Stefania Varnava and Yiannis Parizas examine the benefits of using agile methodology within the insurance industry
The digital evolution has put intense pressure on all businesses in terms of meeting customer expectations and keeping up with market dynamics. Like many other sectors, the insurance industry depends on technology for maintaining its competitive advantage via innovation and enhanced customer satisfaction. The COVID-19 crisis stressed the need for organisations to obtain a framework that empowers constant shifts in products and business goals.
The agile approach
As a result of meeting new challenges in this fast-moving market, many companies have started to embrace an agile methodology.
The approach was primarily introduced in the technology sector around 20 years ago and is aligned with the main concepts of the Agile Manifesto: customer satisfaction, flexibility, transparency, product quality, and continuous improvement and delivery.
In contrast with the ‘waterfall approach’ (Figure 1), the agile methodology represents an iterative and incremental approach that allows companies to deliver high-quality products to end users as quickly as possible. It works by dividing the product cycle into shorter repetitive phases (sprints) of design, development, testing and deployment, enabling the flexibility to make regular adjustments to a product’s features. Features consist of several user ‘stories’, which are short descriptions of the desired functionality.
Sprints can last from one to four weeks, depending on the team and sector’s requirements. During a sprint, the team will have daily catchups to discuss progress and resolve challenges. This encourages the collaboration of cross-functional teams for gathering requirements and delivering solutions according to the company’s goals and customer needs, increasing team performance and project versatility.
“The agile methodology is an iterative and incremental approach that allows companies to deliver high-quality products as quickly as possible”
The benefits of the agile approach
There are numerous benefits to adopting agile methodology. One of the most important reasons that companies choose it is increased client satisfaction. Each new feature added to a product or service is driven by customer feedback, ensuring that value is delivered to the customer. In each iteration of a product cycle, starting with the product design, the teams divide the product enhancements into stages with clearly defined requirements, and they are scheduled for development based on priority. The testing phase is a vital component within each iteration, ensuring enhanced product quality.
Since iterations are short in time, the priorities can be shifted according to the market’s needs without overbearing costs or time delays. In addition, re-assessment of priorities is supported throughout each repetitive cycle, minimising the risk of failure and boosting continuous delivery.
In an agile structure, there is constant communication between the teams involved in the process and the stakeholders observing the progress and managing any amendments. If a problem arises, a solution is found quickly and efficiently due to the visibility and transparency of the process. This allows the company to be more adaptable to change, and to have complete control of the development process without endangering the team’s productivity. Due to the iterative form of the product phase, the development of new features is accelerated and products are delivered faster to the market, ahead of the competition – producing a higher return on investment.
Adopting the agile approach in the insurance industry
To embrace an agile framework, a company must consider adopting values, principles and behaviours across projects and teams. The fundamental way of working will be adjusted through training and software tools that support agility to enable autonomy, collaboration and speed of delivery. There are multiple software tools in the market that are widely used by many technology companies and service-industry leaders, which encourages a collaborative dynamic in cross-functional teams; they can be chosen depending on the team’s needs. Examples of such tools are Microsoft Azure DevOps and Jira
The insurance sector used to conduct business very traditionally, but businesses have embraced technological transformation as part of the world’s digitalised growth. The agile methodology is similarly emerging in this market, empowering businesses to adjust to change quickly. Insurance companies are often using complex machine learning and artificial intelligence models based on customer data to price their products, identify fraud, estimate claim costs and automate processes. Integrating an insurance company into an agile infrastructure could increase the efficiency of core systems – for example, enabling faster information gathering for enhanced development of customer profiling and therefore more targeted pricing offerings.
A less obvious application of the agile approach would be in reinsurance pricing. During renewals, the standard market approach is to draw up a list of accounts pending for pricing and assign them to pricing actuaries. In an agile environment, an underwriter may take up the role of a subject matter expert who creates ‘stories’ for the potential pricing work with descriptions attached. Weekly sprints can be set up for the pricing team, accompanied by short daily catchups and a weekly pricing scrum meeting.
During the meetings, pricing work (stories) will be split into smaller tasks. These are allocated to team members, along with the time necessary to complete them. The system automatically shows the capacity of each member and how many units of time will be used whenever a story is allocated to a person. This enables better prioritisation, more efficient use of people’s time, transparency within the team and the reduction of time spent on team management. Tasks that cannot be completed in the sprint due to blockers or underestimation are moved to the next sprint. The automation tools analyse the team’s performance every sprint to see if the team was set too much or too little work (extra work can always be added during the sprint).
During the renewal season, longer-term stories for tool bugs could be created. Beyond the renewal period, the team could use the agile methodology to create new tools or fix the bugs identified during the renewal period to enhance the pricing product. The same would apply to case pricing for speciality lines or large corporate accounts. Personal lines pricing would be the more obvious example of agile work application because of the continuous development necessary for the insurer to maintain a strategic advantage in the pricing domain. Insurers have already started implementing the agile approach for personal lines pricing designing and deployment teams.
Customer satisfaction is an important driver of business, and customers are looking for effortless, timeless and efficient policy issuance and endorsement and claim service experiences. Having in place a claim and/or policy management tool, built in-house or provided by a third-party partner and supported by an agile development team, enables the speedy implementation of custom updates, enhancing customer journeys and processes. In insurance, embracing business agility would enhance a company’s model of delivering high-quality products in a short space of time that meet customer expectations, especially in the sales and claims process.
Using technology in an agile manner will be essential for insurers to become faster, leaner and more effective. Early adopters of the approach will differentiate themselves in the sector through their innovative products and maintain their competitive edge. An important lesson learned during the pandemic is that quick adaptation to change and the ability to reassess strategy are critical for all business sectors.
Stefania Varnava is a product manager at Scope Markets
Yiannis Parizas is an actuarial pricing consultant
Image Credit | Getty