5 minute read
Digital transformation
Co-innovating business models for the future
Irene Philipps, Chief Digital Officer at The Norwegian Shipowners’ Mutual War Risks Insurance Association (DNK), argues that the time is now for digital transformation in the marine insurance sector. To embrace the opportunity the market needs to think collectively and look elsewhere for inspiration
With more than 50,000 ships registered in more than 150 nations, the international shipping industry is responsible for about 90% of world trade. Yet, as the industry expands, the sector faces significant safety challenges, including those related to fire and explosion.
Digital transformation is not about automating business as we do it, but about radically changing the way we do business. We have all heard it many times, but do we truly understand it?
SAME, BUT DIFFERENT
The global pandemic has increased the speed of technology adoption in even the most remote corners of the marine insurance industry. When the old model simply no longer works, even those generally reluctant to change realize that we need operations that enable digital service delivery.
From implementing basic infrastructure for remote work to developing smart placement and underwriting platforms, the marine insurance industry has in the last two years seen a rush towards new technology that makes transactions less dependent on human interaction.
But is this really digital transformation? Or have we simply been “electrifying paper”, doing what we have done for hundreds of years, just a bit faster and online?
Organizational long-term studies on how corporations adopt new technology, suggest that first movers often make short-term gains from using new technology to increase productivity and improve their current business model.
However, they tend to fail in seeing the long-term transformation potential of technology and may therefore become even more susceptible to disruption than those who adopt slower.
DIGITALLY DISAPPOINTED
Stanford University researcher and futurist Roy Amara stated back in the 1960s that “we tend to overestimate the effect of technology in the short run and underestimate the effect in the long run”. What is often referred to as “Amara’s Law” explains how people typically believe that the impact of technology increases at a consistent, linear rate through time.
In reality, most technology-driven development starts slow, leaving people immediately disappointed at the lack of effect while surprising them later with unexpected force and scope of impact.
The marine insurance industry seems to have come to a point where we experience a certain fatigue related to all things digital. We feel that we have attended enough conferences and read enough articles about the topic. To this extent, we are probably slightly disappointed that all our investments in technology have not yet brought along the fundamental transformation we were expecting to see in the short term.
We may sit with a feeling that all the digital buzzwords we were so excited to talk about a few years ago, may be just that – buzzwords. We probably start thinking that we may have come as far as we could in digitizing our industry.
Irene Philipps, DNK
CO-INNOVATING A NEW PLATFORM
In digital terms, insurance is a platform business model, a network that connects people, services and things in exchange for money. Insurance as a product has traditionally been seen by its buyers as a must have-investment or a “necessary evil” to avoid worse things from happening.
If purchasing the same old product faster and online is the best digital value proposition marine insurance can offer to its stakeholders, we fail to fundamentally understand the benefits and challenges of digital transformation for the industry platform as a whole. What if we instead try to turn insurance into a positive experience that buyers are excited to engage in?
Digital changes the way we interact, the way we innovate collaboratively or internally, and how we organize ourselves – across the entire marine insurance platform, not within one company or business line.
The new tools we have available are intelligent, autonomous and collaborative, and enable us to work together and innovate in new and more integrated ways, beyond the limitations of a single organization.
Insurance companies that think the introduction of digital delivery channels for their traditional products is building a platform tend to overlook that, from a stakeholder’s perspective, the marine insurance platform is the entire industry, a cross-functional, cross-company value chain.
If we use digital only to focus on short-term economic value within our own organization, we will not be able to develop or deliver the increasingly complex solutions that are needed from our industry. However, if we start to better understand our platform as a whole, we will be able to provide a more seamless, positive and exciting experience to those who engage with us.
GETTING IT RIGHT
Amara’s Law implies that between the early disappointment and the later underestimation there must be a moment when we get it about right, after the first hype subsides. For marine insurance this moment is now.
This does not mean that we are suddenly able to predict technological change to our industry - nobody is. It means that the marine insurance network has the opportunity to get it right if we tap into our collective experience from the first wave of digitization to start co-innovating our future platform.
As a mutual owned by shipowners, DNK has traditionally looked at how the value chain can benefit all stakeholders. Through our insure-tech company Osprey Solutions and through the Norwegian Maritime Cyber Resilience Centre (NORMA), we are engaged in various co-innovation initiatives with thought leaders from in- and outside marine businesses.
Together, we try to identify new insurance solutions to the challenges that digital transformation will bring to the marine industry, such as increasing cyber risk.
One of the most important insights we have gained from these processes and experiments so far is that we need to constantly test our hypotheses and create new data rather than just look for what has been collected already.
We have also learned that we often view our problems from too narrow lenses and tend to look for answers in our own backyard, believing that marine is so different from anything else that we can’t possibly take any advice from “outsiders”. But as history has shown, industry disruption often comes from the least expected outsiders.
The more we test and try and the wider the network, the stronger the platform and the more rewarding the experience for its stakeholders. Maybe there is a way to get it right.
