenges.
Firstly, to make the software systems that disrupt the redesign of processes more flexible. These in turn can prevent implementation of strategies that reduce the number of variables required to quote for a given product or implement the likes of embedded insurance. Facilitating the inclusion of external sources of data facilitates the acceptance of the risk. Also, including the mediation network and service providers in the business processes guarantees, in real-time, the quality of service an insurer offers its policyholders.
Secondly, cultural change. This means aligning the different areas of the company around the processes, especially the business and technology departments. Defining a common framework creates a shared objective. Design standards such as BPMN and DMN (Decision Model and Notation), for the processes and the set of business rules that support the processes, make the processes that support the company more flexible in terms of design and execution. Applying these standards presents a much more agile structure when it comes to detecting weaknesses in business processes.
Overcoming these challenges could mean companies could choose a non-disruptive strategy. This is based on implementing a product workshop that facilitates a defined business process around an insurance product and product configuration, including all the business rules that govern their lifecycle. This configuration would be included by the various modules of its insurance Core via a predefined standardised API layer. With this, positive impacts on the business become evident from the start of the project.
The above context explains why Sapiens Iberia’s product strategy team created Horizon.
This new product and process configuration workshop covers life and non-life insurance. Horizon is the key solution to implementing transformation strategies based on the optimisation of the time-to-market of product launch, after-sales processes and single governance model based on rules covering the management of products across different distribution channels.