Insurance: High Time for Adopting Agile at Scale

“Success today requires the agility and drive to constantly rethink, reinvigorate, react and reinvent” – Bill Gates

From the largest conglomerates and big banks to new internet companies are now adopting agile principles in their product and/or service delivery.  Insurance companies across the world do not seem to have adopted agile at scale approaches with the day-to-day management of the business as big banks or other financial institutions have adopted. The reasons highlighted for using a status quo approach (the so-called “waterfall” approach) for the delivery of their services are:

Legacy systems and business:

Insurance firms are generally legacy businesses with acquired businesses and a combination of multiple systems used for different classes of businesses. For these firms, the value of the in-force business is significant and therefore the desire to make a completely new product is less strong as compared to say other companies where the new product or service delivery to market takes higher precedence. These products are managed by legacy IT systems and there is little value observed in making a significant change.

Fear of failures:

Insurance firms are heavily regulated and capitalised businesses and due to strong regulatory penalties in case of any non-compliance or delays in reporting or regulatory requirements. This again means a tendency to use the traditional “waterfall” approach instead of the “agile” approach where lack of experience and execution may lead to initial failures.

Lack of training in Agile framework:

The staff involved in multidisciplinary teams are not professionally trained in Agile methodology and/or certification. Mainly IT staff/developers are trained in Agile but the real need is to provide professional Agile training to a wider staff and stakeholders within the company to change the mindset and create an environment of challenging each of individuals’ own laurels and standards.

What is Agile?

Agility refers to a business’s ability to respond to change. It is an approach to succeeding in an uncertain and turbulent environment. In the day-today industry parlance, Agile is a common name used for methods based on the principles of the Agile Manifesto[1]. Till the early 2000s, Agile principles have been used widely in software development but nowadays these principles are used almost more widely for any complex tasks that organisations are trying to achieve.

Waterfall vs. Agile

Winston W. Royce[2], a computer scientist is considered the father of the so-called “Waterfall” model that has been widely used in large scale software development traditionally.

The distinctive features of Agile compared to the Waterfall method are:

• Customer focus: Customer collaboration over contract negotiation.
• Interactivity: Individuals and interactions over processes and tools.
• Flexibility: Responding to change over following a plan.
• Learning ability: Ability of the organisation to continuously learn and adapt to a changing environment. Embed customers and their feedback in order to continuously improve.

In the case of an insurer, it will have separate departments covering each of the activities such as:

• Underwriters perform underwriting of the risk and consider value propositions;
• Actuaries do risk management, asset-liability management and product pricing;
• Marketing team will perform the marketing and sales of the insurance products;
• Developers will be engaged to provide effective management of the policies from data entry to claims handling;
• Claims team will manage the claims coming from the in-force business.

Each of the above steps is performed one after the other and therefore this method of product development and management is a very elongated and time-consuming process involving multiple departments while stakeholders await customer needs to be met and, in some cases, the opportunities are lost.

Now consider an agile team scenario, where a small cross-functional consisting of a few actuaries and data scientists, a marketing team, software developers and claims team members who are set on delivering new products and increasing sales through various sales channels in a timebound manner. Instead of each of the teams under a water-fall approach performing their tasks in insolation and in a cascade of work that is dependent upon each other, under the agile approach they work on each of the areas in a more focussed and iterative approach with the client needs in mind at all times. This team will not only work towards launching the product but also continual maintenance of the product, collects customer feedback and improves customer experience as well. Under the agile approach, the time to market significantly reduces and this idea can be propagated into various other projects and services delivery.

A pictorial comparison of the waterfall and agile methods is outlined in Figure

Why does Agile work?

Applying Agile principles to many the complex tasks works because of:

• Change of mindset: Adopting Agile approach leads to a change of mindset and continuous improvement and challenging ourselves to give our best becomes culture. This helps to find innovative solutions to day-to-day issues faced by teams.
• Sharing of information: Agile teams avoid pockets of excellence by sharing a lot of information. This leads to shared goals, and mental models and improves working relationships. This shared experience contributes to team members who stay aware of each other’s needs and provide support, assistance and guidance on tasks, improving the outcomes overall.
• Discipline: Following Agile principles would mean applying common sense and discipline to devise a way of systematic way of working to make the process efficient with a prime focus on delivering value add to the customers.
• Satisfaction: Agile teams work on a concept of iterative and continuous improvements to the tasks leasing to improved satisfaction with deliverables.

Which are the areas where Agile can help insurers?

Insurers can utilise agile concepts in the following key areas:

• Product development and time to market products/services
• Digital transformation of product sales
• Regulatory and financial reporting
• Successful change and transformation programmes to replace legacy systems

How to make a start?

Most companies who have adopted Agile methodologies in their day-to-day management of the business have realised notable benefits and the benefits are well-documented for banking and financial sector companies. Insurance companies, particularly general and health insurance companies, are better placed to adopt Agile principles. This is because the shorter customer cycle overall and policy duration are material lower as compared to life and pension insurance policies. It is better to make start pilot projects in various activities and /or projects and slow apply them at the enterprise level.

We recommend considering the following aspects for implementing an agile mindset within an insurance company:

• Start small but make a consistent effort to change the mindset of the company employees. It is important to note that Agile transformation is a multiyear journey that requires full support from senior stakeholders. Agile transformation can fail in some cases and therefore the cost of failure should not be made prohibitive.
• Cultural transformation is a must requirement for a growth mindset where employees have to feel involved and are appropriately rewarded to ensure a sustained effort is made to continually upskill themselves.

Why use SAFe as an agile framework?

SAFe is an agile framework that combines the iterative development practices of agile with the mindset of Lean thinking. Lean thinking aims at using fewer resources and eliminating waste to maximize customer value. SAFe aims at:

• It is a well-structured and disciplined approach to agile framework implementation throughout the enterprise
• Driving faster time to market, increased productivity and quality, and higher customer engagement.
• Not only provides alignment between teams but also to all levels of the enterprise that are involved in solution development: Team, Program, Large Solution and Portfolio. This leads to greater visibility and alignment across the organization. This also ensures that everyone from upper management to individual agile teams shares the same vision and goal, thus making the enterprise focus on the most important topics at hand.
• Involving upper management on a portfolio level, and combining planning with the enterprise’s strategic themes.
• It is a successful, tried and tested framework that is used widely across the globe.

How AgilityPad can help you with your journey of being a SAFe Agile Organisation:

We work with our clients to implement a variety of solutions, that are tailored to their transformational needs and meets all the stated requirements. We manage their training and coaching / consulting needs in the area of agile transformation.

• Agile Training and Skill Development: We provide some of the best agile trainers and coaches for the skill development of the IT / Finance staff. We provide industry recognised SAFe training and certifications.
• Speed of Implementation: We will mobilise rapidly. This will reduce any burden on senior BAU teams and executives and help to build out a resolution fast and effectively.
• Specialist and high-quality service (SME): We supply SME expert consultants to help our clients with a variety of requirements. This means that you will get a project that is focused on providing the correct outcomes and improving existing ways of working.
• Flexible solution: We recognise and have experienced that the landscape, priorities or direction can change, therefore all of our consultants have the deep industry experience to be able to react positively and supportively and maintain delivery in parallel to any revised circumstances.

[1]  Agile Manifesto: It is a set of 12 principles set by Agile Alliance.  More on Agile manifesto is covered here: https://agilemanifesto.org/principles.html

[2] Note: Winston Royce introduced the Waterfall method mainly to show how it should not be done. He was in favor of the iterative approach, in which the focus is on splitting the project into small parts and acting on these. Ironically, since then most of the projects have been executed according to the Waterfall method.