Our Takeaways from Insurance AI and Innovative Tech 2022

The 2nd Watch team attended the Reuters Insurance AI and Innovative Tech conference this past month, and we took away a lot of insightful perspectives from the speakers and leaders at the event. The insurance industry has a noble purpose in the world: insurance organizations strive to provide fast service to customers suffering from injury and loss, all while allowing their agents to be efficient and profitable. For this reason, insurance companies need to constantly innovate to satisfy all parties involved in the value chain.

AI and Innovation in the Insurance Industry

But this is no easy business model. Ensuring the satisfaction and success of all parties is becoming increasingly more difficult for the following reasons: 

  • The expectations and standards for a good customer experience are very high.
  • Insurers have a monumental amount of data to ingest and process.
  • The skills required to build useful analyses are at a premium.
  • It is easy to fail or get poor ROI on a technical initiative.

To keep up with the revolution, traditional insurance companies must undergo a massive digital transformation that supports a data-driven decision-making model. However, this sort of shift is daunting and riddled with challenges throughout the process. In presenting you with our takeaways from this eye-opening conference, we hope to address the challenges associated with redefining your insurance company and highlight new solutions that can help you tackle these issues head-on.

What are the pitfalls of an insurer trying to innovate?

The paradigm in the insurance industry has changed. As a result, your insurance business must adapt and improve digital capabilities to keep up with the market standards. While transformation is vital, it isn’t easy. Below are some pitfalls we’ve seen in our experience and that were also common themes at the Reuters event.

Your Corporate Culture Is Afraid of Failure

If your corporate culture avoids failure at all costs, then the business will be paralyzed in making necessary changes and decisions toward digital innovation. A lack of delivery can be just as damaging as bad delivery.

Your organization should prioritize incentivizing innovation and celebrating calculated risks. A culture that embraces quick failures will lead to more innovation because teams have the psychological safety net of trying out new things. Innovation cannot happen without disruption and pushing boundaries. 

You Ignore the Details and Only Focus on the Aggregate

Insurtech 1.0 of the 2000s failed (Metromile, Lemonade, etc.), but from failure, we gained valuable lessons. Ultimately, they taught us that anyone can grow while unintentionally losing money, but we can avoid this pitfall if we understand the detailed events that can have the greatest effect on our key performance indicators. 

Insurtech 1.0 leaders wanted to grow fast at all costs, but when these companies IPO’d, they flopped. Why? The short answer is that they focused only on growth and ignored the criticalness of high-quality underwriting. The growth-focused mindset led these Insurtech companies to write bad business to very risky customers (without realizing it!) because they were ignoring the “black swan” events that can have a major effect on your loss ratio.

Your insurance company should take note of the painful lessons Insurtech 1.0 had to go through. Be mindful of how you are growing by using technology to understand the primary drivers of cost. 

You Don’t Pursue an Initiative Because It Doesn’t Have a Quick ROI

Innovation initiatives don’t always have an instant ROI, but that shouldn’t scare you off of them. The results of new technologies often aren’t immediately clearly defined and can take some time to come to fruition. Auto insurers using telematics is an example of a trend that is worth pursuing, even though the ROI initially feels ambiguous.  

To increase your confidence in documenting ROI, utilize historical data sources to establish your baseline. You can’t measure the impact of a new solution without comparing the before and after! From there, you can select which metrics to track to determine ROI. By leveraging your historical data, you can gather new data, leverage all data sets, and create new value.

How can you avoid these pitfalls?

The conference showed us that there are plenty of promising new technologies, solutions, and frameworks to help insurers resolve these commonly seen pain points. Below are key ways that developed new products can contribute to a successful digital transformation of your insurance offerings:

Create a Collaborative and Cross-Functional Corporate Culture

In order to drive an innovation-centric strategy, your insurance company must promote the right culture to support it. Innovation shouldn’t be centralized, and you should take a strong interest in deploying new technologies and ideas by individuals. Additionally, you should develop a technical plan that ties back to the business strategy. A common goal and alignment toward the goal will foster teamwork and shared responsibility around innovation initiatives.

Ultimately, you want to land in a place where you have created a culture of innovation. This should be a grassroots approach where every member of the organization feels capable and empowered to develop the ideas of today into the innovations and insurance products of tomorrow. Prioritize diversity of perspectives, access to leadership, employee empowerment, and alignment on results.  

Become More Customer-Centric and Less Operations-Focused

Your insurance company should make a genuine effort to understand your customers fully. This allows you to create tailored customer experiences for greater customer satisfaction. Empower your agents to use data to personalize and customize their touchpoints to the customer, and they can provide memorable customer experiences for your policyholders. 

Fraud indicators, quote modifiers, and transaction-centric features are operations-focused ways to use your data warehouse. These tools are helpful, but they can distract you from building a customer-oriented data warehouse. Your insurance business should make customers the central pillar of your technologies and frameworks.

Pilot Technologies Based on Your Company’s Strategic Business Goals

Every insurance business has a different starting point, and you have to deal with the cards that you are dealt. Start by understanding what your technology gap is and where you can reduce the pain points. From there, you can build a strong case for change and begin to implement the tools, frameworks, and processes needed to do so. 

Once you have established your business initiatives, there are powerful technologies for insurance companies that can help you transform and achieve your goals. For example, using data integration and data warehousing on cloud platforms, such as Snowflake, can enable KPI discovery and self-service. Another example is artificial intelligence and machine learning, which can help your business with underwriting transformation and provide you with “Next Best Action” by combining customer interests with the objectives of your business. 

Conclusion

Any tool or model you have in production today is already “legacy.” Digital insurance innovation doesn’t just mean upgrading your technologies and tools. It means creating an entire ecosystem and culture to form hypotheses, take measured risks, and implement the results! A corporate shift to embrace change in the insurance industry can seem overwhelming, but partnering with 2nd Watch, which has experts in both the technology and the insurance industry, will set your innovation projects up for success. Contact us today to learn how we can help you revolutionize your business!

rss
Facebooktwitterlinkedinmail

The Importance of Leadership in Moving to a DevOps Culture

Why DevOps?

DevOps is a set of practices that improve the efficiency and effectiveness of IT operations. Utilizing many aspects of agile methodology, DevOps aims to shorten the systems development life cycle and provide continuous improvement. As you consider incorporating DevOps into your operations, understand the effect DevOps has on processes and culture. Successful implementation is about finding the right balance of attention on people, processes, and technology to achieve improvement.

devops culture

The ultimate goal is continuous improvement through processes and tools. No amount of tooling, automation, or fancy buzz words can cause any greater effect on an organization than transforming their culture, and there’s no other way to do that than to focus on the change.

Understanding What You Are Trying to Accomplish with DevOps

Ask yourself what you are trying to achieve. It may seem obvious, but you may get on the wrong track without thinking about what you want your development and operations teams to achieve.

Often, when clients approach 2nd Watch wanting to incorporate DevOps, they are really asking for automation tools and nothing else. While automation has certain benefits, DevOps goes beyond the benefits of technology to improve processes, help manage change more effectively, and improve organizational culture. Change is difficult. However, implementing a cultural shift is particularly challenging. Often overlooked, cultural change is the greatest pain 2nd Watch consultants encounter when working with companies trying to make substantial organizational changes. Even implementing things as simple as sharing responsibility, configuration management, or version control can cause turmoil!

From IT Management to Leadership

There is a distinction between what it means to be a manager versus being a leader. And, in all industries, being a manager does not necessitate being a good leader.

It’s helpful to consider the progression of those in technical roles to management. Developers and operations personnel are typically promoted to managers because they are competent in their technical position—they excel at their current software development process, configuring a host or operating a Kubernetes cluster. However, as a manager, they’re also tasked with directing staff, which may put them outside of their comfort zone. They are also responsible for pay, time and attendance, morale, and hiring and firing. They likely were not promoted for their people skills but their technical competencies.

Many enterprise organizations make the mistake of believing employees who have outstanding technical skills will naturally excel at people management once they get that promotion. Unfortunately, this mistake breeds many managers who fall short of potential, often negatively affecting corporate culture.

Leading the Change

It’s imperative to understand the critical role leadership plays in navigating the amount of change that will likely occur and in changing the organization’s culture.

Whether you’re a manager or leader matters a lot when you answer the question, “What do I really want out of DevOps?” with, “I want to be able to handle change. Lots and lots of change.”

Better responses would include:

  • “I want our organization to be more agile.”
  • “I want to be able to react faster to the changing market.”
  • “I want to become a learning organization.”
  • “I want to embrace a DevOps culture for continuous improvement.”

The underlying current of these answers is change.

Unfortunately, when bungled management occurs, it’s the people below that pay the price. Those implementing the changes tend to take the brunt of the worst of the change pain. Not only does this cause lower morale, but it can cause a mutiny of sorts. Apathy can affect quality, causing outages. The best employees may jump ship for greener pastures. Managers may give up on culture change entirely and go back to the old ways.

However, there is light at the end of the tunnel. With a bit of effort and determination, you can learn to lead change just as you learned technical skills.

Go to well-known sources on management improvement and change management. Leading Change by John P. Kotter[1]  details the successful implementation of change into an organization. Kotter discusses eight steps necessary to help improve your chances of being successful in changing an organization’s culture:

  1. Establishing a sense of urgency
  2. Creating the guiding coalition
  3. Developing a vision and strategy
  4. Communicating the change vision
  5. Empowering broad-based action
  6. Generating short term wins
  7. Consolidating gains and producing more change
  8. Anchoring new approaches in the culture

It’s all about people. Leaders want to empower their teams to make intelligent, well-informed decisions that align with their organization’s goals. Fear of making mistakes should not impede change.

Mistakes happen. Instead of managers locking their teams down and passing workflows through change boards, leaders can embrace the DevOps movement and foster a culture where their high-performing DevOps team can make mistakes and quickly remedy and learn from them.

Each step codifies what most organizations are missing when they start a transformation: focusing on the change and moving from a manager to a leader.

The 5 Levels of Leadership

Learning the skills necessary to become a great leader is not often discussed when talking about leadership or management positions. We are accustomed to many layers of management and managers sticking to the status quo in the IT industry. But change is necessary, and the best place to start is with ourselves.

The 5 Levels of Leadership by John C. Maxwell[1] is another excellent source of information for self-improvement on your leadership journey:

  • Level 1 – Position: People follow you only because they believe they have to.
  • Level 2 – Permission: People follow you because they want to.
  • Level 3 – Production: People follow you because of what you have done for the organization.
  • Level 4 – People Development: People follow you because of what you have done for them.
  • Level 5 – Pinnacle: People follow because of who you are and what you represent.

Leadership easily fits into these levels, and determining your position on the ladder can help. Not only are these levels applicable to individuals but, since an organization’s culture can revolve around how good or bad their leadership is, this ends up being a mirror into the problems the organization faces altogether.

Conclusion

When transforming to a DevOps culture, it’s essential to understand ways to become a better leader. In turn, making improvements as a leader will help foster a healthy environment in which change can occur. And there’s no better catalyst to becoming a great leader than being able to focus on the change.

2nd Watch collaborates with many different companies just beginning their workflow modernization journey. Contact us to discuss how we can help your organization further adopt a DevOps culture.

-Craig Monson

rss
Facebooktwitterlinkedinmail