Running Your Business for Growth: Could Your Operating Model Be Standing in the Way?

Viable business opportunities, such as international expansion, and digital channels—are available for insurers to lower costs, satisfy customers, and pursue growth. Yet, some insurers’ operating models are standing in the way.

Based on Accenture research and experience, top insurers manage two business aspects well: strategy and execution. They have a comprehensive business strategy enabled by an innovative operating model.

A sound business strategy sets forth the carrier’s plan to generate revenue. Influenced by market trends, it articulates the insurer’s deliberate decisions about multi-year business objectives, value to deliver, customers to target, products and services to offer, and go-to-market approaches.

A robust operating model addresses the tactics an insurer uses to execute its business strategy. It defines how the business is organized, what processes and capabilities are needed, how workforce resources are allocated and which information technology platforms will enable operations.

Drawing on Accenture’s experience, this white paper highlights how insurers can rethink and restructure their operating models for high performance.

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Components of many conventional operating models constrain how effective an insurer can be in adapting to volatile markets, executing its business strategies and achieving growth. This makes it difficult for an insurer to attract and keep customers. Data that is duplicated and stored in disparate units across the enterprise also prevents a unified view of the customer or risk, increasing operational complexity.

An innovative operating model, however, focuses on the kind of operational agility that delivers an exceptional customer experience. It connects the dots across four core business components to create value against specified success metrics:

• Leadership that takes ownership of the new model and champions the organization’s movement towards it.
  
  
• Organization architecture and infrastructure to guide how decisions are made and facilitate how the organization works together.
  
  
• People who bring the necessary skills and competencies, working within the right roles.
  
  
• Processes and technology, defining needed capabilities as well as how they will be performed.
  
  

Executed well, such an operating model helps a carrier meet its growth and profitability goals by:

• Lowering operational and IT costs. Based on Accenture analysis, the most common areas of operations cost reduction and opportunity for exemplary improvements offer up to 30 percent in cost savings.
  
  
• Providing additional underwriting capacity by eliminating the need for underwriters to perform certain functions, either through automating the function or shifting the role to another skilled (lower cost) resource.
  
  
• Increasing speed, efficiency, and agility in quoting and issuing a policy.
  
  
• Improving customer retention through enhanced customer experiences.
  
  

As business models change, so must operating models. An effective operating model is aligned with business strategy, guided by an ability to anticipate customer requirements and responds competitively to market changes. When defining their operating models, insurance executives should ask four critical questions:

1. What makes your company unique?
   
   
2. How should we change the way we connect with our customers, employees, and suppliers, considering today’s market?
   
   
3. How do we structure our companies to take more effective decision making in an increasingly networked and globally dispersed organization?
   
   
4. How can we better penetrate new markets and defend against competitors without introducing unnecessary complexity?
   
   

Answers to these questions point to design options for the new operating model. While operating model design will differ by carrier, there are a number of leading design practices that all insurers should put in place to improve their efficiency and effectiveness.

Transforming an insurance operating model can be complicated. The approach for some companies will be a series of small initiatives for continuous improvement, while others will choose targeted intervention, with big changes implemented one at a time. A third option is a complete reinvention of the operating model, with large shifts in the organization’s structure to sync up to the business strategy. In any case, transformation impacts almost every aspect of a company and every employee. Without commitment from the top down, game-changing shifts in the operating model will not happen. Inadequate change management or follow-through also puts successful change at risk. P&C insurers can simplify their transformation by taking a holistic approach to change that addresses related issues (ranging from corporate culture to IT) and sets the context for all actions enterprise-wide.

Keys to a successful, holistic execution:

• Support and sponsorship at every enterprise management level along with clearly articulated expectations of each role responsible for helping achieve the new operating model.
  
  
• Recognition that the new operating model is a critical component of the business strategy.
  
  
• Leaders and change agents committed to, responsible for, and empowered to deliver the cost/benefit goals.
  
  
• A program team capable of managing difficult transformation areas, including intense culture change.
  
  
• Emphasis on both cost savings and delivering the promised customer experience through process improvement initiatives that do not require major investments.
  
  
• Prioritized capabilities that order the sequence of operating model initiatives.
  
  
• Governance to facilitate easy decision making with the flexibility to course correct as needed.
  
  
• Transparency and shared success metrics.