Accelerating the agile insurer
Dutch Insurance Outlook 2018
Digital technology is having a profound effect on 21st century organisations. It is fundamentally changing the way we work, the way we manage, where we work, how we organise, the products we use, and how we communicate. In this article we explain the concept of agile, and provide seven accelerators for scaling agile in the insurance industry.
Despite of the previously mentioned changes, some aspects remain constant. Insurers still exist to unite around a common purpose, common values, and strategic objectives to get things done and remain relevant players in the market. People remain the most critical asset for insurers—but they are increasingly surrounded by technology. Individuals are still bound by the hours in a day and their mental ability to process information. Work (done by computers and people) must be coordinated to create maximum value for customers.
In order to adapt to increasingly digital workplaces and work, many insurers are implementing agile ways of working. Agile is a set of values, principles, and a mindset that combines multiple techniques to drive customer focus, increases collaboration across an organisation by removing ‘silos’, and strengthens the ability to adapt to a continuously changing environment.
Deriving from software and product development originally, these ways of working are now also being applied across insurance companies, for example through the introduction of multi-disciplinary teams, combining workers from commercial teams, software development, quality, pricing, and marketing. Even a redesign of the boardroom to adopt agile principles and an agile mindset is not uncommon anymore.
Start small, fail fast, and scale quickly
If agile ways of working are implemented successfully, the effective collaboration in multi-disciplinary teams leads to a reduction of time to market, an increase in customer satisfaction, and increased problem-solving capabilities. The prime focus of true, mature agile insurance companies is on generating continuously improved value for its large corporate clients and institutions, as well as its private clients. Insurers on the path towards increasing agility tend to focus on optimising services and alignment with internal customers first. In robust 20th century organisations, initiating transformations on a large scale is complex. To kick-start larger scale transformations successfully, we apply an iterative approach, applying the principle ‘start small (with experiments), fail fast, and scale quickly’. This generates quick wins and establishes credibility first, before changes are rolled-out on larger scale.
So what challenges are tackled once agile ways of working are adopted effectively?
Agile transformations are usually initiated when companies search for ways to keep up with rapid changes in customer needs. For insurers, experimenting with the implementation of operational agility, this may mean that the initial focus is on internal ‘customers’ of the IT teams; parties within the company. However, regardless of the sector in which agile ways of working are adopted, the ultimate aim is always to bring the focus on continuous improvement of customer value back to the heart of the organisation.
These are some strategic challenges that insurance companies aim to tackle by applying agile ways of working on a larger scale:
1. Agile ways of working strengthen the flexibility to adjust effectively to rapidly changing customer behaviours, following lifestyle changes and new trust concepts, by tapping into the wisdom of the crowd.
2. As customers are adopting new digital channels rapidly, agile insurers have the ability to benefit effectively from the opportunities to build more intimate customer interaction, and use data to personalise services and product offerings.
3. Once agile ways of working and the agile mindset are adopted across an insurance company, and operational and strategic agility are combined effectively, financial benefits usually follow.
4. New generations of professionals want to contribute and make a valuable impact, each in their own way, in an environment that provides meaningful, purpose-driven careers. Agile organisations seek to effectively align corporate ambitions with personal development goals of their employees.
For many insurers, significant changes are needed to increase their organisational nimbleness. Traditionally, insurers were organised in product line structures. In these types of organisations everybody is focused on his or her specialised area. All specialised areas are connected around a specific product category such as individual life, pensions, or non-life. From a risk and product perspective, this provides overview and control. However, from a customer value perspective this might not be very service-oriented. It could lead to multiple required log-ins when the customer wants to access his personal insurance portal. A product line structure also does not facilitate delivering best advice or best next action to the customer if the full overview of the customer portfolio is not known. An agile approach allows for new, flexible ways of interacting with the market, though a continuous conversation, replacing the 20th century insurers built solely for ‘pushing products and services’.
Lesson learned from banks: organising around the customer journey
A useful approach for organisational redesign that strengthens the focus on customers, starts by defining customer journeys. So called ‘value streams’ are defined along the customer journey, targeting a specialised area of the customer journey. These value streams consist of agile, multidisciplinary teams. Dedicated teams can deliver valuable improvements across product/service lines on topics such as customer onboarding, claim management, and divorce settlement. Banks sometimes add an additional dimension and map the customer journey per target segment. This results in agile teams which, for example, focus on the onboarding of students, or on facilitating international expansion for SME customers. A value-based approach to customer journeys—as described in this Insurance Outlook—also facilitates a fact-based agile approach. Objectives can be quantified and successes of the agile methodology can be measured. Lastly, adopting a customer journey approach to organising agile teams also facilitates organisations to think in terms of partnerships and networks. Because the teams are output driven, solutions for achieving the desired output can lead to refreshing insights and new types of collaboration across a wider insurance ecosystem.
Scaling up agile ways of working across the insurance company
Many insurance organisations start by implementing agile ways of working at operational levels, usually within the IT division first. Initial experiments generally work fine, when a limited number of multidisciplinary teams are guided by product owners. The teams use task boards (scrum or Kanban) for prioritisation of work, and for the alignment in and between teams they have stand-up meetings and ‘scrum of scrum meetings‘. But once work needs to be scaled up to more than 8 or 10 teams, alignment and decision-making become more complicated. When scaling up the agile ways of working across an insurance company, we recommend using a central body, an Agile Center of Expertise (CoE), as a ‘change engine’ to support teams to stay aligned and connected to strategic goals, so called ‘epics’, which in turn can be translated into features and user stories. Coaches and experts in this Agile CoE help both the teams and executive management to shape common language around agile principles. This helps to ensure teams are guided and coached in working towards the common purpose.
We are often asked if agile transformations should be initiated top-down or bottom-up, but in our view, a shift to get customer focus back at the heart of the insurance company starts by shifting the perspectives from the outside-in. If agile ways of working do not support a ‘bigger purpose’ that adds value for customers, the focus on an agile way of working can easily become a means to an end, which usually limits the impact that working with agile values and an agile mindset potentially offers.
To align value streams and teams around a common purpose and common Objectives and Key Results (OKR), we work with these value streams, describing their genuine value to customers, focusing on maintaining relevancy for the future. Customer journey mapping is one of the powerful tools for aligning teams with their strengths and weaker spots in serving their customers, internally and externally.
Scaling agile practices and genuinely making them stick, requires a redesign of organisational structures. It requires fundamental shifts in the ways in which work is organised (prioritised). Employees collaborate with more autonomy, and in different connections with the parties in the organisational ecosystem. Successful agile teams work with high levels of trust, openness, and leadership, based on expertise rather than on hierarchy. The cultural changes that insurance companies go through on a path towards more agility are therefore often significant. This does not necessarily mean a ‘big bang’, but a step-by-step roll-out across those business units that show the highest readiness and relevancy for agile work. Deloitte uses the Change Adoption Profiler1 to assess change readiness using data-driven insights.
An agile scaling framework
Some insurers have used methodology from the Scaled Agile Framework (SAFe), LeSS (Large Scale Scrum), the Spotify Model or NEXT to support their efforts in rolling out nimble ways of working across their organisation. Experiments with these frameworks in the last few years have shown that the silver bullet for scaling agile has not yet been found in one single methodology. Some insurers have left the framework they originally chose for their roll-out, others have implemented parts or combinations of elements of multiple frameworks. The context in which agile ways of working are being scaled always demands careful selection and embedding of any of the frameworks in the organisational context, if used at all. Once a clear focus has been created around the broader efficiency and effectiveness benefits that insurers aim to achieve through scaling, it can be very helpful to use a set of agile principles or one of the scaling framework methods for guidance on rolling out these agile ways of working on larger scale.
A critical role for HR
Early involvement of HR is crucial for the successful scaling of agile ways of working. Besides changing roles, and an often significant reduction of job categories and titles, HR can help to redesign performance support, recognition and reward systems. As we redesign organisations to work more effectively with customer feedback, younger generations of employees also demand more frequent feedback. Salary, lease cars, and bonuses are no longer the highest motivational means for recognising high performance2. This is where Human Resources experts have a valuable role to play.
Seven accelerators for scaling agile
Based on our experience in multiple industries we advise seven accelerators for scaling agile in the insurance industry:
1. Start with a common purpose around which teams can align. All successful transformations have a clear view on their ambitions to deliver (unique) customer value. Detailing value-driven customer journeys helps to bring this focus and to spot opportunities for optimising client and customer value.
2. Framing aspirations and agreeing on the best ways to achieve these can always count on active board involvement and buy-in.
3. Implement agile principles in those areas where, for example, continuous alignment with rapidly changing customer needs is required or opportunities across the customer journey are eminent. This is where nimble ways of working add most value. Agile principles do not necessarily have an impact in all types of work activity.
4. Review the benefits and downsides of using one of the scaling agile frameworks. These may offer guidance for the tailored redesign towards improved organisational nimbleness.
5. Establish a central agile expertise center (‘change engine’) to design and implement a governance structure, coach teams, and establish alignment between teams, but also to ensure a common language is built to facilitate effective communication.
6. An iterative implementation approach drives the ‘start small, fail fast, scale quickly’ mentality, and allows quick scaling of successes. This is more effective than a large-scale longer-term roll-out.
7. Attention and effort will be needed to transform the organisational culture, because the mindset shift in an agile transformation is profound. It takes much more than training and skill building for agile ways of working to really ‘stick’.