McKinsey: Agility and scale key to insurance development
The unprecedented advent of COVID-19 has caused global reverberations. One industry that has felt this keenly, is the insurance world. Suddenly faced with a range of brand-new requirements, speedy product development has never been so essential. We examine the latest McKinsey report on agility, scale and how teams are making it happen.
What is agility?
The usual process for creating new insurance products is a complicated one that requires a number of processes to take place, each relying on information provided, to complete the next task in the chain. The term ‘agility’, defines a different management style, which though in use in the tech industry, is only recently being applied to insurance.
An ’agile’ team is one that’s comprised of a number of industry experts who work together – marketing, data, software, production and so on, to develop an-to-end product. If several products are required that are of similar ilk (like insurance) instead of developing one product at a time, several could be in production. After discussion, two might be launched, and the data collected on those products will be used to improve and adapt the other products, so that they can be launched on the basis of that market information and ‘test run.’
The concept of agility in companies results in the faster development of products and a streamlined launch and delivery.
COVID-19 and agile insurers
Insurers are adopting agile practices because traditional models have been beset with challenges since the pandemic struck. Demand for services and new products have increased, and customers expect faster, more efficient results. Not only that, but new financial constraints has meant businesses need to streamline their operations. An agile company is often one that works with less hierarchical layers. For example, the stages from entry-level employee to CEO, might be seven or more in a traditional structure. But a company with an agile structure typically has only three levels. This streamlines operating costs, creates better efficiency and results in greater company resilience.
How to achieve agility
According to McKinsey’s whitepaper, to change the structure of a business and create agility, executives must address a set of questions to their management teams. These are:
- Are there problems with responsibility and ownership when it comes to delivering a product – and is the hierarchical structure of managers contributing to this issue?
- Are critical solutions being delayed because of multiple handovers – which result in long lead times?
- Is the company over staffed at the middle management level?
- Are collaborations across the organisation held up by the leadership approach?
- Does the company attract new talent?
- Does the technology support growth and flexibility?
Businesses that answer affirmatively to several of these questions, would benefit from a restructure that accommodates agility.
The agile tribes
There are two types of tribes that operate within the agile business model. The first is the self-managing tribe. This is a group of experts who, led by a team leader, manage the day to day operations of the company.
The second type of team is a cross-functional one. This team is also led by a team leader, and is responsible for creating change and streamlining processes as efficiently as possible. Each cross section team works on a particular element of the company process. For example, after-sales care, or underwriting, production, servicing and so on. Their job is to ensure that all avenues are being explored so that improvements can be constantly implemented.
Creating efficient tribes is a science in its own right. Once again, McKinsey pinpoints a series of questions executives can ask to streamline and bring focus to the process of tribe-building.
- What form will the tribes take? Should they be used on production, customer experience or sales?
- How could tribes best manage a digital transformation?
- What kind of link can be made between self-management tribes and cross section tribes?
- How will the self-managing teams be organised?
Two big factors should influence the decision of tribe creation. Those are that the company structure should minimise handovers to ensure faster delivery times, and all changes must allow for growth.
Ultimately, companies must change structure and adapt products to accommodate the new ‘normal’ and recognise the opportunities it brings. Flexibility, a willingness to embrace new technology, and the breaking down of old model silos, is increasingly becoming the essential strategy to create a brighter future.
Global investment in insurtech reaches all-time high
Global investment in the InsurTech sector reached an emphatic record during H1, 2021, as half-year funding of US$7.4 billion exceeded full-year investment in 2020, and in every other year, according to the new Quarterly InsurTech Briefing from Willis Towers Watson.
It was found that the latest quarter saw 162 deals yield more than $4,824 million in investment, a 210% increase over Q2, 2020. The enormous quarterly total, itself more than any annual total before 2019, was driven largely by 15 mega-rounds of $100 million or more. Collectively, these deals reached $3.3 billion, or two-thirds of total funding during the quarter. The money was raised predominantly by later-stage players seeking expansion.
A need for the insurance community to reflect digital changes
Series B and C fundraisings drove a large number of deals in the second quarter, but the number of early-stage deals also increased. They were up by more than 9% from the previous quarter, and 200% from pandemic-stricken Q2, 2020. As a percentage of overall deals, early-stage activity held roughly steady, at 57%.
InsurTechs focused on distribution accounted for 55% of start-up deals, and for 10 of the 15 mega-rounds. Most of the distribution InsurTechs target reduced dependence on agent channels. Of all Q2 deals, 73% were for P&C-related InsurTechs, while 43 companies raised funds for L&H technology. Funds were raised by companies from 35 countries, including new entrants Botswana, Mali, Romania, Saudi Arabia, and Turkey.
Dr. Andrew Johnston, global head of InsurTech at Willis Re, said: “As technology changes our lives, society will demand an insurance community that reflects and supports our changing, digitally empowered behaviours. Consumers and businesses increasingly expect insurance to be delivered when and how they want it, and risk carriers that fail to respond will fall away over time. To embrace technology is a minimum survival condition. Those that use it to redefine service in the insurance world will thrive. That means a positive future for InsurTechs that bring a truly differentiated business approach to our industry. Some of them will create untold long-term opportunities for themselves and the insurance sector.”