Transforming insurance operations through advanced operating models

Transcription

1 Transforming insurance operations through advanced operating models Insurance executives believe there is untapped potential for advanced operating models to address the most strategic enterprise challenges 1

2 About the research In 2014, Genpact commissioned a research project conducted by an independent research firm. The goal was to assess the potential for new operating models across a wide spectrum of industry sectors and functions. More than 900 senior-level executives completed the survey (see Figure 1). Respondents were screened based on their ability to materially influence functional decisions. The survey findings complement other research and insight derived from Genpact s experience in designing, transforming, and operating business processes and operations. Sample of more than 900 executives REGIONS SIZE* FUNCTIONS 78% of insurance respondents from North America alone 84% 65% 84% * 15% 40% 10,000 + Risk Operations 77% of insurance operations respondents from larger companies (size > 10,000 employees) This document presents findings drawn from *Company size defined by number of employees 95 senior executives in the insurance industry including 52 operations executives. Figure 1 EMEA 25% 10% NAMER APAC 16% 5,001-10,000 16% Company size defined by number of employees Procurement Finance 17% 13% 15% 16% of operations executives from insurance industry Marketing n=912 2

3 Abstract 04 What are the most pressing company challenges? How can functions and related operations address them? Which functions are most effective at addressing these challenges? Are those functions mature? Are those functions ready to transform further? Can new operating models of those functions help them transform? Which models can do this? In conclusion 14 3

4 Abstract As the insurance industry emerges from the financial turmoil and economic uncertainty of the last few years, COOs and other senior executives are once again focused on growth. Insurance operations have the potential to help address some of these issues, but levels of maturity and preparedness vary across companies and functions. Specifically, actuarial and claims analysis as well as the commercial claims and underwriting functions have emerged as key areas to watch. In addition, the three levers of operating model transformation technology, process reengineering, and advanced organizational structures (shared services, business process outsourcing, and hybrids thereof) all create impact differently. Using commissioned research, Genpact has examined these trends to understand how enterprises are driving transformation to achieve business impact. 4

5 Insurance executives say that customer satisfaction, growth, and cost are the top challenges facing their companies Customer satisfaction, growth and scalability, and cost are the biggest challenges confronting insurers today Senior insurance operations executives were asked to rate the most important challenges facing their companies. Customer satisfaction stands out as the most frequently cited challenge with about 60% of respondents ranking it in their top three, followed by reducing costs and increasing growth and scalability. Risk management and compliance to regulations immediately follow these (see Figure 2). Importance of the challenge (% of respondents in specific industries stating that the challenge is among the Top 3 for their company) Ensure compliance to regulations Increase customer satisfaction Increase growth and scalability Reduce costs Enable company s innovation Manage risk Enable agility and adaptability Reduce capital and asset intensity n=52 insurance operations executives Figure 2 5

6 Insurance executives are slightly less concerned about compliance than counterparts in other financial industries but more concerned about growth and scalability Capital intensity, innovation, and agility and adaptability are seen as less pressing. While the concerns are broadly based, they are significantly less intense in the insurance sector than in other financial areas. For example, executives in banking and capital markets are currently much more concerned about compliance and risk management (see Figure 3). Importance of the challenge (% of respondents in specific industries stating that the challenge is among the Top 3 for their company) High Tech Capital Markets Healthcare Banking Insurance * Life Sciences CPG Manufacturing Ensure compliance to regulations Increase customer satisfaction Reduce cost Increase growth and scalability Manage risk Enable company s innovation Reduce capital and asset intensity Enable agility and adaptability 1 n=95 (all) insurance executives n=912 Figure 3 6

7 Customer satisfaction, growth and cost reduction are the most important challenges in insurance operations Insurance executives engaged in risk and operations activities have somewhat different perspectives on the most important challenges facing their businesses. Customer satisfaction (60% of respondents) and growth/scalability (54%) top the list for operations executives while risk executives are more concerned about risk management (64%) and compliance (57%). Operations executives are also more concerned about cost reduction (52%) than counterparts in the risk function (39%) % of respondents from various functions stating challenge as among the Top 3 for their company Ensure compliance to regulations Increase customer satisfaction Reduce capital and asset intensity Manage risk Increase growth and scalability Enable company s innovation Enable agility and adaptability Reduce costs Overall Risk Operations n=95 insurance executives Figure 4 7

8 Commercial claims have the biggest impact on customer satisfaction, but P&C agency support can do more to drive growth The personal and commercial claims functions have the highest potential for improving customer satisfaction, while agency support and actuarial/claims analysis materially address growth and risk challenges To identify the best opportunities for process transformation, insurance operations executives were asked to assess the impact that different insurance functions can have on business challenges. In the case of customer satisfaction the top overall challenge the property and casualty (P&C) claims function is seen as having the biggest potential for material impact. About 84% of operations executives say that commercial claims can have material impact on this challenge, and 71% say the same for personal claims. On the other hand, the biggest proportion of operations executives point to P&C agency support (79%) and commercial underwriting (75%) as offering the highest potential for increasing growth and scalability (see Figure 5). % of respondents stating function can have material impact on addressing challenge Magnitude of challenge Increase customer satisfaction Increase growth & scalability Manage risk Ensure compliance to regulations Reduce costs % of respondents stating it is one of the top 3 challenges in their company P&C personal claims P&C commercial claims P&C commercial underwriting P&C agency support Personal policy admin/underwriting Actuarial and claims analysis n=52 insurance operations executives Figure 5 8

9 Actuarial analysis and commercial claims functions are seen as important in solving many of the most pressing challenges To achieve additional insights into the potential impact of each insurance function, impact indexes were calculated that weighed the impact of each function according to the importance of the business challenges they address. This analysis found that actuarial and claims analysis has the deepest overall impact, with an index of 149, compared with 144 for both P&C commercial claims and P&C commercial underwriting (see Figure 6). Actuarial and claims analysis 149 P&C commercial claims 144 P&C commercial underwriting 144 P&C personal claims Personal policy admin/underwriting P&C agency support *Impact of a function on company's challenges is defined as f(x i ) = n j x ij y j, where x ij is the % of respondents who believe that improvement in the function x i will have a material impact on the challenge y j ; y j is the % of respondents citing the challenge as among the Top 3 n=52 insurance operations executives Figure 6 9

10 Most functions considered mature, but agency support and personal policy administration and underwriting are comparatively less mature than others Actuarial and claims analysis, the most impactful function, is considered currently mature, but not prepared to mature further; the comparatively less impactful function, agency support, is considered both the least mature and least prepared to mature further The ability to deliver improvements in every insurance function depends in part on the existing maturity levels of each but also on the preparedness of respondents companies to further mature each function. Insurance operations executives were therefore asked to rate both the maturity and their organization s preparedness to continue maturing each function. The results indicate that most insurance functions are thought to be relatively mature. P&C personal claims and actuarial and claims analysis are seen as the most mature, with 80% and 78% of respondents, respectively, rating them as mature or very mature. At the other end of the scale, only about 70% of operations executives see P&C agency support as mature or very mature (see Figure 7). % of respondents stating the maturity of the functions in their organizations Very Mature Mature Somewhat mature/ Immature P&C personal claims Actuarial and claims analysis P&C commercial underwriting P&C commercial claims Personal policy admin/underwriting P&C agency support n=52 insurance operations executives Figure 7 10

11 Agency support and actuarial/claims analysis least prepared to mature further The P&C commercial underwriting function is seen as best prepared to mature further, with 74% of operational executives saying that it is prepared or fully prepared. On the other end, actuarial and claims analysis, considered by respondents to be the most impactful function with regard to key industry challenges, is reported by 45% of respondents as not being particularly prepared to mature further in the future. In addition, P&C agency support is reported as the least ready to mature further, as well as the least mature (see Figure 8). % of respondents stating the preparedness of the functions in their organizations Fully prepared Prepared Somewhat prepared/not prepared P&C commercial underwriting P&C personal claims P&C commercial claims Personal policy admin/underwriting Actuarial and claims analysis P&C agency support n=52 insurance operations executives Figure 8 11

12 IT, reengineering, and advanced organizational structures (BPO/SSC/ hybrid) are all priorities for insurance operations executives Many insurance operations executives see advanced organizational structures as applicable, but radically improved technology can generate slightly greater dollar impact when appropriate Advanced organizational structures including shared service centers (SSC), business process outsourcing (BPO), or hybrids of these are cited by insurance executives as having greater material impact for some functions such as personal and commercial P&C claims (see Figure 9). % of respondents stating the initiative can have a material impact on the function Radically improved use of technology Business process re-engineering SSC, BPO or Hybrid Impact Index* Actuarial and claims analysis P&C commercial claims P&C commercial underwriting P&C personal claims Personal policy admin/underwriting P&C agency support BPO Business Process Outsourcing, SSC Shared Services Function Impact Index* combining stated importance of challenges and stated ability of a function to address them n=52 insurance operations executives Figure 9 12

13 Insurance operations executives expect higher dollar gains from advanced operating models than do their counterparts in other industries On the other hand, where applicable, technology can deliver higher dollar impact (see Figure 10). AVERAGE $ IMPACT 1 Column width proportional to % of respondents stating that the initiative will have a material impact OPERATIONS ALL INDUSTRIES $242m $186m OPERATIONS INSURANCE $210m 1 Annual $ impact is the impact of operating model initiatives in $ per annum including reduction of cost, capital required, improvement of cash and revenue growth $151m $109m $108m TECH - radically improved use of technology BPR Business Process Reengineering SSC Shared Services BPO Business Process Outsourcing TECH BPR SSC/BPO/Hybrid TECH BPR SSC/BPO/Hybrid n=365 executives responsible for industry specific operations from retail and commercial banking, insurance, healthcare payer and life sciences n= 52 insurance operations executives Figure 10 13

14 In conclusion COOs and other senior insurance executives are once again focused on growth, following a sustained period of financial turmoil and economic uncertainty. But prioritizing growth and scalability brings new challenges, including rising customer expectations, escalating costs, and an increasingly complex risk management environment. This research examined how these challenges can be addressed by three levers of operating model transformation: improved use of technology, process reengineering, and advanced organizational structures. The related transformation of operations is an untapped strategic lever for the COO as well as the CEO. However, it is sometimes seen as a formidable undertaking. Few understand the IT + analytics + process operations nexus sufficiently. Technological excesses of the past (such as ERP or data warehouses) are well-documented. Some technologies are unproven, some uses of analytics are unclear, and older technologies are rigid and expensive to evolve. Finally, deep analytics still frequently struggles to scale throughout the enterprise. Our experience of advanced operating models, accumulated over 15 years, clearly indicates that there are agile and practical ways to transform. The key is to design, transform, and run the processes that power advanced operating models so that they closely align with measurable business goals, thereby avoiding saddling the company with unnecessary and often unmanageable complexity. This approach focuses more rigorously on the sources of impact and deliberately disregards any practice that does not yield material outcomes. It also takes a more objective and holistic look at technology, analytics, and organizational practices. It leverages now-mature system of engagement technologies that complement system of record technologies. It treats analytics (the arc of data-to-insight-to-action) as a process and determines how to embed insight at scale into the fabric of other enterprise processes; it does not take the typical approach of viewing analytics as a task and a set of technologies. Finally, it harnesses the process and organizational levers available from established disciplines, such as reengineering, shared services, outsourcing, and global delivery. We think that there is a smarter way to transform operating models and address the most complex strategic challenges. This is a way for COOs to make their enterprises more intelligent and generate material impact. 14

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16 Genpact Research Institute The Genpact Research Institute is a specialized think tank harnessing the collective intelligence of Genpact as the leading business process service provider worldwide - its ecosystem of clients and partners, and thousands of process operations experts. Its mission is to advance the art of the possible in our clients journey of business transformation and adoption of advanced operating models. About Genpact Genpact (NYSE: G) stands for generating business impact. We design, transform, and run intelligent business operations including those that are complex and specific to a set of chosen industries. The result is advanced operating models that foster growth and manage cost, risk, and compliance across a range of functions. We have hundreds of long-term clients including more than one-fourth of the Fortune Global 500 and currently employ over 66,000 employees in 25 countries, with key management and corporate offices in New York City. Behind our passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 16 years. For more information, contact, insurance.solutions@genpact.com and visit, Follow us on Twitter, Facebook, LinkedIn, and YouTube Copyright Genpact. All Rights Reserved. 16