Why We Need New Operating Models – for Insurance and Financial Services

The time has come (some would say it is long overdue) to seriously consider new operating models for Insurance and Financial Services. I may be committing some type of heresy or creating confusion by mentioning both industries in the same sentence, but as an implementation and strategic advisor/partner for both industries, the truth is not pretty. The competitive and survival threats to both industries are real and becoming more evident in our evolving culture of expanded consumer awareness and increasing demands for customer transparency into the operating models of both Insurance and Financial Services companies. Although the 2008 recession opened the window into some of the business practices of both groups, there is a clear need to do much more than meet current legal and regulatory requirements of Basel III and Dodd-Frank.

 

Examples of threats that are going to drive new operating models in both the Financial Services and Insurance industries include:

 

Consumerization: The mobility and iPad revolution has arrived and has already moved beyond the current capability of most firms. Firms must “get in the game” and offer content and services that are valuable to the consumer. This is the real ‘game’ and the real threat. The ability to successfully initiate and complete transactions in limited time and with a high level of accuracy is troubling. When the capability does not exist, the consumer will move on to the next best provider. The lack of ‘best in class' capability for today’s consumers of banking and insurance products has become a reflection of the lack of current capabilities of senior leadership in operational delivery. Rather than radically change the operating model in response to demand (remember the use of the assembly line for automotive industry?) the operating models continue to represent an inability to quickly grasp customer demands and turn them into consumable products and services.

 

Data Management: Yes, ‘Big Data” is real and there is a lot of talk about its capabilities and how the world of data management and “Big Data” will change the world. Even so, there is little discussion about the use of data management and the impact is has on the operating models in Insurance and Financial Services. In a few cases, new approaches for data are layered on top of existing practices and operating models, causing the models to expand and create new operating processes, new operating controls and positively impact the overall risk framework. What is not happening is the rationalization and shut down of in-effective data processes and practices and the requisite changes to the operating model in both industries. A great example from my life is the interaction between looking at your online bank statement and calling the help line. What may happen is that data management will not be adequately addressed by either Insurance or Financial Services and the result will be complexity and consumer angst.

 

Transparency: As a consumer and a taxpayer who has funded several of the firms bailed out in 2008 with little or no insight into how the bailout money was spent and how the firms are actually operating today, the threat/value of transparency is very real. Consumers will continue to want transparency into billings and fees and the key items of service. But in addition, consumers, partners and providers of services to the Insurance and Financial Services industries will be clamoring for transparency into the use of capital, the realization of strategic goals for decreasing internal expense and holding management accountable for the same. How in this age of transparency can Insurance and Financial Service firms hold negotiations or reward participants in a financial transaction with limited transparency to their stockholders and the taxpayers who fund them? Transparency of data, transactions, leadership, decisions key funded ventures, and strategic partnerships are not threats to competition or confidentiality….they are threats to the survival of the Insurance and Financial Service firms, if not managed effectively with the stockholders and taxpayers who offer support.

 

These are just three examples of why new operating models are needed for both industries. Our experience and insight into both Insurance and Financial Services has proven that over the years, the operating models have evolved to in-effective monoliths that reflect corporate structures and not the consumer. Just as rapid as the “Occupy Wall Street” movement in 2011 and the KONY 12 video spread in 2012, the threats identified above will spread and will drive change to the operating models that exist today.