New promise for insurance transformation

By Jamie Rogers, Associate Partner, IBM Business Consulting Services

Sept., 2004 – Jamie explores the need for change in an insurance market place that is often unable to keep pace with the demands of its customers …


“Many financial institutions are focused on providing product to their customers without an understanding of their relationship with the company, particularly across product lines. IBM in a recent research project determined that customers of financial institutions are increasingly interested in “one stop shopping”. Perhaps they want to purchase their insurance, arrange mutual funds and do their banking all with the same company. Some financial institutions responded through acquisitions or convergence of complementary services, but were still unable to meet the customer’s expectations. They were not effective at integrating the products or services at a customer level, in many instances an attempt was made resulting in disjointed operations, complex processes and increased costs.

We are seeing significant changes in the insurance market place, an increase in distribution channels, acceptance of the web, the need to be accessible outside traditional hours of doing business and customization of product. In other words, give the customer what he wants when he wants it and be profitable at the same time. Companies will need to significantly change their business model to meet these growing customer demands. Some insurers have recognized this need for change and are developing a comprehensive customer relationship strategy to drive their integrated philosophy. They are organizing their business models around core components to realize the strategic transformation to an integrated business. This is being achieved by dividing the insurance value chain into interconnected business areas covering distribution, manufacturing and operations. Each is further divided into building blocks or components that are assigned authority to deliver services at agreed cost levels.

A component based business model (CBB) organized around the customer will deliver results. It is will not be easy; it means changes in organization structure, processes, systems, culture and performance measures. Adopting a CBB framework is challenging but will be rewarding to the insurance company that is truly able to meet the needs of their customers…… “

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