Striving for simplicity: 'industrialized' strategies reduce costs and accelerate growth.

It's no secret that insurance companies are burdened with myriad information systems, multiple products, ,duplicated back-office processes and redundant service centers. Carriers, particularly those that have grown through acquisition, often have many systems per product, so even a simple address change has to be entered several times.

All that complexity takes its toll in higher costs, inefficiencies, compromised agility and inconsistent customer experiences--a burden that insurers, under pressure to reduce expenses and boost growth, can ill afford in today's high stakes marketplace.

To remain competitive and deliver growth, insurers need to start thinking like other industries. The best route to follow is what Accenture calls "industrialization,' a strategy focused on simplifying internal operations, automating processes, consolidating common organizational capabilities and embracing a range of sourcing options. To become high performers, insurers must embrace simplicity--from standardizing products and services to identifying where they need scale and how to gain it. By industrializing, carriers can achieve greater economies of scale, lower costs, operational agility and improvements in product and service quality. Industrialization for insurance is inspired by its success in manufacturing industries, such as the auto industry, where standardized operating platforms are used to reduce cost and complexity, while at the same time providing product components tailored to the needs of specific customer segments. This approach seeks to address the inefficiency and high costs accrued from years of increasing complexity as insurers expanded capabilities, offerings and channels, thus gaining the flexibility needed to excel with customers.

In much the same way, insurers can industrialize their operations via common platforms to streamline product manufacturing. Core product components, such as coverage that's essential across multiple products, can all be built the same way on a single set of platforms. Customization for different deductibles, policy forms or exceptional coverage could be accommodated.

For example, product development, underwriting and policy servicing systems are closely connected from a business process perspective. These functions can be built in a factory mode--a centralized setting that leverages technology and low-cost qualified labor where appropriate. Shared common elements, such as customer service and billing, across widely disparate products can be leveraged through a uniform platform.

By standardizing its operating model, an insurer can effectively manage costs. Consolidating common capabilities across the organization onto shared platforms enables a reduction in the number of stand-alone or unique processes, procedures and systems, enabling greater economies of scale. In a virtuous circle, savings earned by simplifying operations can fund future growth initiatives that help differentiate the firm in the marketplace.

An industrialized operating model also enables flexibility in responding to the market. Beyond saving money, efficiency is about optimizing resources at an insurer's disposal. By simplifying the organization, insurers can more easily identify where resources are needed during critical times. Carriers can scale up or down and diversify or simplify their offerings to maintain competitiveness throughout changing market cycles.

For instance, a leading global insurer implemented an operating model with distinct distribution and manufacturing businesses, enabling sales professionals to focus on what they do best--recruiting new distributor relationships, broadening existing relationships and generating sales. At the same time, manufacturing centers maintained high levels of service and reduced operating expenses. This has eliminated duplication in the back office and provided access to the benefits of scale and specialization.

Industrialization isn't a quick fix. Rather, it requires management stamina and investment. A road map for getting started down the path should include:

* Organizing around customers, not products; analyzing customer segments and buyer values will help determine focus.

* Segmenting products and jettisoning unprofitable ones.

* Radically reducing the number of business applications supporting each product line.

* Developing and mining customer and product insights from a central data warehouse.

Becoming industrialized is challenging, but it holds the key to reduced costs and high performance in an increasingly competitive market.

You Need to Industrialize If Your Company Has:

* More than three policy administration systems for a single line of business.

* Redundant points of entry for customers and agents.

* Response time to claims in excess of 24 hours.

* High days premium outstanding.

* Long introduction cycles for new product features.

Contributor John Del Santo is a managing director of Accenture Insurance Industry Group. He can be reached at [e-mail].