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"Simplicity" is not as simple as it looks

23 July 2013

'Simplicity is the ultimate sophistication'. Leonardo da Vinci beautifully summed up an ideal, but in too many cases Insurers are afraid to clear away the complexities in their business.

From personal observation, the internal complexities within the Insurance world have three main causes:

  1. Overly complicated technology solutions
  2. Strategic complexity
  3. Complex lines of responsibility

Delivering innovation and sustainable growth with these restrictions is nigh on impossible.

1) Technology

Mobile technologies herald a new era, with the ability to deliver mass individualisation. Customers expect the online and offline retail experience to be seamless and personalised to meet their individual needs - but Insurers are not delivering. Worryingly only 20% of Insurers have a mobile strategy and, although two-thirds of people would pay for better customer service, very few Insurers are truly responding to this need. They are constrained by legacy systems, complex product and process design and in many cases, a 'we have always done it this way' attitude. There is no excuse, simplicity can be delivered, there just needs to be the leadership, the will and the right technologies in place.

2) Strategy

There are probably too many tired phrases to sum up the need for a defined, consistent and well communicated strategy, my personal favourite is 'If you don't know where you are going, how are you going to get there?'

Insurers talk about simplifying products - and then add more and more complexities to their existing portfolio. They talk about creating loyalty, but then reward volume rather than persistency. They talk about 'customer centricity' but don't't understand their customers. Worst of all they have spent decades pointing to the 'insurance gap' but then continued to use the same tired approach and do not embrace new ideas. There is no chance of engaging a new audience by doing things the same way.

Consistency is possibly a 'big ask' given the constantly shifting personnel at board level, but without it a company will really lack direction and focus. Strategy is simply about guiding large numbers of people to do the things they need to do. Unfortunately, the simple concept of strategy has become a complex process, the output of which is often not communicated effectively. Basically, many are falling into one or more of the following traps

Once a strategy has been defined, all activity has to create value and work towards the goal. Anything that doesn't create value, or creates it in a convoluted, costly or inefficient way, needs to be stopped.

3) Reporting lines

Put simply, the needs of the customer should dictate the hierarchy of an Organisation, not the product line or the distribution channel. If we are to see Insurers meeting the holistic product and purchase convenience requirements of their customers, there has to be more 'joined up' thinking. Currently there is little overlap between general insurance and 'protection' product responsibilities - but customers need both. Likewise responsibilities are often allocated by distribution channel, but customers will span many - sometimes buying on line, sometimes via the 'phone and often using an Intermediary. As choice of product and methods of purchase have increased, so have the complexity within Organisational design and it does not seem to be benefitting either the customer or the company. A horizontal rather than vertical organisational design would ensuring the sharing of 'best practice'; deliver benefits of economies of scale with technology and deliver more product sales per customer.

To conclude where I started, 'simple' is not easy - but nothing worthwhile ever is!!

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