Thomas Olsen: Winning Operating Models for Insurance Companies

Many insurers want to hone their operating models so that they can target emerging markets and adapt to new technology and regulations more effectively. But some are struggling with questions about integration, culture and setting the right the pace for change. In this short video, Thomas Olsen, a partner in Bain’s Financial Services practice, says that companies that find a winning formula stand to dramatically improve their performance.

Read the Bain Brief: Winning operating models for global insurance companies

Read the transcript below.

THOMAS OLSEN: Designing the right operating model is an increasingly hot topic across global insurers. And there are really two strategic things that are driving that. First of all is the increasing importance of new and emerging markets for the growth, given the slower growth in their mature markets. The second is a set of important trends that are transforming the insurance industry generally across markets: the importance of digital and customer loyalty, the increasing things you can do with technology in the back office and claims, and analytics driving important innovations in underwriting, as well as regulations that have important impacts across geographies.

And as insurance companies think about what's the strategy to win in that environment, the operating model is the bridge for how they move that, to be able to execute that, across different parts of the business. And most of the insurers are struggling with four difficult trade-offs to get that right. The first one is defining how integrated should the company be, and why and where. So, for example, they may see big benefits in a global claims platform, but that may vary for different geographies and may not be the right thing for everyone.

Second is getting the right balance across the matrix, and how do you work decision making and accountability across geography vs. product vs. channels and vs. functions. The third one is about doing this right with the company's culture, and how do you make that change with the starting point of the company's culture. These big insurance companies have different histories, different DNA, and if you're moving to try to have a much more integrated model or drive—you know, scale benefits across a part of the business -- but your starting point is a very strong local geographical accountability, that's going to cause a lot of tension. So you have to figure out how to get that right with the culture.

And finally, the pace and sequence of the change are important also. So you need to do it fast enough to keep up and win the strategy side for the market, but not do it too fast or at the wrong sequence to create problems. So I think [the companies] that are too slow maybe or overshoot will have some problems, but the ones that get it right have a real opportunity to make a step change in their performance.