Digital disruption affects nearly every aspect of the insurance business. In response, many insurers are looking for ways to move toward a digital-first strategy.

To transform into a digital-first P&C insurer, support from leadership is necessary but not sufficient, say Philipp Gerbert, Jan-Hinnerk Mohr and Michael Spira at Boston Consulting Group.

“Digital transformations are too long and arduous to succeed without full CEO support. But they also require support from the executives who control budgets, personnel decisions, and day-to-day priorities,” they write. In turn, these executives find that their own teams must embrace the digital transformation process, or the company will continue to rely on slow, outdated methods of meeting day to day goals.

Comprehensive cultural change drives digital transformation. To become a digital-first P&C insurer, both leaders and the teams they oversee must change their approach to the digital world.

The Link Between Technology and Culture

Technology plays a key role in the transformation to a digital-first P&C company. But technology alone can’t sustain a long-term positive change, according to Carey Oven, a partner with Deloitte Risk and Financial Advisory. “Technology is definitely a part of digital transformation, but unless leaders can ‘win hearts and minds’ throughout the process, efforts can staff or be less successful than they could be.”

To drive digital transformation, focus on culture.

In a study of approximately 40 corporate digital transformations, Jim Hemerling and fellow researchers at BCG “found that the proportion of companies reporting breakthrough or strong financial performance was five times greater (90%) among those that focused on culture than it was among those that neglected culture (17%).”

The study also found that 79 percent of the companies that focused on culture change experienced “sustained strong or breakthrough performance,” or performance boosts that lasted at least three years. Among companies that neglected culture, not even one saw strong or breakthrough performance that lasted at least three years.

Throwing new tools at your team isn’t enough. A focus on culture change is important to digital-first success and essential to long-term digital-first success.

Which Cultural Attributes Drive a Digital-First P&C Insurer?

Digital-first insurers who focus on culture see long-term positive results from their new technologies in a way that non-culture-focused companies do not. What do the culture-focused companies do differently?

Embracing Means, Not Ends

Insurance companies that prioritize cultural change in the shift to a digital-first environment see technological upgrades as a means to cultural and business ends. For instance, they may embrace the ability of artificial intelligence to supplement, not replace, human decision-making, or they may see the promise in IoT-enabled objects like smart smoke detectors or moisture sensors when it comes to preventing or mitigating losses, write Nancy Albinson, Yang Chu and Andrew Blau at Deloitte.

To this end, many successful digital-first companies have built strong cross-functional change management teams. These teams focus their attention inward, looking at the company’s strengths and capabilities to reimagine cultural and business processes, says Vinod Kachroo, chief information officer at integrated insurers services provider SE2.

A cross-functional team also boosts communication among different departments and areas of expertise. When implemented well, the team can help lead cultural shifts towards technology as a means for improving customer service and meeting other insurer goals.

Putting the Customer First

Customer demands are driving digital change in insurance. It makes sense, therefore, to build a customer-centric culture as part of a digital-first transformation.

“Becoming a digital-first company doesn’t start with an IT department or a sales and marketing team. It begins with a commitment to customer experience (CX) above all else,” says business growth advisor Dave Orrechio.

When outstanding customer experience becomes the goal, insurance teams can align their day-to-day work with new technological tools to offer a digital-first experience that both satisfies customers and streamlines insurance professionals’ tasks. A strong customer service culture boosts customer loyalty and retention, helping insurers maintain and build on gains from the switch to a digital-first approach.

Opening the Mind to Change

Insurance and finance have centuries of established norms and practices at their core. While longstanding tradition and stability can provide strength and security in a rapidly-changing world, they can also make an organization brittle, and thus more likely to crack in the face of unprecedented stressors like digital disruption.

Insurers and financial institutions face a “multifaceted challenge” when it comes to the cultural changes required for longstanding digital transformation in industries where stability, not change, has been more often rewarded, says Jim Marous, co-publisher of The Financial Brand and owner of the Digital Banking Report.

“In some cases, current leadership may not fully understand the dynamics of the culture change required, or may just be ‘willfully blind’ to what is required,” Marous writes. When this happens, employees don’t have the power or direction required to seize opportunities to do their daily business in more efficient or effective ways.

When leadership is willing to dive deeply into the idea of cultural change, however, they gain understanding that helps them mitigate the risks of a cultural change. Leaders feel empowered to drive change and can in turn pass that empowerment to their teams.

Best Practices for Culture Change

Culture and technology are co-equal drivers of positive change in a digital-first insurance approach. To optimize technological opportunities, insurers must take certain key steps to guide and support cultural change.

Listen at Every Level

While a successful transformation must be driven by enthusiastic leadership, it also requires the buy-in of everyone whose work will be changed by a digital-first approach. “Leaders would be wise to gauge the so-called ‘mood in the middle’ and ‘buzz at the bottom’ to help close the gap between the desired and actual state of organizational culture and behavior,” says Oven.

During a cultural shift, ask insurance staff what currently works, suggests Melissa Henley, director of customer experience at enterprise content management software company Laserfiche. Questions like “What part of your job inspires you most?” or “Does our executive team behave in a way that is consistent with our company values?” can help leadership see how well cultural touchstones like the organization’s values and mission are being communicated and implemented in daily tasks.

“The challenge is to show how your original values are still relevant to your organization’s success today. Employee surveys, interviews and observation can help you identify your cultural strengths,” Henley writes.

Encourage New Leadership Styles

“The new reality is that hierarchical thinking no longer works in today’s disruptive world,” says Marc Wilczek, chief operating officer at Link11, a DDoS protection company based in Germany. Instead, strive to create a culture in which team members have the support and resources they need to solve problems, experiment and improve on existing processes.

Make a leadership shift one of the first goals articulated in plans for cultural change. “It comes down to minimizing the impact of hierarchical adherence and encouraging employees to work freely across the organization,” says Steve Salisbury at Human Synergistics. Give leaders and teams the coaching they need to understand digital-first change goals, as well as the freedom to move towards them in collaborative ways.

Keep What Works

It can be tempting to turn to born-digital companies for examples of digital-first culture that thrive. Yet born-digital companies often operate in ways that don’t suit established companies seeking to adapt their longstanding business practices to a digital model.

For instance, in 2016, appliance maker Electrolux sought to make a shift to a more digital-ready approach, but patterning that change on companies like Amazon or Google made no sense. For instance, constantly rolling out new products and services didn’t fit an organization whose customers expected to buy an appliance and keep it for many years. Likewise, Electrolux’s staff weren’t driven to work 70-hour weeks in the same way many Silicon Valley developers were, and offering stock options as incentives wasn’t an option for Electrolux.

“However, [Electrolux CEO Jonas Samuelson] could drive a culture shift that would energize employees to generate more innovation and profitable growth. He believed strongly that this could change Electrolux for the better without losing what was already terrific about the company,” write George Westerman, Deborah L. Soule and Anand Eswaran in the MIT Sloan Management Review.

By placing digital tools and customer service in the context of what Electrolux already did well, the company’s leadership was able to spot opportunities to drive cultural change that worked in the context of Electrolux’s business and the appliance industry as a whole.

Insurance leaders who approach a digital-first strategy within the context of their company’s values and the property and casualty industry can likewise drive the necessary cultural changes to succeed in a digital-first world.

Images by: dolgachov/©123RF.com, Cathy Yeulet/©123RF.com, Cathy Yeulet/©123RF.com