A template for change: Why insurers should act more like retailers

Britain’s insurance industry is a major success story, employing over 300,000 people across the country, helping millions of British people and businesses every day and exporting across the globe. UK insurers have always been at the forefront of innovation and early adopters of the latest technology – whether pioneering new ways to reach consumers or developing creative new product lines. Direct Line, founded in the mid-1980s, transformed the distribution of motor insurance via telephone, and more recently the rise of a certain meerkat led ‘aggregator’ price comparison website has had a significant impact on consumer choice and competitive pricing.

The challenge ahead

The insurance industry today faces challenges on several fronts, not least of which is a fundamental shift in consumer expectations. The customer experience approach set up by retail giants, such as Amazon and eBay, has led to a huge dynamic change in the way consumers want to be able to access their information and interact with companies.

The consumers who now expect transparency when buying products from retailers see no difference in the way they buy insurance products. It is, therefore, imperative that the insurance industry follows the core principals which apply to omni-channel retail. Those that grasp this concept with both hands will likely emerge as a customer favourite.

Learning from the high street

Savvy retailers were quick to realise that there was a clear shift in how customers wanted to interact with them, in part due to the digitisation of their everyday lives. They set about to ensure there were sufficient systems and processes in place to be able to facilitate their customer’s changing needs in how they wanted to interact with them. By engaging with an integrated customer experience, retailers are giving customers a convenient, customised - and hassle free - experience.

John Lewis has been one such high street stalwart to embrace the change in customer behaviour and recently announced that a surge in the popularity of ‘click and collect’ shopping has seen the service overtake home delivery for the first time. In the five weeks leading up to Christmas last year, some 56 per cent of the company’s online customers opted to collect their goods from a shop rather than to have them delivered to their home. The news was hailed as the latest evidence of how the online shopping revolution is changing the way Britons go about their daily lives.

Digitisation in retail encompasses three broad areas: customers, the value chain and the real-world. In the case of customers, information can be captured on the likes of buying habits, preferences, body size or dietary requirements. This information can then be used to enhance and customise the overall customer experience.

The retail industry provides a perfect template for change for the insurance industry. The desire to digitise the retail industry puts pressure on IT departments, driving them to review the capability of their legacy systems and integrate new technology that facilitates the omni-channel experience. To help with the complexities associated with such technological change and the potentially damaging effects of a software ‘glitch’, quality assurance (QA) must be a priority and it is the same for the insurance industry today.

How insurers can pass the test

The complexity of change is often amplified in heavily regulated industries such as insurance. Insufficient quality assurance (QA) throughout the software development lifecycle could cause failures and consequently lead to potential fines, market share loss and irrevocable impact to reputation. Insurers need to take this opportunity to reduce their own risk.

Evaluation of the true business requirements is the first stage in any digital transformation project. There is a tendency to rush into the functional specifications prior to a detailed business requirements analysis. This results in a large number of gaps being discovered during the implementation and testing stage. Ensuring the involvement of the quality assurance team at the early definition stage of a project is preferable for a number of reasons. Not only does it result in a more realistic timeline, but it identifies whether current systems can support the new demands placed on it without the need to invest in additional infrastructure.

Selection of the technology and appropriate implementation methodology marks the second step for insurers entering the new dawn. As the third step, extensive analysis of integration requirements of the required solution need to be carried out.

Based on the technology and methodology adopted, a detailed quality management plan and test master plan then needs to be devised to ensure that all quality objectives are met. Any such plans must be closely allied with the development and implementation methodology.

Conclusion

The retail industry has been an exemplar in adopting digitisation to transform its business model – with the success evidenced by the increased share of sales coming from online. The insurance industry in the UK has been a trail blazer in its own right and has the capabilities to undertake the digital transformation with the same gusto as the retail industry. However, as a highly regulated industry, its transformation will be relatively more complex and costs of failure potentially much higher.

The first step for managing risks in complex projects is to recognise that quality assurance is critical to the success of any transformation project and that the earlier it is started the quicker the results. As technology increasingly disintermediates financial markets, digitisation is inevitable for insurance firms and must be embraced. Not sure where to start? We suggest that you start with quality.

Anand Vyas, Head of Banking, Financial Services and Insurance at SQS