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Jean-Francois Gasc Q&A:
The digital multiplier

With digital technologies at the heart of insurance’s future growth potential, as well as being a preferred means of doing business, insurance leaders must make sure their digital investments multiply value creation.

Accenture created the Digital Performance Index, based on a study of 343 leading global companies across eight industries. We speak to Jean-Francois Gasc, Accenture’s EALA Insurance Strategy lead, about where insurance companies rank in the index and how their leaders can improve performance.

What sort of picture does this research paint about digital performance in the insurance industry?

Insurance is relatively conservative in its adoption of new technologies, so it’s not too surprising that it is lagging other industries, both in its level of digitalization and in its ability to realize financial returns on its digital investments.

Of course, insurance executives are making large-scale commitments to digital technologies such as the cloud, mobile, big data, robotics, and the Internet of Things. But they are not focusing enough on generating value from these commitments. Only 10 percent of insurance companies have made sufficient investments in digital to meet the criteria of our "digital leaders" category—the cross-industry average is 18 percent.

And worryingly, three out of four insurers are failing to build digital capabilities and reap financial rewards from their investments—significantly more than the 60 percent cross-industry average. We found that only five percent of insurance companies could couple strong digital and financial performance, showing a clear a gap between vision and execution at scale and speed on digital transformation.

What sort of rewards could insurers reap if they had to harness digital more effectively for creating value?

We estimate that insurance companies that embrace digital transformation could increase their underwriting profits by as much as 100 percent. But to achieve this, insurers must focus on converting digital capabilities into financial benefits—for example, by adapting their strong local distribution models to compete more successfully on the global stage.

When we look at the digital high performers in the industry—those that have combined strong digital performance and financial performance—they outperform digital leaders, which is our category for those who have made significant progress in digital capabilities, but have failed to translate that into financial strength.

The digital high performers show a 64 percent improvement on digital leaders in terms of revenue growth, and a 48 percent difference on profitability (return on equity).

How do the digital high performers set themselves apart? Are there industry-specific factors holding insurers back?

What we have found is that being a digital insurer in a single, large market is the simplest, fastest way to gain the most value from digital investments. Global players are struggling to prove themselves digital high performers in large part because the distribution of insurance is still being conducted at a local level. That makes it complex to leverage digital investments or achieve scale across geographies. In fact, most insurers allocate their digital investments locally. They focus on adapting their geographical management structures and local factors such as compliance, distribution models and customer needs.

But they should rather adopt a focused global approach to their investments around key digital capabilities like the Internet of Things, artificial intelligence, digital platforms, and mobile architecture and apps. Major players in others industries, including the utilities and banking industries, that face similar local constraints have done a better job of globalizing their investments and scarce digital skills.

What can insurers do to change this picture, given that no insurer can ignore the importance of local capabilities?

Many insurers duplicate their efforts across local markets. They invest in areas and geographies which do not make financial sense, and they are also often not adequately organized to evaluate what works best where.

Instead, they should emulate the many major players in other industries that have done a better job of optimizing digital capabilities like analytics and digital platforms. They should look at running a cross-market platform approach that suits their geographic needs, avoids duplication and brings scale to investments.

Targeting the right areas for investment and sharing leading practices can double the value generation opportunity for the average insurance company.

Winning insurers will transform decentralized digital models by identifying digital capabilities that can be rolled out globally. They must systematically seek out a “multiplier and time-to-value” effect.

Do you have any advice about how to approach this in practice?

We’d recommend looking at it as a five-step process. 

It begins by establishing clear group-level digital-maturity and digital-value-creation measurement for the insurance group.

Next, the insurer should understand which capabilities are structurally local, or specific to one line of business or product, versus those that will apply across most dimensions of the business. It should align scarce investments with the global or regional strategy to achieve a multiplier effect across many geographies and drive a shorter time to value.

Thirdly, it’s important to balance investments and execution efforts across all four areas of digital performance—plan, make, sell and manage—both at group and local level.

Fourthly, insurers should allocate local investments to specific opportunities and regions with shorter time to value. They must avoid over-investing in countries or business lines where the competition is less intense or the digital maturity far lower.

Finally, they should strive to increase the multiplier effect by sharing leading practices at speed in business areas where centrally developed or high performance digital capabilities cannot be applied.

See more perspectives from Jean-Francois Gasc by taking a look at his blog.

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