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 digitalized, up-to-date and real time available creating excellent service, fast underwriting & claim processes, and a real time view on company's production and productivity.
Fully digitalized 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 digitalized 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 will not 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 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.
Source by Paul De Bruijn