“Digital disruption isn’t
just for hip start-ups. Incumbents can not
only compete but actually
lead radical industry change if they pay attention
to
the way their business model is shifting and act boldly in response.
Founded in 1871, Economical Insurance operates within the
old and relatively static Property and Casualty (P&C) insurance
industry. According to the American
Insurance Association (AIA), the modern insurance industry, developed
primarily in England after the Great London Fire in 1666. Today, this insurance
industry segment protects from risk in
two primary areas:
- Protection for physical items, such as houses, personal possessions, cars, commercial buildings, and inventory (property); and
- Protection against legal liability (casualty).
Property insurance provides for losses related to a policyholder’s
person or property while casualty/liability insurance protects a policyholder against the claims of others.
Economical sees itself as the
insurance company “For Canadians by Canadians.” They also tout themselves as a
company that imagines bigger and better things. Their credo is to focus on the
customer first, and this is why Economical
is one of this country’s leading and most
trusted P&C insurance companies.
With this background and belief, it may come as no surprise
that innovative internal thinking led to
the conceptualization of a new business model. One targeted to a market segment that was
comfortable with advanced technology.
They saw these customers as underserved because traditional
service channels were not meeting their unique needs. By feeding on a passion
and desire to make a difference in everything they
do, Economical business and technology teams partnered to build a new channel
built entirely on digital processes.
The vision they saw was Sonnet.
Launched in 2016 t,his new brand brought an innovative new insurance experience
to Canadians who prefer to purchase insurance directly online. Using
sophisticated technology and real-time analytics, customers are now able to
instantly get customized quotes, purchase a policy, and make account updates
online at any time.
The intent was to leverage and aggregate data from multiple
sources, apply real-time analytics and
provide a unique personalized recommendation based on the customer’s profile.
The twin challenges were finding an evolutionary
and transformative path that wouldn’t crater the existing business and a savvy business technology partner that wouldn’t
waste the company’s time and money. That partner was IBM.
The most critical element in this effort was speed. With time to market being so important, a public cloud-based
solution was the answer. The IBM public cloud allowed Economical to deploy
quickly, take advantage of automation to reduced errors and enabled business flexibility.
Another key component
of this partnership was software development that used the KANBAN Agile
Methodology. Kanban is based on three
principles:
- Visualize what you do today (workflow) to see all development items within context.
- Limit the amount of work in progress (WIP) to balance the flow-based approach and prevent team over commitment.
- Enhance flow that uses a priority process to pull in development backlog in as soon as a previous task is completed.
When compared to the well know SCRUM model, using KANBAN
promoted continuous collaboration and encouraged active, ongoing learning and
improvement by defining the best possible team workflow.
Economical pursued a hybrid
cloud strategy to leverage the previous enterprise IT service investment. Significant
time was therefore spent in the design phase because the right design required
decisions on what went in the cloud and what stayed on premise. Those
decisions, in turn, drove data flow,
security control locations, and any required
infrastructure resiliency improvements.
The hybrid strategy also brought with it a need to integrate with legacy
systems. IBM was able to meet this and associated requirements to partner with
other members of Economical’s business ecosystem.
In the end, the key to an on-time launch of Sonnet was
primarily teamwork and a real partnership. Sonnet thoroughly disrupted the P&C Insurance market in Canada. It
successfully challenged the status quo and demonstrated that digital transformation
was possible with the right technology partner. This success has spotlighted
Economical as an industry leader and business innovator. Customer reaction has
been extremely positive, and the business
has been scaling with a healthy and steady growth trajectory.
One of the many lessons learned by Economical during this process was that disruption is not a one-time
event. Organizations must continue to re-invent themselves or competition will disrupt you. This new internal operating
model has led to new product suites, new offerings, simplified pricing and new internal workflows. The service
offerings will be built on top of the
infrastructure put in place for Sonnet and will
change the way Economical works
with their brokers. Although a bi-modal, two speed IT operations model was
initially accepted, this next step will use
cloud computing to connect cloud-native
components to core legacy assets. This “real IT transformation” will use additional efficiency to fund future
transformation initiative through a long-term
partnership with IBM.
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