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DEFINITION OF A WORLD CLASS OPERATING MODEL FOR INSURANCE

There is no common certified definition of

an operating model for Insurance. An

operating model is a representation of the

reality of the implementation of the

company’s business and IT processes

supporting the business model. A

business model defines how a company

makes money; an operating model

defines how the company is organized to

ensure it actually makes money.

A World Class Operating Model is the best possible Target Operating Model for an organization,

defined based on the external market and internal governance and culture. World Class defines

an excellent organization able to deliver shareholder value, stable high profits and growth with

an agile organization able to adapt quickly to market changes.

A World Class Operating Model supports a company to streamline all improvement efforts to

ensure the promised return on investment and prevent the introduction of new problems due to

incomplete or wrong changes caused by a lack of overview or ability to deliver complex

solutions.

There are many examples of World Class organizations globally with an excellent service and

optimized internal processes and IT; however, in the Insurance industry it is hard to find a World

Class organization. Ask customers, distributors and even internal management and staff of

Insurance companies and the overall perception is quite bad. There are of course examples of

substantial improvements, most of the time covering only parts of the organization.

The objective of a World Class Operating Model is to define an organization able to deliver

excellent service and products with a low cost, reliable, scalable and sustainable Operations

and IT organization, which is fast and flexible in adapting market changes.

Where in most cases the operating model of an Insurance organization is a complex maze of

processes, IT and governance implemented in a dominantly manual organization, a state of the

art World Class Operating Model is based on a full digital service organization with high skilled

experts for product development, marketing, product advice, claims management and customer

service.

A World Class Operating Model for Insurance is based on the following principles:

Availability of real time information

One often heard complaint of customers and distributors is the lack of up-to-date information in

the service processes, especially in case of a claim. Call centers and internal staff simply have

no access to the latest data and have to wait until paper files become available. An important

principle of a World Class Operating Model is that all information is digitized, up-to-date and real

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DEFINITION OF A WORLD CLASS OPERATING MODEL FOR INSURANCE

time available creating excellent service, fast underwriting & claim processes, and a real time

view on company’s production and productivity.

Fully digitized self-service capabilities

Today, all information should be available real time, anywhere, anytime, on every computer and

mobile device used by customers, distributors, internal management and staff and third party

service providers. It will save tremendous time and money when customers and business

partners have access to all information via internet, on tablets, phones, etc. and are able to get

quotations for new products and renewals, submit customer and products details, policy

endorsements and changes and upload claims information. In the World Class Operating

Model, the digitized self-service capabilities are fully integrated with comprehensive sales

support and customer relationship management systems.

Straight Through Processing

The complex manual processes in Insurance organizations are causing most of the service

problems. Backlogs, lack of overview, re-entering of data, manual mistakes are the cause of

service deterioration and high expense ratios. A World Class Operating Model organizes all

processes in a standard, simple model. This model is fully automated without any manual

interference except for decision making like underwriting and claims assessment. All data will be

entered in one of the systems and will be transferred straight through to other systems where no

re-entering of data is necessary.

Fast time to market

The time to market of Insurance products is long, even small pricing changes will take months to

deploy in most Insurance companies. This is in most cases a result of the complexity of the IT

environment. Even when companies use advanced product development tools, the problem of

changing the policy administration system remains. The World Class Operating Model aims for

a time to market of 1 day to 1 week, depending on the change and including the product

approval governance and IT changes.

State of the art IT architecture and solutions

Starting point of the World Class Operating Model is to automate all sales, customer service,

new business, renewal, expiry, claims, endorsement and policy change processes based on a

robust loosely coupled, flexible IT architecture with best of breed system components integrated

using an Enterprise Service Bus and one central database. The state of the art IT architecture is

scalable to cope with company’s (fast) growth, is flexible, sustainable and prepared for all

market developments in the coming years.

Culture of engagement and continuous improvement

All today’s processes and IT are defined by people and “we won‘t solve today problems with the

same thinking that created them” (Albert Einstein). This means an implementation of a World

Class Operating Model is more than only an IT transformation. As Insurance is a very traditional

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DEFINITION OF A WORLD CLASS OPERATING MODEL FOR INSURANCE

industry where risk avoidance is the main objective, every transformation change will create

resistance and when not managed well, will destroy the outcome of transformation projects. A

World Class Operating Model implementation includes a culture change towards continuous

improvement, stakeholder and employee engagement and is in most organizations the hardest

nut to crack.

Simple and lean organization and governance

Apart from the technology and culture challenges, organization and governance design are as

important to ensure a successful outcome of a World Class Operating Model transformation.

Insurance organizations have many different representations caused by past and present

management preferences, which are not necessarily the most efficient and effective structures.

Usually these organization structures are causing more complexity, inefficiency and a slow time

to market. The World Class Operating Model includes a straightforward, simple and lean

organization structure and governance delivering optimal customer, partner and employee

satisfaction.

Definition of a World Class Operating Model for Insurance

Singapore, July 19, 2013

Second edition V5

© Paul de Bruijn

www.pauldebruijn.com