Who is leading digital transformation within insurance companies?
We reviewed the roles of 240 senior insurance industry executives to find out who is taking charge
The leader of every insurance company knows their organization needs to re-invent itself in order to thrive — or even just survive — in a new era of digital innovation, but it’s not immediately obvious who should drive the necessary transformation.
Given that the need to address the impact of technology on traditional insurance business models is mission-critical, the obvious candidate is the CEO himself or herself. For some organizations this is indeed the case. However, in most companies, transformation is usually led by another senior executive, normally someone with a CXO title or a role as head of a division.
Having reviewed and interacted with literally thousands of financial institutions, our observations at FinTech Global are that insurance companies have embraced the need for change more emphatically and probably more honestly than most banks.
By this I mean that we’ve seen so many banks take a superficial approach to FinTech, almost as if the whole exercise is part of a PR initiative or an expense line to come out of the marketing budget, whilst the rest of the bank carries on as normal.
In contrast, a greater number of insurance companies are actively engaging with technology innovators. They are already convinced of the impact of InsurTech. It appears the ‘penny has dropped’ with a greater proportion of insurance executives (compared to their banking peers). They know they have to play an essential leadership role in redefining or transforming the business activities under their control.
Digital innovation is being led by senior executives from across the insurance value chain
It’s not surprising to discover that the leaders of digital transformation in insurance companies come from all areas of the organization. The innovation challenge is most often taken on by senior executives who lead key departments or manage activities along the value chain, or have had meaningful experience of doing so. These change agents appear to be much better internally integrated within insurance companies, compared to the more detached innovation noise-makers in many banks. No surprise then, that 11FS, a challenger consultancy, claims “digital banking is only 1% done”.
There are, of course, plenty of banks making real progress in digital transformation, as well as plenty of insurance companies lagging behind (and soon to disappear from view), but in general we’ve observed a significant difference in conviction between the banking and insurance industries.
Back to the question about who is taking charge of insurance innovation; we reviewed the roles of 240 senior executives who have digital leadership responsibilities, and who attended the Global InsurTech Summit in March 2019. A quick analysis of their titles is revealing, as illustrated in Figure 1.
It can be seen clearly that innovation is a priority for all senior managers. Over 10% of this sample are CEOs for whom the innovation imperative is high enough on their agendas for them to get fully involved in the transformation process.
Overall, nearly a third of the group are C-suite executives; over half are heads of departments or functions, many with managing director or equivalent status; and around one-sixth are Directors or VPs.
More than two-thirds of digital insurance leaders come from outside of innovation and technology areas
Another look based on categorization by function, rather than job title, produces a fragmented chart when illustrated, as show in the second figure. Thus simply underlines the fact that technology innovation is impacting every area of insurance business activity. Whilst technology and innovation are the first and second largest areas respectively, in aggregate they only account for 30.2% of digital leaders.
That means more than two-thirds of the senior executives taking charge of digital transformation come from other areas of the company. Unsurprisingly, areas focused on data and analytics are being heavily disrupted by technology, which is why the Actuarial function accounts for 12.9%, Risk & Compliance for 6.9%, and Analytics & Strategy for 6.9%.
It can also be seen that new solutions are having a huge impact on other functions such as Sales and Marketing (from where 9.7% of executives originate), Operations (9.7%), Claims (5.2%) and Distribution (4.4%).
Discussions we’ve had with CEOs reveal that some have made sure the urgency and importance of the digital insurance agenda has been communicated to all senior managers within their organizations, whilst other CEOs have told us that InsurTech is already on the radar screens of their managers and in many cases the call for action is coming from department leaders.
Insurance companies still have many hurdles to overcome, as they to look to remodel their businesses and win or retain future market leadership status, but the ones that have their senior managers already on-board clearly have a head start in the race.
For the providers of InsurTech solutions, the time is now and the potential upside is enormous. A key message to be heard is that sellers need to engage with senior influencers within the departments and activities most affected by their offering, rather than just attempt to target the innovation and technology leaders.
