Insurance Talks #1 – The importance of agility in the insurance industry
For the Insurance FM podcast, Futurologist Michael Carl and Simon Dufour, Sales Director at Keylane, interviewed Heiko Burdack, CIO of the SIGNAL IDUNA Group, and Rainer Sommer, CIO and COO of Generali Germany, on the subject of agile frameworks in the insurance industry.
Through their positions, responsibilities and their creativity, they not only experience the future of insurance, but are also shaping it.
The full interview and podcast can be found here (only available in German).
Agility in Insurance: More than just hype?
Michael Carl: An area of tension in which insurance companies find themselves in, is between agility and mobility on one hand, and reliability and stability on the other. The tension between customer expectations and process expectations. When we talk about agility in insurance, is it actually a meaningful, forward-looking discussion, or is it a hype topic that everyone is talking about, but where there is not a lot of substance behind it?
Rainer Sommer: I don’t think agility is just hype or a saying of the times, I think it’s an absolute necessity when you look at how fast technology is developing, how quickly customer behaviour is changing, and how quickly market conditions are changing. If someone had asked in January “Can we function with 90% of our employees working from home?”, everyone would have said ” No. It doesn’t work that way.” But it did work that way, and it worked very well. You were also talking about the tension between customer expectations and agility. I don’t think there is any tension. In the example of the pandemic, the customers are our employees and they expect that they can stay healthy, that we take care of them, that they can stay safe, and that they can continue working. If we had not taken an agile approach, we would not have been able to meet these challenges.
Heiko Burdack: What we experience in the insurance industry and that I was able to experience earlier in other industries, is the following: imagine you have a runner who has been running for an hour in a marathon and has a good average speed. At some point you realise you want to catch up with him. If you’re not a well-trained athlete who can achieve a much higher average speed, then you cannot catch up. But, agility is not an end in itself, it is a new operating system, which we have to develop further, just like a classic operating system.
Trust is your most valuable product
Rainer Sommer: It is primarily about a transformation of people. We have to transform the way people think, and in the way they are open to change. In a situation where new players are starting to enter the market via technology-driven sales models, where large companies from foreign countries are now setting foot in Germany. There is not such a large insurer yet, but the fact that large investors have invested in Insurtechs, shows very strongly the high level of interest in the German market.
Heiko Burdack: If we simply leverage this basis of trust that we have in Germany, i.e. how much our customers trust us, this creates a huge new market. If only because all other industries don’t sell trust, they sell products with features. We have a very strong insurance product where trust is at the core of everything, and agility fits in perfectly with that, because customer orientation and value orientation are precisely the principles that agility can drive forward. I find it exciting to somehow turn this chemistry into something meaningful and reinvent an insurance company a little bit.
Changing customer expectations
Michael Carl: We just talked about tensions. Your product is trust, that’s right and proper to say. One could also say that your product is security, consistency.
Rainer Sommer: The topic of trust and the underlying trustworthiness and stability of an insurance company are part of its core essence. At the same time, however, we can see that customer expectations have been changing for a long time and continue to change more strongly and significantly. If, for example, your house is flooded, that will be fixed. But what will a few thousand euros bring you? You simply want to be able to live there again. The damage has to be repaired – maybe even in aftercare. With new technologies we can support such prevention services. I believe it is an integral part of a promise of protection that an insurance company has to provide.
Heiko Burdack: If you insure against death, you don’t want death to happen, or with household insurance, you don’t want the damage to happen. You just want to be well taken care of in case it does happen. You want to have people around you who will help you in this extraordinary situation, and that is completely different from the classic product business. Let me illustrate how much the insurance industry is different from other verticals by using the example of the telecommunications industry: If Telekom didn’t have 5G and Vodafone only had 5G, then millions of customers would undoubtedly shift from one to the other within 24 months. The agile approach comes originally from the start-up scene and is strongly linked to product development. I just have to make sure that I include these new methods, such as modern customer interactions with digital portals, but never forget that the human factor is important in our business. I find it exciting that the insurance industry has, in my view, understood the next stage of the digital world – the human factor. That’s what I mean by adaptation: learn from the other industries beforehand. Agility will help us define the next phase of insurance.
Agile models drive customer benefits
Rainer Sommer: The issue of being a partner for the customer in precisely these stressful situations is important. And here too, agility helps with what happens behind the curtain. Documentation data collection and reporting to all kinds of official bodies are necessary, but it is not really a tangible added value for the customer. I think the art will be to digitise these things, and an agile approach will help, precisely because it can be done step by step. Artificial intelligence can also replace human intelligence in some parts, but not emotional intelligence. And that’s where the human factor comes into place. And in order to free humans from repetitive work, from administrative tasks, you need modern technologies, and for this you need agile procedures to gradually work your way out of the business and operating model of the past decades.
Heiko Burdack: you have to change the “how” to influence the “what”. In other words, I need agility in my own company to generate a different outcome. And to take this into account during rollouts or implementations, to explain it to the employees so that they understand which touchpoints I have there and what added value I can generate with customer-oriented products. To do this, I need teams that deal with agile methods in a customer-oriented manner.
Leadership in an agile world
Michael Carl: How do you actually experience this yourself? You are both in prominent leadership positions. How does this development, which you are obviously both actively driving in your own role, change your own perception of how you work as a manager?
Heiko Burdack: The exciting thing is that IT and business are no longer separable. They are causal components. So you still have to think and live in a matrix organisation, but you still need holistic IT somewhere. Silos are tumbling away. People are coming together across divisions. And they are getting better insights into these standard IT topics. Right now we are on the eve of a major transformation, and things I have been preaching for years become suddenly trivial: process maturity levels, cloud technologies, etc., because everyone needs them at once, and that is so exciting!
Rainer Sommer: From the perspective of cooperation: Hierarchies are dissolving. The topic of overall responsibility is increasing significantly. I have to talk about my role and my understanding of leadership, now. I see myself more challenged in three areas. The first is to define the final goal. That means that I don’t specify what needs to be done, but rather what level of satisfaction we need to trigger in the customer. I do not define a product. I define that we need a product that the customer likes. And that’s much more difficult. It’s much easier to dictate from the top down and say, “Do that! It’s much more difficult to define: “Do what the customer wants” because it’s much less tangible. The second dimension is: I see myself much more responsible for creating the framework conditions so that the teams can act independently. So, I have to manage these constraints between planning specifications, between resources, restrictions and degrees of freedom, which such an agile team absolutely needs in order to be able to act and to be effective; to manage this area of tension. These are my challenges, and the challenges of the managers reporting to me. The third challenge is the issue of resource capabilities. Not in terms of the number of people, but primarily in terms of abilities, agility and skills to ensure that we have the right people.
Heiko Burdack: Mr. Sommer has described my everyday work in a great way. I would like to add one more point: the result is very important. Impact is measured in different dimensions. What still keeps me busy, because I have fortunately already done some agile transformation, is to think about the problems of agile transformation. Many people believe that if I am agile, then I am on the road to success. But this is not the case. Just because I say to line managers: “You are now agile leaders”, doesn’t mean anything immediately changes in their minds. These people can be overwhelmed in such situations. So they do a lot of leadership development to support their agile teams. These are the things that are keeping me busy, because we have only created a foundation at this stage.
Agile frameworks across business lines
Simon Dufour: Mr. Burdack, Mr. Sommer, your respective positions have the characteristic that you are responsible for various lines of insurance products. Do you see any differences in agility depending on whether the respective companies operate Life, Health or Non-Life insurance?
Rainer Sommer: I notice differences. But I wouldn’t relate it to the lines of business. I would rather say it’s about people. There are teams that were already thinking in more agile terms before, i.e. in the classic approach, and that are now evolving very quickly and working in agile ways. And there are teams that find it much more difficult to do so.
Heiko Burdack: The product line issue is not so relevant, but you have to be aware of the silos in your company. I still warn against taking too many steps at a time. It’s like climbing stairs. If you take two steps now, you can still do it. But it can be a real pain if you try to take three steps too quickly. It is the same with transformation.
Michael Carl: Heiko Burdack and Rainer Sommer, I can really only thank you both at this point. We have to think very precisely about the role people play in our systems and companies, and also with regard to technology.
Agility in the insurance industry is here to stay
More than just hype, agile methodologies are being adopted across many industries. For the insurance industry, agile frameworks are supporting a transformation that will revolutionise the customer experience and forever change the face of the insurance industry. Combined with advanced technologies, such as machine learning and cloud based services, agility in insurance will enable providers to go above and beyond former practices to deliver products and services that do much more than approve or deny a claim. We are entering a chapter of concierge inspired services, enabling providers to help customers through prevention and post-claim support-as-a-service. In essence, we have returned to the most fundamental question driving the industry: What does the customer need from us? And the answer is clear: Agile solutions that enable better, more personalised and more humanised products and services.