Every change management journey begins with an examination of where things stand today, an accounting of the “as is” conditions.
This set of observations includes the “30,000-foot view” of the organization and its needs, how various parts of the organization interact to achieve business goals, and the supporting technology landscape currently in place.
With a number of successful digital transformations in financial services under our belt, and a team with deep insurance, banking and technology experience, at Earnix we’ve seen and cataloged a set of “as is” conditions that are common starting points on the road to the future.
When we engage, there are typically any number of symptoms that have been identified as business inhibitors, such as these:
Slow Reactions to Changing Market Conditions
The past two-plus years have certainly been a crash course in adjusting to shifting market conditions, testing even the best-prepared financial services organizations’ abilities to react and adapt to change. The pandemic and its effects certainly exposed weaknesses in the industry as a whole. However, some insurers and banks adjusted quickly, and have even thrived and gained market share by transforming their organizations and their cultures.
In most cases, we see financial services organizations unable to react quickly to change, due to internal structures and processes that have been in place for years or even decades. Pricing committees that take too long to render judgments. Actuarial decisions that slow responses to customers and prospects. Regulatory reviews and filings that make implementing rating and pricing decisions a prolonged process. Responses to customers that aren’t able to be implemented online.
Suboptimal Customer Experiences (CX)
These slow reactions manifest themselves to the outside world as gaps in the customer experience (CX).
Customers and prospects have become accustomed to attentiveness from the first exploratory contact and throughout the customer engagement, and even to the potential end of the relationship. Online retail in particular is held up as the benchmark, with remarks such as “just make it like Amazon” indicators of how high the expectations bar has been set.
Unfortunately, many of our customers, as with many financial services firms in their peer group, found in the past that their customers’ expectations were often far from being met. They found too often that decisions could not be rendered online from start to finish. They suspected that “the man behind the curtain” is actually a group of people or functions that are moving too slowly for their taste. And, after engaging, servicing their accounts is often slow and frustrating, very “un-Amazon”.
Eroding Market Share and Revenue
The cascading effects of slow reactions and poor CX are seen in eroding market share and declines in revenue growth, or actual decreases in revenue over time.
Nimbler competitors seem to always be a step ahead, offering new products faster, servicing accounts more effectively, and poaching customers. Senior leadership, the board of directors and stakeholders are typically clamoring to “do something”, but it’s unclear just where to start.
Exposure to Changing Regulations
Financial services are highly-regulated industries, with all institutions expected to adhere to a strict set of laws, regulations and ethics. In theory, this should “level the playing field”, forcing all competitors to compete on an equal footing.
We often used to see slow reactions by our clients that are specific to the regulatory arena. When market shifts are identified, the process of proposing changes to offerings or pricing, for example, get bogged down in long internal reviews, inefficient modeling across multiple systems and myriad spreadsheets, delayed filing with regulatory bodies, and delays in implementing the changes across multiple systems. In the most extreme cases, regulatory violations occur, bringing unwanted attention from regulatory bodies, audits, and fines.
High IT Support Costs
Saddled with a technology infrastructure that in many cases has been in place for decades, the IT team struggles to maintain business operations across a set of disparate systems. Most of these legacy systems are on-premise, making their management and updating a continuous, high-cost endeavor.
At the same time, the business is expecting IT to evaluate and implement new solutions, everything from pricing and rating overhauls to address the issues identified above, to policy administration, call center, billing, and claims systems.
Add all of these symptoms up, and both the top line and bottom line suffer. The effects may be subtle or dramatic, based on the depth of the issues, competitive pressures, and the pace of changes in the market, but with most insurers and banks being public companies, they are highly visible.
Taken in isolation, none of these issues are fatal, at least in the short term. But these issues make organizational performance far from optimal, and can have a cascading effect of eating away at the business slowly but surely.
Just as a physician begins with the symptoms and moves to diagnosis, we do the same. Again, certain patterns tend to emerge, with one or more of these root causes emerging from our analysis:
One of the reasons prospects and customers detect disconnects in their experiences is that either too many organizations believe they own the customer experience, or no one truly does.
Marketers have traditionally “owned” customer acquisition, pricing managers have “owned” pricing and new customer approval, and account service managers have “owned” long-term customer satisfaction. From the outside, customers see the effects of silos, fiefdoms, and too many handoffs from one function to another, all of which create discontinuities in the consumer experience.
It's not that anyone set out to design and implement disconnected processes. Many of the processes in place have evolved over decades, and hundreds of decisions that made sense at the time have now combined to impair the customer experience.
Further, the risk tolerance of the internal functions who designed and implemented these processes also varies widely. This opens the door for more risk-tolerant competitors, including Insurtechs, neo-banks and non-bank entities, who often come from a more aggressive point of view, to step in and steal the business.
Disparate Technology Architectures
Just as organizational decisions have accumulated over the years into processes that no longer meet the needs of customers and the organization, we often see this reflected in technology architectures that have been implemented incrementally to bring those processes to life.
With the best of intentions, disparate tools have been put in place to meet the needs of specific functions, then “stitched together” to build out a complete process.
While each application was chosen in its day to be purpose-built or best-of-breed, it is a daunting IT task to maintain this plethora of distinct systems, most or all of them on-premise, and each with its own functionality, business advocates, training issues, and update cycles.
Disconnects abound, process improvements are difficult to implement, and everything is slow to change. Sometimes even finding staff to manage these systems is a challenge, as younger staff are hungry to work on the most modern architectures and technologies.
Antiquated Core Systems
In contrast with the hodge-podge approach, we also sometimes see just the opposite – core systems that are designed to be all-encompassing, managing every aspect of the customer interface, internal processes, and regulatory compliance.
While blessed with fewer moving parts, IT is still challenged to keep these systems functioning, update them as business and market conditions change, and keep the regulatory house in order. In many cases, the modules are well-integrated into a single core system, but not necessarily best-of-breed in their own right, making various departments less than satisfied with the tools they have to work with.
In the next installment in this series on change management in financial services, we’ll look at how we at Earnix remedy these situations and their effects, by sketching a detailed future state and design roadmap.