Navigating change in turbulent insurance waters

Sweeping changes unlike any ever seen in the history of the insurance industry are altering the competitive landscape. Insurers, brokers and agents alike feel their future survival may depend on wise choices made today – but they are faced with a bewildering tangle of regulatory reforms, new technologies, shifting business models, multiplying delivery channels, and increasing supply chain pressures.

Collectively, we are faced with a multitude of new opportunities at our feet and new competitive pressures at our back. In the property and casualty insurance industry these opportunities include technology, new risks, mergers and acquisitions and the hardening price market. Pressures include rising costs, competition and reduced capital. Many in the insurance industry are worried about the financial cost of the changes they suspect are needed. The time has come to take a higher level look at the change management process and what is needed to succeed.

MANAGING THE FUTURE

“Change management” is the proactive execution of change in a planned, systematic fashion. Within an insurance organization, this might include changes to operations delivery, organizational structure, resources, plans, metrics, or the systems and processes that drive business results. Change can be the result of an internal adjustment to business strategy, or it can come as a reaction to outside forces and events. The goal of managing change is to move the business from present state to future state while:

maintaining focus;

producing business results;

keeping all costs to a minimum; and

negotiating conflicts of priority with operational projects.

A change management process cannot be successful without certain preconditions. You must have a clear mission and strategic plan, as well as annual objectives. These are the blueprints that validate and guide the ideas emerging from your change management process. Detailed and outward-looking research into the insurance industry and your niche in it, as well as larger economic, demographic, political and social trends, is also key. A change management process must be as thorough as a new business start up.

ESTABLISHING PRIORITIES

Is your company delivering on its performance targets? Is your company also moving on its projects to change the business you do? Change is a parallel universe that cannot interrupt day-to-day business yet must smoothly run alongside it.

As one of the first steps in any change management undertaking, an outside facilitator should be assigned responsibility for the change program and for representing the change initiatives at the board level. The pace of business in the insurance industry today – indeed, in most industries – means executives and managers can no longer handle change management and their regular jobs as well.

Change projects need “champions”. In this case, both a non-invested champion and an invested champion are required. The former is needed to provide wisdom and neutrality, and most importantly, to make the tough decisions without fear of their own future in the company. The non-invested champion should therefore be a board member or independent consultant. The invested champion provides the “skin in the game” element and is someone who will “wear” the result of their work. It must be a senior executive in power, someone who has real clout.

In developing the change management team, you must also consider change in the context of your business partners and supply chain partners. Ideally, your changes produce good results for your partners, or at the very least align with their plans for change. Involving your partners with your change management may also uncover opportunities for them to help you. As such, a change management program needs:

a non-invested champion;

an invested champion;

an outside program manager;

representatives from supply chain partners;

representatives from internal staff with detailed knowledge of current products and operations; and

a customer representative

WHAT TO CHANGE?

Knowing what needs to change is the first step in marshaling a response. Most change management processes get off on the wrong foot right from the start by assuming that management knows what change is needed. In today’s business climate, this simply cannot be assumed. All change management tools and services must therefore include a discovery process called an “impact analysis”.

The objective of the impact analysis is to develop a set of well-defined problems and the areas of the organization that are affected. At a high-level, the impact analysis will help you define:

what is already being done;

what new things must be done;

who the new players will be;

what relationships will form or disappear;

what core processes will be affected;

how success is defined;

how you need to structure and operate your organization; and

what knowledge, skills and experience will be required.

To create the actual plans that will be implemented, the change management program team takes the results of the impact analysis and considers them within the context of overarching business objectives and priorities. They then create a set of projects, with each project addressing a specific threat or opportunity.

How do you prioritize all of the resulting projects? A good rule of thumb is to perform a customer test. For instance, what change would make the most difference to them? Can you find a win-win where the customer gets what they want while you meet your objectives? Where is the most good to be gained at the least cost? Where is the leverage? Are your supply chain partners changing an interface that you can build on? Is an industry organization delivering standards you can use? What work is already in progress within your organization that can be adapted to meet new goals?

Customers will not wait for the time it takes to turn a battleship around. Carriers and brokers must keep in mind that all projects need to deliver complete results incrementally. Now more than ever, short projects with visible early benefits are a must for keeping stakeholders engaged. Also, do not proceed in any direction that cannot be changed quickly. No one has a crystal ball, so build flexibility into all solution strategies and projects. In today’s fast paced business world, those who stand still are left behind. The process of change is a “constant state”. As a result, change should become an integral and institutionalized function. Are you ready for it?