Why it’s not too late for insurance companies to make the digital leap

Year 2019, little Accenture research looked at the relationship between the company’s IT strategy and revenue growth between thousands of large companies. The results were interesting: companies identified as technical leaders based on the strategic agility and scalability of their IT systems grew twice as fast as companies with the weakest enterprise IT systems.

But one of the many things that the pandemic changed is the technical investment strategy. COVID-19 revealed how indispensable technology has become for business successes in insurance and beyond.

Which made us wonder: what would happen if we ran the study again?

A growing digital gap

The second round of this study used economic modeling, case study research, and a survey of 4,300 executives, including 215 from insurance companies, to reveal the pandemic’s impact on technical strategy and performance.

The main finding is that the gap we found in 2019 is widening. Technical leaders are now growing at five times the speed of technical laggards. This suggests that a “winner take it all” dynamic may emerge in the digital revolution. Ten percent of the companies analyzed were classified as leaders, while 25% were labeled Laggards.

But another key finding of the research – the most interesting part of the whole study, in my opinion – suggests that this may not be the case.

The research showed that technical leaders are not the only organizations that have made progress in headwinds caused by COVID-19. We found that 13% of the insurers in the sample have increased by four times as many as Laggards between 2018 and 2020. We call these companies “Leapfroggers”, and their success provides a roadmap for the industry.

What does a Leapfrogger do?

Leapfrogger’s revenue growth is mostly driven by two factors.

First, they have a basic level of system strength – corporate IT systems that give them strategic agility and digital momentum. This comes from adopting advanced and emerging technologies and making an organizational change to take advantage of them. A growing number of insurance companies are in this position today.

Less common is the second factor driving Leapfrogger’s revenue growth: “turning around” IT budgets.

From a high level, most companies break up their IT budgets into innovation and business. In general, about two thirds of the budget goes to business and the rest to innovation.

But we found that Leapfroggers turned the script on this in 2018 and started spending about 60% of its IT budget on innovation.

These findings are linked to an action called “Flip Size” that Accenture Research has been tracking since 2017. As you may suspect, leaders were the first to “turn” their budgets. Now Leapfroggers follows.

Release your inner frog in three steps

Our research also identified three steps Leapfroggers took to unleash its impressive growth and close the digital divide with Leaders.

The first is that relocation platform—Specifically, to prioritize the cloud. Leapfroggers realize that the cloud is about more than technology. It provides an opportunity to find efficiency throughout the business.

The second is that transform. Leapfroggers do not think of growth and innovation as their peers; they set significantly more aggressive targets in both areas. Their highest priority in the pandemic was to scale new innovation. Eighty-nine percent build partnerships throughout their ecosystem.

The last step is to reach every part of the business with this view. Leapfroggers targets twice as many digital transformation business processes as others. They fund employees’ well-being and gender equality programs at a higher rate than their peers, and they accelerate smooth training and build a culture of collaboration.

Take the leap and take the lead

The research is clear that for insurance companies that have not made the digital leap, the performance gap with their peers will increase when they maintain the status quo with technical investments.

But it is also clear that this gap, while growing, is not impossible to overcome – yet. Leapfroggers paves the way for technical success for companies that are not yet digital leaders.

We will explore this step in different parts of the insurance industry in future blog posts, but if you want to start your journey right now I would love to hear from you.

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