An innovative organization is rigorously customer focused, allowing its employees the time and money required to work closely with customers.
All business is digital business. But not all businesses are digital.
Besides skills required for each different role, a digital and entrepreneurial mindset is also important. In addition a development program is part of the journey to get teams up to speed, along with an on the job coaching program to ensure the transformation to a digital culture is made.
Digitalization is everywhere, including in the insurance sector. It is an important development for insurers and distributors, as the digitalization of customer contact and internal processes contributes to increasing customer satisfaction and saving costs on the performance of internal processes. In the past few years, insurers, service providers, and proxies alike have invested in the development of online quotation, acceptance, and claim processes. In practice, however, having a digital environment doesn’t necessarily mean the customer or intermediary uses it.
The digital channel and Straight-Through-Processing (STP) are not yet the standard for a variety of reasons – customers are accustomed to the usual, analog process. They have little experience with, for example, submitting a claim or surrender request, and they are uncertain about it. People want to communicate with their insurer in a pleasant way rather than engage in business-like and transactional reporting. It is also necessary to build quite some emotional intelligence into a process to eliminate the need for human contact in the event of a claim.
To allow customers and intermediaries to increasingly arrange their own insurance matters online, we should understand the complexity of human behavior. Why do they make certain (financial) decisions? What impedes them from finding the online channel and successfully completing a process there? What emotions does a customer feel at the moment of injury (agitation, irritation, anger)? What affects their behavior in terms of emotions, motivation, attitudes, beliefs, perception, or the interaction with others? Based on this knowledge, customer communication and processes can be adapted to achieve a higher acceptance rate of digital processes. Ultimately, this results in happier customers, because they are served in a personal, relevant manner.
The interplay of three factors determines the extent to which customers are able to find and use the online channel:
- Improved customer journey
- Behavior within the organization
- Data & technology
1) Improved customer journey
Many of the barriers customers experience to using the online channel can be eliminated if we delve into the underlying cause. By applying insights from the various behavioral sciences, we can respond to the conscious and the rational as well as map out a customer’s irrational behavior. For example, people disproportionately place higher value on their own possessions, solely because these are their property (endowment effect). Therefore, a customer might be insufficiently satisfied with full financial compensation.
We should focus on encouraging and rewarding the behavior we wish to see – for example, by offering an exceptionally good customer journey. When it comes to this, most of us agree that there’s still a lot to be gained in the insurance sector. Incidentally, who said interactions with your insurer should be emotionless and incomprehensible? Why does a letter announcing the payment of a life insurance claim only contain a request to provide information? Why not have confetti pop out, or use another means to show it’s a celebratory moment? The amount to be paid out is often a lot bigger than what most of us will ever win in a lottery. Simple lessons can be learned from companies that take their customer journey very seriously and therefore ensure it is as pleasant as possible. If ordering a vacuum cleaner online can be turned into a small celebratory event, we surely can create more experience and interaction around an expiration or claim process, can’t we?
2) Behavior within the organization
It is not just the customer’s behavior that should be changed to realize a shift to digital processes. Employees, too, need to be taken along on this journey. The organization should travel down this digital road from start to finish. It’s necessary for employees to embrace and encourage digital processes and interaction, actively contributing to the offline-to-online shift of work. Here, we can use techniques from behavioral economics as well. Research shows that people want to maintain the status quo, regardless of whether the change would produce results which would be desirable or better from a rational point of view. The choice architecture should be designed in a way that faciliates the choice for the new option. Examples include a form of gamification or a default option to actively encourage the desired behavior while retaining the positive motivation of employees. There are practical examples of companies that have established a digital environment but whose payback potential has been destroyed due to its employees’ strong belief that an offline process is actually better than an online version. Several interests and beliefs are at play in the background, either consciously or unconsciously (justification of one’s own role in the process and a preference for direct, personal contact, but also employment).
3) Data & technology
Data and technology are the main prerequisites for creating a seamless and measurable digital customer journey. It is important that the (online) process goes smoothly and offers room to make adjustments based on data-driven insights into the behavior of customers and intermediaries gained during the customer journey. Not only does the online process need to exist, it should also generate the data required to make adjustments.
Having these three factors work together intensively ensures digital processes can demonstrate their full potential and insurers and other chain parties can realize a much more positive experience of their services. This results in higher customer satisfaction and lower operational costs, and it provides valuable insights into the customer population.
In the past three years, foreign insurers have managed to increase their premium volume to more than 10% of the Dutch non-life market, according to a study conducted by IG&H. More and more foreign risk bearers enter the Dutch insurance market without reporting to DNB, helped by a mismatch between customer demand and offer, rising premiums, harmonizing legislation, and consultants who professionalize.
This paper maps out the drivers, scope and impact for this development.
If you want to read the full paper in Dutch, please find it here.
It has already been a month since a third major protest was held at the Malieveld. After the agricultural sector, the construction sector now calls for attention, too. Although the nitrogen problem has been known for a while, farmers and construction companies feel abandoned by politicians because they lack help with this inevitable change. And it is not only farmers and construction companies that feel the blow. In the short term, the impact of restrictions will also be felt across the housing market.
It fits the image of a housing policy that – in recent years – has sometimes caused more problems than it has solved. For years, several government agencies and private sector parties have worked at cross-purposes, insufficiently advancing towards a common goal together. With the current, favorable economic tailwinds, the time has come to jointly take targeted action – from national and local government to mortgage lender – and tackle the problems in the housing market.
The situation of Kees illustrates the state of today’s housing market. In 2005, Kees wanted to buy his first house in the city but decided to rent a place with his girlfriend instead, because purchasing a home turned out to be too expensive. Now, 14 years later, they are a young family with a middle income, and they still can’t afford to buy their own home due to rising house prices and the housing market shortage.
Every day, we read another great example of the upended housing market. A €1.5 million, simple terraced house in southern Amsterdam was sold within a week. For the first time, the interest for a rate fixation period of 30 years drops below 2%. One out of ten first-time homeowners now opt for ‘interest-only’ and prefer lowering their monthly costs by a few hundred euros over accruing, paying off, or benefiting from mortgage interest deduction. Or, various mortgage lenders decide to deduct credit spread for ‘interest-only,’ 12 months after the start of a major campaign aiming to encourage action on interest-only mortgages. For consumers, it’s all difficult to understand.
Fortunately, it was time for the 2019 opening of Parliament. There was an ambitious section on the housing policy for the coming year, in which the government tries to make up lost ground with a much-needed new set of plans. The proposed measures – from encouraging housing cooperatives, constructing temporary houses, and adjusting the transfer tax to setting up a separate building fund for the local preparation of construction sites – seem to make sense in terms of content. These plans are necessary to help people like Kees get their dream house in the long term.
However, it is striking that within the same government, plans don’t seem to have been aligned. For example, the Ministry of Agriculture has not taken action on the nitrogen crisis, which currently impedes 18,000 construction projects. And due to the new guidelines set by the Ministry of Housing, Spatial Planning, and the Environment, newly built houses will be 15% more expensive, while the average price of new houses is often too high already for less privileged home seekers.
If this trend continues, the consumer won’t stop footing the bill any time soon. This is also evident from the accelerated rise in the average mortgage loan (+3.4% compared to Q2, 2019) and the first-time homeowner’s average age compared to the previous quarter (+5 months, 31.8 years old – source: Kadaster). Therefore, people like Kees will have to keep their patience for a while.
In my opinion, better cooperation is essential to really tackle the issues in the housing market – cooperation between various government agencies, but also with market parties such as mortgage lenders. Cooperation that’s aimed at a solid long-term plan, which also provides short-term help to groups that struggle with getting help – and which includes smart solutions for financing housing and encouraging innovation in construction to achieve more sustainable and faster construction.
As Remkes wrote in his report: “Not everything is possible.” But I’m convinced that we can make the housing market a lot more accessible again – especially to people like Kees – if everyone in the sector cooperates well, if targeted choices are made, and if the policy is aligned.
Bas de Jong
A (re)design of the organization accelerates the realization of the (digital) strategy, provided that it is properly tackled and implemented!
Do you recognize the feeling that the current organization prevents you from realizing strategic goals and plans for the future? Do you feel that tasks and responsibilities are sometimes divided in a superfluous or completely fragmented way, or that they’re not divided at all?
With changes following each other at an ever-increasing pace (digitalization, in- or outsourcing of business units, or disruptive innovations), having the perfect fit between the organization’s design and ambitions is a growing challenge for organizations. The moment your organization does not adapt to internal and external developments, you create organizational debt: an ever-growing heap of changes the organization should have implemented but hasn’t.
Establishing and implementing a successful organizational design requires a thorough process in which management is actively involved. This article shows you how to establish an optimal (re)design in four steps (see figure 1) and describes decisive success factors.
Phase 1: Designing the organization encompasses more than drawing an organization chart
A frequently heard statement about the design of an organization is, “We already have an idea of the organization chart, so all we need to do is draw and include the people.” A missed opportunity, if you ask us. An organization’s design process requires a lot more than knowing who will be in what place. It all starts with understanding why the current setup of the organization has a restrictive effect on realizing the strategy. The result is a shared sense of urgency.
After that, it’s important to determine a direction by establishing starting points and translating these into design principles. Not only do these principles ensure a consistent course when (re)designing, they also provide a clear, explainable story as well as a mainstay for future decisions. With this context in mind, a core team joins forces to create a clear outline of the desired design, including required functions, responsibilities, and processes.
Organizing the design process like this with one of our clients in the insurance sector made it easy for us to settle difficult (political) issues and discussions based on content at a later stage in the process. This didn’t result in a simple drawing, but in a well thought-out organizational design.
What does it yield?
- Objectives and frameworks for what can and can’t be changed
- Clear design principles with starting points for the (re)design to direct choices and to let ratio predominate over politics
- A detailed design that goes down to the team and business-function levels so all activities are included
- A clear division of tasks and responsibilities (RACI) and associated objectives (KPIs) so as to clarify how the various teams contribute to the organization’s ambitions
- All relevant input for drafting a request for a recommendation for the works council to complete an efficient consulting process with the works council
Phase 2: The impact of the design goes far beyond FTE numbers
Major steps need to be taken before the new organizational design is also the new reality. A typical statement in this phase is, “Our new organization chart says a lot about the changes going on in our organization, but the real impact is evident at the level of the individual employee!” It’s because the employee can end up elsewhere in the organization, needs to work in a different way, or is assigned other responsibilities.
To ensure this goes as smoothly as possible, it is crucial to determine the impact of the organizational design on people, processes, systems, physical design, and management. Devising all this helps draft an implementation plan.
Logically, it requires the involvement of several parties within the organization – for example, for cost centers, physical design, and FTEs. To tie all parties and components together, it’s useful to designate one directing party.
At an organization in the financial sector, for example, we put HR in charge. This resulted in an overall picture of the impact, in all parties being the true owners of the IST-SOLL transitions in their respective fields, and in a grip on interdependencies.
What does it yield?
- Impact on formation (FTE), functions, competences, and way of working, included in IST-SOLL overviews, so as to see the required changes
- Insight into the way in which the IST-SOLL transition impacts existing processes and systems within the organization
- Concrete and time-bound implementation plan so as to be ready for a proper rollout in phase 4
Phase 3: Decision-making is the result of a solid process rather than an obstacle
A question we often hear at organizations that want to realize a new organizational design is, “How can we complete the consulting process with the works council in a smooth and effective way?” Organizations that involve the works council at a later stage often encounter a huge heap of formalities as well as delays in decision-making. This means the desired implementation can’t take off until later, resulting in higher costs and a lower return on investment.
Rather than considering them an impediment, you should involve them early on and collaborate properly so you’ll have a good brainstorming partner. When working with a client from the retail sector, we contacted the works council as early as in the design phase, which initially yielded a surprised response. During the process, however, they also noticed the difference. This approach turned the works council into a constructive partner rather than an obstacle. We were able to test any choices made early on, which, in turn, provided additional insights. Ultimately, we used these to increase support. Moreover, this approach resulted in a fast, smooth, and timely consulting process.
In other words, involving relevant stakeholders at an early stage helps you create support for the organizational design and, on top of that, acceleration during the implementation. Organizations which, for example, involve the works council at a later stage often encounter a huge heap of formalities as well as delays in decision-making. This means the desired implementation can’t take off until later, resulting in higher costs and a lower return on investment.
What does it yield?
- Grip and influence on the main stakeholders in the decision-making process to complete the process smoothly
- Support for the new organizational (re)design among the various stakeholders, which supports the spreading of the story to the organization
- Constructive and efficient consulting process with the works council, which contributes to a good relationship and a higher quality of the (re)design
Phase 4: Implementation determines the success of the organizational design
Often, the previous phases have already taken quite some time and effort, while the actual implementation still needs to be performed. A frequently asked question is, “How do we ensure the design lands successfully in the organization?”
For one of our clients in the banking sector, we made the conscious decision to approach the implementation in a positive way with a lot of energy. Freeing up time and capacity throughout the organization, paying great attention to communication, and celebrating successes ensured that the implementation became part of everyone’s job.
Making sure a new (re)design lands well forms the key to its success. In doing so, paying attention to how the message is conveyed is at least as important as the message’s content.
What does it yield?
- Employees understand why the change is taking place as well as what it means for them and can therefore contribute to the transition
- Grip on the execution of the implementation plan from phase 2, ‘Determining Impact,’ so the transition proceeds in a controlled manner
- Ownership among internal stakeholders for the realization of a transition and/or implementation plan, so everyone contributes actively to the transition
- A dialogue with the organization on the progress of the implementation, so there is a constant stream of input to tighten up the implementation plan
Success factors for the (re)design of the organization
You can’t roll out the four phases overnight. For many, the thought process surrounding the (re)design of the organization seems to be the biggest challenge, but the real challenge is to pay attention to the content as well as the change process and the way people are affected. This can be realized using the following eight success factors:
- Create an organization-wide understanding of the mismatch between strategic ambitions and the design of the organization and the underlying causes
- Use design principles to ensure that rational substantiation predominates over politics and pragmatism
- Include responsibilities (RACI) and objectives (KPIs) in the new design
- Put one party in control of the change process – from head to tail, from design to implementation
- Have a compact, diverse, and content-focused working group research the design process content-wise
- Involve the organization actively in the change process, but only communicate about content-related changes and impact after final decisions have been made
- Involve stakeholders who play a role in the decision-making process (works council, supervisory board, et cetera) early on
- Map out what needs to be done to ensure the new organizational design lands successfully and incorporate this into a roadmap
All this takes time, but you’ll regain it because the implementation will actually work and land in the organization. Taking shortcuts and opting for a sloppy process often boomerang in the form of poor support, delayed decision-making, and an incomplete execution of the strategy. A good preparation and well-considered steps lead to a first-time-right implementation.
Distinctiveness of IG&H: what can IG&H do for you?
In addition to adopting a thorough and proven approach to achieve an organizational (re)design that is supported, we tackle every organizational transformation based on our Make Strategy Work principle. We believe that any transformation only has a true chance of success when there is a balance between content, process, and people. We consider an organizational (re)design to be a part of the overall (digital) organizational transformation – not an isolated component. Such a transformation requires the integration of various competences, which is an area IG&H specializes in – from leadership development to innovation, from process optimization to culture change.
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Utrecht, November 7, 2019 – The revival of the mortgage market results in the best third quarter since 2007. Mortgage revenue grows across the market by 15.1% compared to the previous quarter to €28 billion. This marks the market’s recovery from the shrinkage in the first six months of the year.
“The strong third quarter ensures the market comes close to the level of top year 2018 on an annual basis,” says Joppe Smit from consultancy firm IG&H. Revenue growth in the past quarter is caused by a rise in the number of mortgages as well as a mortgage loan increase. Compared to the second quarter, the number of mortgages increased by 12.8% to 85,000. The average mortgage loan rose to a new record high of €324,000.
Growth among first-time homeowners
Remarkably, the number of mortgages among first-time homeowners also increased (+1.8%), while revenue even rose by 17.2% compared to the previous quarter. This is caused by a strong mortgage loan increase for first-time homeowners. “A possible explanation is that first-time homeowners are older, which means they can afford a higher mortgage loan,” says Smit.
Existing homeowners remain the largest group of those who take out a mortgage with a 46% share. Furthermore, those taking out refinancing and additional loans once again contribute significantly to the growth of the mortgage market (+ 16.5% compared to Q2). Therefore, this group continues to grow, which means it is increasingly important for mortgage lenders to focus on it.
Growth in market share of ABN AMRO and Florius
The market share of banks as a whole, as well as that of the Top 3 Bank Holding, grows at the expense of investment funds enabling non-bank lending. With a 65.9% market share, banks reach the highest market share since 2013, despite a shrinkage of ING and Rabobank. Determining factors for this growth are the increase in banks’ market share among those taking out refinancing and additional loans as well as the substantial growth of ABN AMRO and Florius in the past quarter. A possible explanation is that ABN AMRO has an above-average share of production in the growing group of those taking out refinancing and additional loans.
You can read more about these developments in the appendix, where you can also find the Mortgage Update. We hope you enjoy reading it and welcome your response!
Director at IG&H
E: email@example.com T: 0031 6 2035 2438
Many organizations are facing exciting challenges as a result of increasing digitalization. To stay relevant, it’s ever-more important to quickly respond to new opportunities. Unfortunately, old IT systems, entrenched organizational structures, and outdated outsourcing contracts usually offer little room to properly respond to such opportunities. The combination of the ‘Superfluid Enterprise’ concept and IG&H’s unique ‘Make Strategy Work’ approach helps solve this challenge.
According to leading research and consultancy firm Gartner, companies currently spend 80 to 90 percent of their IT budget on maintaining their existing systems. To increase differentiation, innovation, and flexibility, it is recommended that this percentage is reduced to approximately 50 percent. Additionally, the organizational structure of most companies is mainly focused on maintaining the status quo. As a result, it is often unable to move along with the market in a sufficiently flexible manner.
In their value discipline model, Treacy & Wiersema state that an organization should perform in at least 3 areas. These are:
- Operational excellence
- Product leadership
- Customer intimacy
In other words, for an organization to be viable, its customer friendliness, its efficiency, and the quality it provides should be sufficient.
As these areas are opposing forces, Treacy & Wiersema state that the organization needs to pick an area in which it wants to excel and make a difference.
However, as a result of increasing digitalization and technological innovations, the Superfluid Enterprise doesn’t have to choose. It excels in all these aspects!
Why is this relevant?
IG&H’s proven approach ‘Make Strategy Work,’ combined with the modern technologies that facilitate the Superfluid Enterprise, redesigns the organizational structure while tackling IT challenges. As a result, flexibility is increased and costs are reduced. This leaves more money and resources for differentiation and innovation to pursue new market opportunities.
The Superfluid Enterprise is based on two core technologies: process mining and low code.
What are the benefits?
Combined with a new look at business operations, Process Mining provides a clear picture of how your company is currently functioning. Sometimes, the outcomes may be little painful at first, but they’re always instructive. Also, remember that competitors are in a similar situation. By way of illustration, according to you, how many processes follow the standard-defined step-by-step plan in your organization? When we ask this question, the usual answer is 80 to 90 percent. In reality, the percentage is nearly always lower – sometimes even as low as 8 (!) percent… This (significantly) impacts your operational costs and lead time, as well as customer experience and satisfaction! This insight is provided by hard data gained through Process Mining. However, it’s perfectly possible to start in places where your gut feeling tells you a certain process could be improved.
Based on those hard data, you can start by improving individual processes, which will result in an improvement of the entire business process. Subsequently, it is possible to look beyond individual processes to determine a company-wide approach. Therefore, the key is to first break the familiar vicious circle, indicate points for improvement in small chunks, and demonstrate success, after which you can include the organization in an overall business improvement.
In addition to staff instructions, this improvement often requires adaptation of (existing) software. By using low-code technology, the maintenance costs for applications can be reduced step by step while delivering the required changes and additions. This makes it possible to keep using your old systems while quickly adding new functionalities at low cost from the start. No need to throw your existing systems out of the window at once – you can reuse them and phase them out step by step (this is also referred to as application rationalization). This results in major cost savings and allows you to safeguard your current operations as well as reduce risks.
Low-code also provides a solution to the risks, costs, and lead time of replatforming, as well as the discontinuation of certain packages/subscriptions. Moreover, it solves the issue of a supplier acting like a monopolist (working with unconscionable contracts). It takes less time and reduces the risks of errors while adding new, required functionality, which would take considerably more time during a replatforming project. In addition, it will also be cheaper to upgrade standard software packages used by the organization to a newer version in the future (for example, SAP Hana), and user license fees can often be reduced.
How do I get there and how do I go about it?
Your company can only be successful if it can respond effectively to the continuous changes in the market. Therefore, it’s very important to start by organizing processes in an optimal way: hire or build the right skills and experience.
In doing so, it is essential to clarify the leadership role that management needs to play in the various parts of the process. One thing is certain: an orchestration role will become increasingly important within your organization. For example, which products and services will the organization purchase, what will it build, which subscriptions will it take, and what will the company integrate?
To help make the right decisions, we use Process Mining tooling, supplemented with developments by our data science experts. The use of existing data will provide insight into how your processes actually go and help identify good potential starting points for the continuous improvement process. As mentioned, in reality, your processes often differ quite significantly from the way in which they were written down.
This instantly creates an impact list and a hard business case to make the required change negotiable in the organization. Now that you have a clear visualization as well as figures, this is a lot easier than before. Good to know: the number of interviews required to properly chart the organization is thus greatly reduced, so you can achieve results faster and with less interference of day-to-day operations. A few interviews with key individuals in the organization so as to get access to data and discuss connections will suffice.
These steps form the foundation for the transformation to a Superfluid Enterprise. Alternatively, you could, for example, start from a new business opportunity or a (major) system’s end of life notice. In all cases, it’s important to have the right partner on board that possesses all required knowledge and experience while being small enough to operate as a single company. This is what makes IG&H unique, and it’s the reason why major financial service providers, retailers, and healthcare institutions, among others, make us a preferred partner increasingly often.
Who will realize the first successes in the organization? You can, for example, deliver a working prototype in a pilot – a so-called minimum viable product (MVP). In this case, priorities are determined based on impact, considering the departments and processes in which the highest profit can be made. With the right people, the right focus, and our support, it is easy to take the first step towards a Superfluid Enterprise!
Want to know how this could work for you? Feel free to contact Aernoudt Bottemanne to explore your opportunities.
Written by Tom Jongen, data scientist, and Aernoudt Bottemanne, technology & innovation director
The income insurance market is becoming more complex due to the growing focus on sustainable employability. Yet according to consultants, insurers mainly concentrate on standardization. A mismatch between customer demand and product offer is brewing. IG&H spoke with several market parties in the insurance sector and provides concrete tools for product innovation.
It’s undeniable: currently, ‘sustainable employability’ is a trendy term. But the attention it receives seems appropriate. Not only should employers get a grip on the (financial) risk of rising absenteeism, the tight labor market also forces them to double down on being a good employer. This is difficult, so employers expect ‘customized’ support. At the same time, insurers focus on simplicity and cost reduction, which leads to less innovation and more homogeneity. As a result, income solutions tend to be suboptimal, and not all employers can realize their ambitions.
We’ve observed three axes for product innovation:
- Sector differentation
Conversations with employers have shown that their needs often depend on the sector in which they operate. Of course, all insurers use sectoral premiums, but other than that, consultants still find the sector-oriented offer insufficient, despite the success of (former) ‘pension subsidiaries’ Loyalis and NV Schade. For them, the sector approach results in lower premiums, less absenteeism, and a higher penetration rate.
What elements does such a sector proposition consist of? We’ve listed the three main ones:
- Insurance conditions focus on the collective labor agreement (which is especially relevant to the WIA (Work and Income Act) supplement), so employees’ financial risk is optimally covered.
- Additional services are focused on a sector’s issues. This starts with targeted solutions for the main causes of an inability to work, but it can be expanded to other relevant HR domains. An example includes services which promote older employees’ labor mobility.
- An attractive risk profile is created by a broad inflow (via covering agreements or even collective labor agreements) and by building unique data on a well-defined group of companies. The result is that premiums can be reduced and/or returns can be increased.
Most sector propositions have been created by building reactively on a solution for one customer. But it’s also possible to adopt a proactive approach. In that case, a sector is selected based on several criteria (such as scalability, the collective labor agreement, available data, commitment to the sector), after which a proposition is created with specialized consultants. Not as a replacement for the existing offer, but as a valuable addition to it.
- Premium differentiation
Usually, premiums are determined based on historical absenteeism data. As a result, premiums are volatile and investments in vitality barely pay off. On top of that, the use of sectoral premiums means SMEs are ‘punished’ for absenteeism at the companies of competitors/colleagues. Of course, the ‘MKB Verzuimontzorgverzekering’ (absenteeism unburdening insurance for SMEs) will lead to premium stability, but it will ultimately have a price tag. Therefore, we believe that a more ‘customized’ premium contribution rate has potential for many employers, both small and major. Not to refute the solidarity principle, but to make investments in a healthy company more worthwhile.
Insurers struggle with the use of predictive data. The challenge lies in legal limitations and the complexity of data warehouses, but also in the unfamiliarity with the predictive power of customer and risk data. A good first step to detecting predictive elements is to have consultants and insurers bring together anonymized data. Historical absenteeism data don’t have to be abandoned: the flexible premium model forms a great intermediate alternative. In this model, historical absenteeism determines the basic premium, and the premium surcharge depends on investments in sustainable employability and short-term results (such as a reduction in absenteeism and lifestyle changes).
Furthermore, consultants believe a vitality budget may encourage employers to pursue a more conscious policy. Of course, the amount may depend on the scope of the contract and the risk profile. If the effectiveness of investments is proved, this can be translated into a premium discount.
- Flexibility of conditions
More and more often, an insurance is the closing entry of a vitality solution, and the conditions hardly vary between insurers. Consultants believe more flexibility is required to keep covering the growing financial risk. There is a particular demand for an automatic link to the rising state pension age. Furthermore, there’s a need for a more flexible contract term – standard options of 1 and 3 years, for example. Finally, consultants wish to see more options with respect to self-retention (stop-loss) and a higher maximum insured amount, especially for large employers (invalidity pension).
Solution guidelines for digital innovation
Product innovation doesn’t yield much if there’s no solid foundation. Therefore, we will provide concrete tools for improving digital services in our next blog.
Written by: Bob van Opstal (Manager Pensions) en Idriss Abdelmoula (Consultant Pensions).
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The Dutch collective income market is booming – its social relevance is greater than ever and margins are improving. Foreign insurers enter the market and several Dutch insurers make strategic acquisitions throughout the value chain. At the same time, consultants and insurers are increasingly at odds. IG&H spoke to several parties in the market to determine how they can break the tension and join forces to work on effective customer solutions together.
There is a strong consolidation in the income protection market. In 2018, for example, the 50 largest consultancies accounted for half of the total production – 60% without sick leave insurance. All insurers are fully committed to this leading group and are improving their services. Nevertheless, they don’t always hit the right note: insurers’ average NPS among income consultants is -15 in mid 2019. The average performance score is 7.1.
Gradually, the consequences are becoming clear. For instance, >5% of the total WIA/WGA premium is placed with foreign insurers, elipsLife being the main example. Their success primarily results from ample underwriting capacity, sharp pricing, and an equality-based collaboration model with room for services offered by the consultant. In addition, we’ve observed a development we’re familiar with in the non-life market: substantial growth of mandated brokers. By now, 35% of the sick leave portfolio has been placed with mandated brokers (2016: 25%) – with service providers (including Felison, Nedasco, and Mandaat) making a name for themselves. Often, they turn out to be the go-to solution in the SME segment: they offer administrative convenience and quickly arrive at a market-wide price comparison. Between 2016 and 2018, their portfolio grew by more than 50%, and their market share in the intermediary sick leave market has increased to as much as 12%.
We believe insurers can improve their services on three axes:
1. Mismatch between customer demand and product offer
Sustainable employability is high on employers’ agendas: absenteeism costs are rising, and in this difficult labor market, all attention goes to being a good employer. At the same time, income issues are growing more complex, and customer needs increasingly diverge.
A common observation is that many insurers opt for standardization – which, of course, results in simplicity and lower costs. But it also leads to a limited response to sector-specific needs and a lack of product innovations. Furthermore, consultants believe predictive data are still underused. For example, they are open to a model in which investments in sustainable employability lead to lower premiums. After all, it improves the risk profile, which means the insurer can benefit from a decreasing claims ratio. Finally, they indicate that the risk appetite of Dutch insurers seems to wane, making it difficult to insure a growing part of the market.
2. A lack of digital innovation
As a result of consultants’ professionalization and cost pressure from the market, they place increased demands on digitalization. A much-heard adage is, ‘Stagnation means regression’ – which concerns administrative processes, among other things. Requesting information during quotation processes is often time-consuming, and the lead time for customized quotations increases. Furthermore, consultants expect more digital insight into customer and risk data so it can support their consultancy and serve as an additional service for employers.
3. Declining trust due to conflicts of interest
Both consultants and insurers support employers in improving sustainable employability through consultancy and various prevention & reintegration services. This often leads to conflicts of interest with consultants and insurers ‘competing’ for access to the customer and the associated revenue. To many consultants, recent acquisitions by Aegon, a.s.r. and NN also fit into this picture. They fear that insurers will become competitors in an increasingly important part of their business model. Therefore, their message is clear: actively seek collaboration so the customer ends up getting the best solution.
In-depth solution guidelines
Our conversations yielded more than a problem analysis. In fact, they’ve provided concrete tools for a better collaboration between consultants and insurers. Curious? We’ll explain them in our next three blogs.
Written by: Bob van Opstal (Manager Pensions) and Idriss Abdelmoula (Consultant Pensions).
For more information, contact Bob: email@example.com
Mortgage revenue (-9.1%) and the number of mortgages sold (-12.5%) fell sharply
Compared to the same period last year, mortgage revenue fell by 12.5 percent in the second quarter of 2019, as consultancy firm IG&H’s Mortgage Update points out. Since the average mortgage loan only grows to a limited extent, mortgage revenue is also considerably lower than a year ago (-9.1 percent). As a result, this is the third consecutive quarter in which the mortgage market is shrinking on an annual basis.
In the past quarter, the average mortgage loan rose to a record amount of 317,000 euros – only a slight increase (+0.5 percent) compared to the first quarter of 2019 and a clear indication that growth of the mortgage loan is decreasing.
“There are signs across the board that the trend of strong growth in the mortgage market, which has persisted for years, seems to be broken,” says Joppe Smit, who works at consultancy and implementation firm IG&H. “This is the third consecutive quarter in which we observe shrinkage on an annual basis, although the second quarter of 2019 was better than the first three months of the year. Record year 2018 seems to remain unparalleled, which will put an end to the consecutive growth of the past five years.”
Mortgage refinancers grow increasingly important
Most mortgages (more than 31,000) are still taken out by existing homeowners. This is an 8-percent increase compared to the previous quarter. Mortgage refinancers show the strongest quarterly growth with 13 percent. “The number of mortgage refinancers continues to grow,” says Smit. “Mortgage lenders and consultants that specifically target this group can take advantage of this. On the other hand, it makes banks with large mortgage portfolios vulnerable. They will need to do more to retain these customers.”
Mortgage is one click away with an app
A notable trend in the mortgage market is the growing interest of banks and insurers in simplifying mortgage applications. The market is in the early stages of a digital data transition. “Right now, it’s not yet possible to take out a new mortgage on the sole basis of digital data,” says Smit. “Several sources with reliable and verified data have now been unlocked, but the number of sources should be increased. In addition, mortgage lenders should adjust their processes and systems in such a way that digital applications can also be processed immediately. It’s simply a matter of time before we can submit a complete mortgage application with a few clicks.”
IG&H is one of the initiators of ‘Handig!’ (Handy!). The purpose of this partnership between HDN, ING, NHG, Florius, ABN Amro, Rabobank, De Hypotheker, and IG&H is to make the process of applying for a mortgage as fast and complete as possible based on digital, validated source data. “We see that more and more parties are exploring digital possibilities,” says Smit. “DUO, for example, experiments with possibilities to make government data easier to share, but other parts of the government also follow these developments with interest. Developments will accelerate once they get on board, too.”