Digital-first operating models in mid-market commercial to enhance broker and client experience
by Juan de Castro, COO, Cytora
This a shortened version of Making Risk Flow podcast, episode:”Digital-first operating models in mid-market commercial to enhance broker and client experience.” Juan is joined by Simon McGinn, CEO of Allianz Commercial UK, and Richard Coleman, Managing Director, UKGI at Ecclesiastical Insurance Group, on a panel discussion at a Making Risk Flow live event. With the guests coming from two contrasting insurers, in terms of scale, Juan asks the guests how their companies are approaching digital transformation, what avenues they are prioritising, and any vital lessons they’ve learned throughout the process.
Listen to the full episode here
Juan de Castro: Welcome everyone and thanks for joining us today. Simon and Richard, if you introduce yourselves directly, that would be fantastic.
Simon McGinn: Simon again, I am the CEO of Allianz Commercial in the UK. We’ve got a business of about 1.5 billion writes all P&C lines, trade exclusively through brokers, through a branch network of 12 these days, 12 locations across the UK. We’re in the midst of a major business transformation program from an Allianz Group and Allianz UK perspective.
Richard Coleman: I’m Richard Coleman, I’m Managing Director of Ecclesiastical. I think we’re the counterpoint to Allianz. We’re the smaller and specialist insurer. We’re a factor smaller than 1.5 billion. Desperately trying to get larger. Succeeding, grew by about 30, 40% in the last three years. Very much a specialist, and I suspect as you talk through some of the topics, we’ll probably touch on what specialist means, but broadly, we’ve got an intermediary business which focuses on particularly heritage risks and real estate risks, so we’re very, very strong in property. That comes from our background, which originally was started in the 1890s insuring churches. We still insure a huge amount of the Anglican church, so all the cathedrals and most of the parish churches around the UK, and our direct business.
Juan: Thank you. We are going to be talking about digital risk flows in commercial insurance. I thought it was an interesting perspective to have a massive player like Allianz and a specialty, niche one like Ecclesiastical. I think through the panel we can discuss similarities and differences in the way you think about digitising your business and those digital risk flows.
Perhaps starting with you, Simon, you mentioned you’ve got a very large transformation program. What’s your view on how you will thrive in the next stage of growth? What do you need to get right? Some of the priorities of that transformation?
Simon: We are right at the beginning of a very large program. We have done some work with you guys in terms of delivering componentry, but we are still at the very beginning. In terms of the way in which we intend to digitise our commercial business, in some ways, it’s going to be quite easy because we start from a relatively low base. We’ve got a 1980s mainframe where green screens that underwriters use that does nothing more than a basic policy admin. We’ve surrounded that with lots of spaghetti of old platforms that plug together, and nobody is quite sure how they all work, but they do seem to stand up. Therefore the transformation journey we’re on is going to be very dramatic even though it will take multiple years to get there.
I think the vision we have is about turning ourselves from an organisation that has prided itself on its technical excellence capability, but that’s largely a human capital sort of asset that we have. One we wish to retain, one we think makes a massive difference for us. We have that as a core capability. We have an approach that largely has been consistent in terms of how we face the market, who we trade with, and what business we like.
We are consistently boring, but brokers know what we want and how we do it, and we stretch that envelope a bit. We’re a known quantity. We like to be very technically excellent, and we drive the normal KPIs that any business will drive, which is about, “What’s your margin? How are you driving efficiency and productivity improvements on a long-term basis?”
I think we’ve reached the stage, and it was probably five or six years ago we probably reached the stage, where that model competes with people who are smaller, more agile, or who are big and have gone through their transformation program, we’re essentially in a position where we’re asking our teams to run twice as fast as everybody else to keep up.
That becomes exhausting, it becomes challenging and you get to a point though, where you can’t actually run any faster. What we’re trying to do is take those core capabilities around that consistent approach to the market, that clarity of appetite, the technical excellence, and then sort of put it on steroids, by digitalising the data flows within the organisation.
We have fragmented data to piece together, taking teams of people to do the data engineering rather than actually do the analysis and the production and deploying that into a capable usable format. We want that end-to-end data to flow across the value chain. We want to improve our ability to deliver service quicker to brokers where we choose to, enabling ourselves to be more informed about which distribution we wish to play with at any one time, to be able to better select risk, so pretty standard insurer stuff.
Also within that, I think one of the things we’re really keen on is getting to the stage where we can talk to our intermediaries and to our customers on the basis that we know them, “We know you and we understand you.” Not to the extent that we know their business better than they do. I think we’d get shot if we turned up and tried to tell somebody, “Well we know what all of your risks are and how you should be running–” It’s not that. It’s just about in a competitive marketplace, where frankly, my main competitors offer very similar products, very similar service propositions, and are trying to compete on the same things.
That ability to pull through the distribution channel by demonstrating, and understanding of particular customer segments, particular business profiles, and the likely and the potential needs and wants that we can service from a group like Allianz, which in the UK, has still got four or five different components. We do trade credit, travel, through global programs, etc. Trying to bring all of those things in a way that is not just throwing lots of stuff at a wall to see what sticks, but being able to build propositions, and to enable brokers to be more successful by helping them understand how they can win in a very competitive market.
One of the things that we think about is the digitisation of the business and the platform, plus the ability to enrich our understanding of risk with further information, we think that will give us the ability to work much harder in understanding the customer.
Juan: You’ve just talked about productivity, about efficiency, maintaining this boring consistent risk selection that obviously will make you successful. You’ve talked about broker service and quick turnaround time. I know you guys talk a lot about making commercial insurance a flow business.
Juan: Is that at the core of how you’re going to deliver on those objectives?
Simon: Absolutely. It has to be a flow business. The thing for me is that it has to be a flow including the intermediary in the broker, so that you are plugging in data, so that you’re not spending a lot of time as our teams do at the moment in our regions, where somebody’s sending them data, we pick it up, turn it around, put it into us. Then we say, “Oh can you now give us this?” We send it back and then it comes back again. We waste all this time and effort and cost on transacting.
I think the vision we have longer term would be to be able to integrate with the broker platforms through the APIs to actually ensure all the data flows seamlessly into our systems. It would then hit our rating capabilities, it should be able to just do simple midterm adjustments without anybody being involved, and the broker can be confident, and the client can be confident that we’ve bound a risk. That’s where, ultimately, we want to get to, and have the underwriters and the experts that we’ve got, add value where it’s absolutely necessary.
Juan: In the end, all of that has to do with efficiency digitisation, that has to do with broker service.
Juan: It’s not just efficiency, efficiency is a path for scaling. How would you define the type of broker service you want to give in the next few years?
Simon: I suppose in a very simplistic term, faster and more efficient, and one where you deliver elements of self-service, which aren’t a game of, “What can I get you to do, so that I save the money, and you have the cost?” I think there is so much cost in the system, and friction in the system, that actually there’s a massive win for both parties.
Now, the challenge for my distribution guys would be making sure we hold onto half of the win rather than give it all the way to our brokers, but that’s a normal competitive environment. Yes, I think there’s so much friction in the system that we’ve got some real opportunity.
Juan: Then part of that is I think when you mentioned API integration with your distribution partners. How far away do you think that is? Because we’ve been talking about that in the industry for a number of years.
Simon: I think we’re a good way away yet. As ever with these bigger programs, we’ve got all of the business I’ve referenced already across multiple lines that have got to be put onto the new platform, and we’re at the beginning. I’d be quite happy if I can get a data flow that goes from new business, through quotes all the way to claims, and the data to flow through my internal platform to start with. That will be a big win. I think it’s probably a few years away yet, but we’ve got real clarity about where we want to be.
One of the things that helps us, certainly with the larger brokers, is the consolidation that the brokers are going through. They’ve got exactly the same operation efficiency challenges, they’re going to have the same data challenges. There is a point at which those come together, and who knows with smart companies like you guys around, there’ll probably be a way that you don’t need to do all the integration. You can put it through some clever thing and it’ll all just turn up in the right place. I don’t know, that’s where I run out of any sense of knowing what’s going on.
Juan: Magic will happen, thank you, Simon. Richard, from your perspective, we’ve heard efficiency, productivity, broker service, do the same objectives apply to a niche specialty insurer?
Richard: Yes. In some areas, it’s probably worth sharing a few things that are slightly different between the two companies, and some of the more unique problems we’ll face. Service, for us, is a huge opportunity. If you’re an Allianz broker, you’re used to dealing with Allianz, you understand what Allianz do. If you find an Ecclesiastical risk, you probably find it 1 time in 10 or 20 that comes across your desk, so muscle memory’s not our friend. Actually, we find servicing engagement a really interesting opportunity because that enables us to add value to the broker. It enables us to spend a bit of time talking about why our proposition really works for e.g. heritage products.
Pure flow probably isn’t necessarily what we want and I’m not sure it’s necessarily what drives broker satisfaction. We have very high broker satisfaction at the moment and have done for a long time.
That’s, I think, because we can add a lot of value when we have that empowered, engaged conversation with somebody who’s got a fairly difficult risk to place. That’s one thing for us. Muscle memory, using service, and using engagement as an opportunity to get across.
The other challenge we face with our size is we’re not £1.4 billion/£1.5 billion of turnover, we’re considerably less. That changes the dynamics of how much you can afford to invest at scale. The last few years have become really interesting in that transformation background. We’re going through a big transformation, we can maybe talk about later on. The world now of a more API-connected world, a world where actually, there are lots of people like Cytora who do really interesting things, are very interesting to a company like ours because we can’t afford to invest in the scale, but connecting into partners who are doing interesting things is a really useful way.
Having said that we treat service and engagement as an opportunity, it doesn’t mean we don’t want to take the efficiency gains. It doesn’t mean that we don’t want underwriters doing exactly what they’re doing in an Allianz. By the way, we have a 1980s green screen sting with loads of peripheral stuff around the outside that no one really quite knows how it got there, or how it works. We’re in a very, very similar place. We want to take that out, but be thoughtful about where we still intervene, where that adds value, and how we leverage it.
Juan: In a niche insurer it’s about educating that set of brokers about what’s your appetite? What type of risks do you want to see? What’s the Ecclesiastical type of risk, right?
Juan: I guess the question is can technology help there? I think one of the things we see with other specialty insurers is, it’s quite complicated to educate hundreds of insurance companies. If each of them has to educate brokers on their appetite, it becomes quite a burden. Can technology play a role there where you stop almost educating brokers and you just say, “Hey partner, Sam, just send me any submission.” Then I will be able to use technology to spot really the ones with Ecclesiastical risks for me.
Richard: One theme I might try and pick up on today is I’m trying and be a bit controversial for some fun. We’re trying not to talk about digital technology transformation, but talk about business transformation with digital technology as one of the ways in which you might achieve it. This is a good example. We try to solve that problem a bit at the moment by saying to brokers, “Well, if it looks a bit ‘heritage-y’ and you think it might be one for us, send it to us and we’ll have a look,” because it’s really important. We can’t get brokers to spend the time and effort unless they’re really specialists and in our areas, truly understand our appetite, to know quite what to send us. This means we manually, at the moment, triage very, very heavily. Our dynamic of “funnel” would look like a very low quote rate and a very high strike rate. We spend a lot of time sifting when we find something that works for us, we engage deeply and it tends to stick with us.
Can technology play a little bit of that role and take out some of that sifting for us? We think absolutely. We are working with Cytora, for full disclosure, around trying to solve some of that triage problem. It isn’t easy. The data’s there, but it’s how you map that into your underwriting appetite. How you make that work is a real iterative journey.
Juan: You’re right, it is not easy for many resources. It’s not like you can write on a piece of paper what is the Ecclesiastical risk. Often underwriters have this, call it gut feeling or experience to identify what is.
Richard: Sometimes equally scary when you’re running an insurance company. How much do you want to trust that? How consistent is that across X amount of underwriters?
Juan: Literally, the problem is the alternative is probably not good either, right?
Juan: Because when you say you’ve got humans doing the triage, what we find actually, literally with you guys, and many of our other clients is, you often have the most senior underwriters doing that triage.
Juan: Because they are the ones who understand what the Ecclesiastical risk is.
Richard: Yes, and it’s difficult when you’re trying to get into qualitative factors where you do want people to do it. I’ll give you a practical example. We’ll write Heritage Hotels, but only write them if they’re really good quality. If you ask one underwriter, “What does really good quality mean?” He goes, “Well, if I look at the menu and I think I’d eat there that’s good.”
If you ask another one, then they’ll look at things like ratings. Those are all really good, and we’ve got great underwriters that make, on the whole, really, really good judgments. That’s quite different. Actually, maybe one of those ways is better than the other. We don’t really know because we don’t track on which basis we select and then how that flows through into loss ratio. The subsequent data flow, when you can start to do that, is really interesting.
Juan: I guess it starts with that data flow. Just simply being able to feed better data capture, identifying like what are the drivers of a good risk? Is it the restaurant menu or is it something else? You also touched on your transformation program. It would be nice just to understand what are your priorities or areas of focus in that program.
Richard: We do have end-of-life platforms, those 1980s platforms, people just aren’t around to code them anymore. Actually, it’s less the support and more, “God the developers are 79 years old, and they’re going to want to retire at some point.” We face that end-of-life issue. What we’ve been spending a lot of time trying to do is to talk much more about, as I say, business transformation. We do have to move the core forward, but how can we transform the business on the journey as we go through?
That’s required quite a lot of hard thinking that is natural to business leaders. What is the value that I really drive? For us, as a specialist, that deep engagement’s really important, that personalisation of policy is really important, but at what point does all that complexity get in the way versus actually adding value? We are spending a lot of time trying to be very, very clear about what’s the business value in the business outcome we’re trying to drive. How much of that could or should be done through technology, how much it could or should be done in a different way? Because you can pour a lot of money into recreating the complex you’ve already got, or you can try and be much more critical about the business value you’re trying to drive, with digital data or technology as one of the ways in which you might do it, but candidly, a very expensive and difficult way to do it.
Juan: Let’s talk about the lessons learned. In the way you’re transforming the business and you’re adapting it to thrive in the next few years, what do you think is working really well and what are some lessons learned?
Simon: We’re still, as I say, relatively early in the process. I say that, we’re two years in, we’ve got a plan, and we’ve got some coding going on. We are a bit further on. To your question, the lessons we learn, firstly, in a group, the size of Allianz, the size and scale of the stakeholder groups that you have to get on board to get anything moving forwards is probably the biggest personal lesson that I and the director that runs transformation and our COO have experienced. That has been quite mind-boggling.
We’ve sat in board meetings with paper taken to the PLC board saying, “Right, we’re going to do this,” and we’ve got everybody signed and then somebody crops up from part of the business says, “Well, we don’t agree, we haven’t seen this.” You’re thinking, “Well, where did you come from, and what’s your interest in this?” In any organisation, I suppose it gets harder if you’re in Allianz and there are 150,000 people all around the globe, and you’re using your global capabilities to deliver different parts of the transformation, and therefore that, just on its own, pure geography and time zone makes that hard. That would be one lesson.
I think the other things we both know is right, but also have surprised ourselves as to, “We’re not quite as right as we thought we were,” as we always say, “Oh, yes, but the UK’s different.” Particularly when you’re trying to be a global platform and capability, which is what we’re plugged into, we’re actually leading it on behalf of the group. When you really get into it, I make the point, well, yes, I go to Leeds and they tell me they’re really different market to Manchester and Manchester is really different to Birmingham. Of course, on one level, they absolutely are, but on most levels they’re absolutely not. It’s exactly the same.
I think one of the things that we’ve learnt is to really challenge ourselves about just because we’ve done this, this way for so many years and it’s the right way because our underwriters prefer to do things that way, that doesn’t mean that you can’t get better synergies by looking at products in a combined way and saying, “Well, what about if we did all of this in a similar way?” Now, you’ve obviously, in the UK, got to consider the broker and how does the market work? Challenging ourselves to actually really ask how much simpler can we make the business process by being more consistent and more uniform, I think is one of the big lessons we’ve learnt.
I think the other thing as well that we’ve learnt, is that there are good ideas from outside of the UK. Again, because we do generally have, I still believe, the world’s most competitive commercial insurance market. Some of it is just completely irrational what goes on in our market at times, that makes it very different to lots of other areas. There are still some very good ideas from around the globe that you can bring in. That’s probably a very ‘Allianz-y’ type statement, but I think we’ve learnt an awful lot around that.
Then, the other thing then is the adoption piece with getting our underwriters to start to use the new capabilities. We’re a bit earlier in the journey, I think, with you, but I absolutely buy your point about it’s not a cool platform replacement process. We are going to completely turn our business model on its head, hopefully, and do things that are much more sensible, re-organise ourselves, have different skill sets, have different approaches, all those things that you have to start thinking about.
Just with some of the early deliveries, getting the underwriter to trust the information that’s been provided to them even though they used it and they used to go after it from five different sources, but because they went and got it themselves, they knew that it was okay. Trying to get that adaption and utilisation and trust is probably something we knew we would experience, but it’s one of the biggest challenges.
Juan: Then gaining the trust of the underwriters is probably one of the biggest drivers of success, and you’re doing it quite well actually– Well, the team we work with Jonathan, Paul, Jason and the rest of the team. You guys won the Change Team of the Year at Allianz, so clearly, things are going well, and then its underwriters are trusting you.
Juan: What have you done differently?
Simon: I forget who I was talking to, it might have been Richard earlier, there is actually, for us, something that’s quite new and different which is, “Here’s something that we’re giving you which is actually going to make your lives easier, and is exciting, and gives you more dimensions than just it’s a nice automation process that moves data from here to there,” it’s actually adding new insight.
I think the way in which the team have piloted it, the way in which they’ve got some real advocates. We took some of the more cynical underwriters in some of our locations and said, “What about that then?” I think like most of them said, “I’ve seen all this stuff before, it won’t be very good.” Then we had a couple where we got some verbatims from an underwriter who enabled them to look at a risk that they would ordinarily have just put on the no-quote pile.
Actually, they looked at it, got some more information, and were able to say, “Oh, I’ll write that then,” and we did, and bound a risk. I think generating excitement is the short answer to your question. An excitement about something new and different that does actually do what it says but is also not over-promising. What we’ve got is quite a basic instance at the moment, and we’re adding more to it, and there’ll be more to come. I think that’s the best way.
Again, last point really, the degree and speed with which that sort of feedback has been picked up within the UK, then suddenly creates a demand. More importantly, from a group perspective, the group is looking at this and saying, “Okay, given our aspirations around commercial business, integrated businesses around the world, looking at commercial, et cetera how do we get everybody else excited and interested about it?”
There’s a lot of positive PR going on, there’ll be, I’m sure, a degree of cynicism, and we’ve heard it before. I think we can actually show progress and show success. In the start of a very big program having something early that you get a win, I think really builds confidence as you go through. I don’t think that’s rocket science, but it’s how we’ve done it.
Juan: It’s not rocket science, but it’s not easy to get right either, right?
Juan: I think that that’s a good case study. How about you, Richard, in terms of lessons learned from the transformation? What’s worked well? What hasn’t? What would you do differently?
Richard: A lot. I completely agree with everything that was said there. I’ll probably focus on a slightly different angle of people and perhaps the people who are doing the change. We’ve just gone through to the stage where we have dropped the new platform into our church team, our direct team, and that’s been a really, really difficult journey. What we have learnt is mainly about people and the people doing the change.
I am so much more confident about the next series of changes we’re going to do because we’ve got a cadre of people who’ve been through that process. We’ve become much, much clearer about what the pain points were earlier on and where the pain points are now, and they do come to how people interact and how they think.
We have pushed very, very hard to make it much more of a business-led transformation in the latter stages which is hard because you get people like me, general insurance people who’ve been doing it for 25 years. Not necessarily techy people but having to be conversant in a language they’re not necessarily used to being conversant in. You have to really make sure those business people are super clear about the value they’re trying to drive and have those really, really hard conversations up front. I suspect some of why this journey was hard due to our first release was because we created a little bit of complexity early on rather than really pushing it out.
Juan: This was about this core system replacement, right?
Richard: Yes indeed. If I give you an example about this next iteration we’re looking at, there were 140 value-driving items that came out from the teams they wanted in this piece. We’ve got a cadre of people, I might just dwell on in a second actually, to really challenge that really hard, and now there are 19 items that are driving 80% of the value that 140 did. Okay, we’ll go build those first, and then, of course, iterate from there. We’ve had to really look into our business to find the kind of people who are capable of thinking a bit more like a business architect and a bit more thinking about what really value and the challenge is.
Also, we deliberately created these domain owners across all of our key functions that people with enough technical know-how and enough reputation in the business to carry the broader stakeholder group. That’s been super powerful, all of a sudden people having cross-domain conversations, pushing things through in the right way, and looking very, very hard at a business value.
Then, you’ve got a technology team, that in previous lives would’ve been the wrongdoers at the back end who we really embraced. We’ve really tried hard to make this a business program and been really clear that stuff’s going to go wrong, and when stuff goes wrong, we’ve all got to pitch in and figure out how to do it. Don’t get into that situation with either your own people, or worse the supplier, which I’ve seen in previous lives, so about people I would say, is probably the biggest thing.
Juan: There’s a component of technology and process but it’s more about how you manage the people involved in transformation, and how you involve underwriters and other stakeholders, right?
Simon: Yes, I get my terminology wrong here but we’ve had that conversation very recently. Not so much from the implementation point, but it’s one of these journeys you’re never going to end in terms of how you keep the transformation going for your business. We’re now starting to look at, “Okay, so what we really need is, we need product owners within our business that are going to have that blend, they understand the business, they understand the technology, and whatever else as well.” How do you actually build that capability because usually, you start, you either understand the business or understand the technology and then it takes time to transfer the two.
For us and our business to be very flexible and able to be– I was trying to avoid the word agile, but agile going forward, we’re going to need that sort of skill set. We don’t have training thoughts yet about how you build that capability systematically. I think that’s a massive, massive component for us going forward.
Juan: Perhaps as a last question, if you had a magic wand and you could make something appear from a capability perspective or from a technology perspective, what would that be?
Richard: I would like it so that our underwriters only spend their time making judgments about risks, risk quality, and then trading and engaging with brokers and customers to explain what we offer them, that’s where I’d like them to spend their time. If we could, A, do that, and B, have it done quickly so I don’t have to sponsor it for another three years that would be fantastic.
Juan: Exactly. Which is funny because that is a core component of making commercial insurance flow, right? It’s how can you digitise risks upfront so that you remove all the double keying, like data flow through your systems which is easier said than done, but that is one of the fundamentals, right?
Richard: For me, if it was a really big magic wand if you could just do the whole transformation there and then,-
Richard: –that would be great. More specifically, I think one of the things, for us globally, would be a single customer ID, so we understand where we’ve got the same customer within our organisation on a global basis and even on a UK basis, because, to my earlier point, as we intend to be much more customer orientated and segmented, in all meanings of the phrase, then we need to know who we already touch and which customer we’ve got. If I could have one thing overnight it would be that.
Juan: You’re actually working on that as a group, right? You’ve got this initiative about a single customer idea.
Juan: Well this was fantastic, thank you both so much for joining me today and sharing all your thoughts and learnings with us.