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Implications of Digital to the organizational structure of P&C insurers


At the 2016 IASA conference, held in San Antonio, Texas - Novarica, Erie Insurance and ValueMomentum collaborated to present a session titled Digital Journey: From Strategy to Implementation where Ruben Fechner, Senior Vice President, Erie Insurance Group, shared his insights on the implications of Digital to the organizational structure of property & casualty insurers from his experience at Erie going through their digital journey.

What are the implications of Digital to the organizational structure of P&C insurers-958468-edited.jpegShift in organizational mindset

Ruben stated that as a prerequisite for digital transformation, Erie needed to undergo a shift in organizational thinking. They conducted organization-wide conversations including their entire IT department, sales and marketing business partners, and technology partners about how they would need to make a shift in their mindset in order to achieve their digital goals. Ruben added that this shift had implications in many areas of how their organization functions, for example the structure of the organization, structure of work, scope of work, technological architecture, and reuse of the existing systems.

Ruben stated that they made organizational changes in a way that the presentation layer in the organization separated the experience layer from the core systems. This is Erie’s interpretation of a bimodal strategy where they could introduce changes to their core systems, e.g. adding coverages, adding states, changing product quickly, etc. without interfering how the presentation team works creating the experiences at the front-end.

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As a result of this organizational shift, the creation of presentation or implementation of the experiences at the front-end became a centralized process at Erie. This made it easier for multiple teams to contribute toward creating consistent and empathetic experiences. Erie conducted end-to-end orientation of their business teams to ensure that working in the presentation layer does not require one to have expertise in policy, billing, or claims systems. In fact, expertise in these areas could be an inhibitor potentially diverting the team’s focus from creating consistent experiences.

However, from management’s perspective, it was not easy to manage such cross functional teams working and collaborating toward achieving a single objective, Ruben added. One presentation team was solely responsible for creating the end-to-end presentation of everything created for the business at Erie. The team needed to work in close collaboration with other business teams, which created leadership and management challenges.

No customer buys excellence in policy administration system!

Ruben stated that alternative to the above is the traditional siloed approach for systems management, which lacks integration and alignment. Experiences created in silo-based approach results in delivering inconsistent experiences. Siloed implementation encourages excellence in individual business areas and attracts high unit costs. However, customer is least bothered about insurers’ excellence in the policy, billing, or claim systems.

Flatten the organization!

Ruben went on to add that the conventional organizational structure of insurance industry is such that different teams within the organization work in silos where responsibilities for a certain solution flow from one team to the other. This structure makes it difficult for the leadership to keep track of status and accountability of tasks. To evolve as a digital organization, insurers need to move to an accountability model where they flatten the organizational structure. Cross-functional teams including IT, business, agents, customers and technology partners can be engaged and involved from the beginning to make digital transformation an organization-wide initiative.

 

WATCH THE COMPLETE VIDEO


If you are inspired by the takeaways of the post and want to learn more, click below to watch the complete recording of the session.

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