The business case for change in insurance: Ensuring a return on investment

In today’s fast-evolving insurance landscape, change is not just inevitable; it's essential for survival. As we navigate through digital transformation, shifting customer expectations, and technological disruptions like AI, insurance companies must adapt to maintain a competitive edge. The pressing question, however, is how can insurers ensure they get a solid return on investment (ROI) from these transformation efforts? Over the years, I’ve seen strategic planning, focused investments, and clear KPIs drive successful transformations. More generally across the industry, a sizeable portion of projects fail to yield the expected ROI, with failure rates estimated at a staggering 70% - 90%.  

It begs the question: how can you ensure that the time, money, and resources you pour into transformation will translate into tangible benefits? 

1. Align investments with business strategy to maximise value 

A pitfall I have observed is insurers investing in too many disparate transformation initiatives without a clear business strategy or unified objective. This can lead to duplicating efforts, wasted resources, and cannibalisation of outcomes between competing projects. To prevent this, investment must contribute to agreed long-term business goals - be it reducing costs, achieving market growth, enhancing customer retention, or boosting operational efficiency.  

For example, an insurer that streamlined its claim handling process not only reduced operational costs but also improved customer satisfaction – a double win. Initiatives need to be directly aligned with the core objectives, ensuring every penny spent is measured against achieving the desired outcome. 

2. Build a compelling business case for stakeholder buy-in 

Transformation programmes are prone to stalling without a clear, compelling business case to secure resources and stakeholder support. A well-crafted business case must outline not just the financial ROI but also the long-term strategic benefits - such as improved customer loyalty or enhanced market positioning. In my experience, some business cases are weakened by overly optimistic assumptions or vague descriptions of desired outcomes.  

More recently, 'regulatory compliance' has been used as a blanket justification for spending. While meeting regulatory standards is important, critical examination of these business cases could lead to more efficient fund allocation and outcomes that extend beyond mere compliance. 

A robust business case should include moderated projections, evidence-based scenarios, and a detailed risk assessment to ensure expectations are realistic and achievable. 

3. Track KPIs for data-driven decision making 

Central to this issue is the lack of clear metrics to track ROI and adjust initiatives as needed. Insurers must adopt data-driven KPIs such as operational cost savings, revenue growth and customer satisfaction. These should be evaluated alongside actual costs incurred and projected budgets to completion. Regularly reviewing these metrics allows for agile, data-backed decisions, enabling us to pivot or scale projects based on results.  

Forecasts, priorities, and plans may change throughout the transformation life cycle. A KPI-focused approach allows for real-time insights into progress, boosting confidence in the transformation strategy's execution and ensuring the projected ROI is achieved. For this vision to become a reality, insurers need to redefine their projects to be more agile, quickly adopting Minimum Viable Product (MVP) solutions that can iterate towards the final solution and provide early indicators of success. 

4. Equip teams to leverage new technologies 

Technology investments can be rendered ineffective if employees lack the skills to utilise them effectively. Adoption rates are a critical factor that should be considered when determining expected ROI. Organisations often introduce new technology, only to have the workforce circumvent it due to a lack of understanding or buy-in.  

Investing in training and readiness is essential to ensure full adoption by users and maximise the technology's benefits. Including KPIs that track business adoption in project management reporting is crucial, as they ultimately determine the feasibility of achieving the original ROI. 
 

Looking ahead  

In a post-Solvency II and IFRS 17 world, there will be greater scrutiny on the transformation budgets and expected outcomes within firms. I believe that transformations will continue to face challenges in meeting their ROI unless there are clear, consistently understood guidelines established from the start. These guidelines will enable teams to measure progress and proactively inform decisions throughout the transformation journey. The result should be a shift from focusing on failure rates to celebrating success rates.