Interview Notes

This interview is based on extensive research performed by ACORD exploring the linkage between digital maturity and financial performance across the global insurance industry. The complete research paper can be found at www.acord.org/research.

The study examines digital maturity versus key financial and operating metrics over the last 10 years for the top 200 carriers worldwide. Does digital maturity correlate to high performance? The digitization imperative is reviewed in the context of emerging technologies used by “insurtechs” and incumbent insurers, change management, strategy development, and execution.

In this research ACORD seeks to answer the question: Are there measurable outcomes that warrant the cost, time, and risk associated with the digitization journey? The discussion with Bill and the findings of the study are inspiring.

A Quote from Bill

“Digitization is the key enabler for the vast majority of strategic imperatives and allows insurers to address them in an effective, efficient, and timely manner. Enterprise-wide digital maturity provides insurers the flexibility and adaptability necessary to fully leverage data at the moment of value, such as in underwriting, claims, and stakeholder support.”

Interview

David Schapiro (DS): Could you please tell us a bit about yourself and your career?

Bill Pieroni (BP): I have been President and CEO of ACORD since 2016, and before that served as the Global Chief Operating Officer at Marsh. Prior to my time at Marsh, I was the Senior Vice President and part of the Office of the Chairman at State Farm, and I also served at Aon as Senior Vice President and Global Chief Information Officer. I’ve also been fortunate to serve in leadership positions at other major insurance and financial services organizations throughout my career, including the IBM’s insurance business, as well as a partner at Accenture and a consultant at McKinsey & Company.

DS: Could you please share with us how you entered the insurance industry?

BP: There are two types of professionals in the industry: those who knew early on that they wished to join insurance, and those who came to it by accident. I am one of the latter. I actually planned on a career in medicine; however, I found myself as a consultant early on serving a health insurer, and, lo and behold, thirty years later I’m still in insurance. I feel incredibly fortunate to have found this industry, and I think it’s a wonderful career path for those who want to make a positive impact across industries, communities, and in the lives of others.

DS: Could you please elaborate on the methodology of the “digitization imperative” research implemented by ACORD.

BP: The challenges and opportunities the insurance industry has been facing in recent years, accelerated by the pandemic and now impossible to ignore, can be summed up in what we call the digitization imperative. Market demands, amplified by the pandemic, have made digital capabilities not just an option for insurers, but a requirement.

ACORD established a proprietary methodology to assess insurer digitization that moves beyond simple metrics, evaluating it across nine dimensions:

• Sustained Investment – Consistent investment to support continued renewal

• Consumer Enablement – Cross-touchpoint capacity and competency

• Data & Analytics – Big data, real-time analytics, and cognitive computing

• Ecosystem Integration – Timely and seamless stakeholder interaction

• Operational Optimization – Organization and process streamlining

• Capability Alignment – Unified process, organization, and digital infrastructure

• Value Management – Leverage of digitization to support improved efficiency & effectiveness

• Models & Option Value – Increased strategic & tactical degrees of freedom

• Talent & Culture – Receptive to innovation and change, C-suite support for digital capability programs.

We began an annual study several years ago to look at the state of digital maturity across the industry and evaluate how digitization corresponds to value creation by studying metrics like total shareholder return, cash flow generation, and premium growth. Moreover, the study offers key execution imperatives for insurers seeking to create and capture value for stakeholders. The 2022 ACORD Insurance Digital Maturity Study is based on an extensive analysis of the 200 largest insurers worldwide. As I highlighted, it seeks to understand how digital maturity supports strategic flexibility, operating adaptability, and, most importantly, stakeholder value creation.

DS: What are the key findings over the years that ACORD has conducted this research?

BP: The results of the digital maturity study have consistently indicated the unambiguous connection between digitization and insurer performance. This year’s study, conducted post-COVID, further underscored the increasing importance of digital maturity for the industry.

We have found the relative digital maturity of insurers is naturally distributed across five levels of digitization, ranging from Digitized Competitors (those who demonstrate the highest levels of digital maturity in relation to their peers) to Digital Laggards (those with the lowest level of digital maturity). The performance gap between highly digitized insurers and digital laggards has continued to grow year over year, and as the ecosystem continues its rapid evolution, the need for insurers to digitize becomes all the more urgent.

DS: Is digitization the only aspect of the new age of technology?

BP: Given our robust definition of digitization, it encompasses many of the most impactful ways that technology can be deployed. But clearly it is just one element of the wave of change facing the industry. The war for talent, macroeconomic forces, sophistication of insureds, and changing channel dynamics are additional forces impacting our industry.

Current and emerging digital capabilities enable insurers to not only survive but, more importantly, thrive in the midst of accelerating change.

Of course, leveraging these tools is not without its growing pains either. Insurers must learn to adapt to the strategies, business processes, and organizational capabilities that will help them effectively utilize technologies to meet consumers’ expectations and buying behaviors. Unfortunately, insurers exhibiting lower levels of digital maturity, who have accumulated “technical debt,” are increasingly falling behind—and may find it impossible to catch up.

DS: Looking back, is this the only time the insurance industry has been “challenged” with the opportunity of new technology?

BP: No. In fact, insurers have steadily leveraged technologies over the decades to improve efficiency, effectiveness, and positioning. We see this beginning in the 1970s. Insurers were early adopters of computing technology in the ’70s, utilizing new capabilities to support their existing business processes and reduce costs. The 1980s and ’90s was the era of integration, in which insurers focused on core process enablement through technology. Insurers began to adapt their business with the turn of the millennium and into the 2010s by creating new technology-driven processes that allowed them to not only cut costs but increase revenue.

Now, the last decade or so has seen an even greater shift, with insurers leveraging digital tools to develop fundamentally new operating models—a key distinction from past eras of technology in insurance. Leading insurers are merging business and technology into one set of capabilities that can drive value generation through strategic flexibility and operating adaptability. The challenges and opportunities presented in this emerging era can be best approached through a strategy of digitization. Paradoxically, though, insurers may struggle to modernize because they were early adopters, as they have accumulated so much legacy technology over the decades.

DS: Are all insurers aware of the challenges and opportunities of the current decade?

BP: I think the pandemic created a moment of truth for insurers, regardless of their level of digital maturity. For those who systematically invested in digital capabilities, their past investment was validated and this was reflected in financial results. On the other end of the spectrum, digital laggards may have already recognized that digitization is a future inevitability—however, they thought they had more time. The pandemic served as a wake-up call for insurers who systematically underinvested in technology. And while those who did not embrace the digitization imperative still can, they will undoubtedly encounter—and likely already are—the challenge of overcoming the mountains of technical debt they have accumulated. For some of them, the scale and scope of change may be insurmountable.

DS: And how does digitization tie into all of this?

BP: Digitization is the key enabler for the vast majority of strategic imperatives and allows insurers to address them in an effective, efficient, and timely manner. Enterprise-wide digital maturity provides insurers the flexibility and adaptability necessary to fully leverage data at the moment of value, such as in underwriting, claims, and stakeholder support. It helps to ensure that the right processes, capabilities, and organization come together in an effective strategic operating model.

DS: What percent of the insurers demonstrated the highest levels of digital maturity?

BP: We found that, among the top 200 insurers around the world, fewer than 25% demonstrated high levels of digital maturity.

As I said, we segmented the insurers into five categories, based on their relative level of digital maturity. Digitized Competitors and Digitized Firms, the two groups that exhibited the most advanced levels of digital maturity, only account for about a quarter of companies we studied. Despite the fact that they are in the minority, these are the organizations that truly drive the market, using digitization to shape stakeholder behaviors, optimize effectiveness, and support strategic positioning.

On the other hand, more than half of the insurers in the study are still exploring how digitization can be applied against their business model. These organizations may have early or isolated instances of digitization, but they have not yet embraced digital capabilities in an impactful way.

DS: What was the impact of increasing levels of digital maturity on the insurers’ business performance?

BP:  For the most part, increasing levels of digital maturity drive improved value creation and capture across stakeholders. Over the period studied, the top tier—Digitized Competitors—more than tripled their share prices, as well as growing premium at more than 1.5x the industry average. Though there are many factors that influence growth, these results underscore the importance of a well-managed business model supported by robust digital capabilities to an insurer’s ability to survive and thrive in the industry.

Conversely, those with the lowest levels of digital maturity— Digital Laggards—delivered below-average performance across nearly all metrics. As a group, the Digital Laggards are actually experiencing negative cash flow in the current post-COVID environment. The performance gap between Digitized Competitors and Digital Laggards has grown significantly over the years that ACORD has conducted this study, emphasizing the importance of a digital strategy in the insurance industry.

DS: What would your guidance be to insurers facing the digitization challenge/opportunity?

BP: If you’ve seen one insurer, you’ve seen one—strategies and models that work with one insurer may not apply to another. Moreover, the answer to this important question will depend on your current level of digital maturity.

Those with high levels of digital maturity should continue with sustained levels of thoughtful investment, supporting renewal and pursuing superior positioning. Don’t rest on your laurels. Achieving and maintaining high levels of digital maturity require sustained investment and, more importantly, leadership focus.

For those with isolated levels of digitization and digital laggards, the situation is more complex, and depends on the insurer’s capacity and competency to execute large-scale change programs. For some of those with lower levels of digital maturity and who choose not to begin the journey, we see two options: 1.) focus on a product set or component of the value chain that does not rely heavily on technology enablement, or 2.) seek out M&A options.

DS: Are there any final thoughts you would like to share?

BP: If there’s one imperative I care most about, it is attracting, developing, and retaining talent in our industry. The insurance industry is an incredibly important part of the global economy. And for those of us fortunate enough to have a career in it, it is deeply fulfilling. We are able to make a real difference in people’s lives when they need help the most.

Despite the significant role our industry serves in society, we do not attract our fair share of high-skill, high-will talent. Collectively, we need to ensure that we attract and develop the next generation of leadership to support continued positive impact.

Bill Pieroni – Bio

Bill Pieroni is President & CEO of ACORD, the standards-setting body for the global insurance industry. His career has spanned technology, operations, and top executive roles at several leading insurers, brokers, and consulting firms.

Prior to his appointment as ACORD CEO, Bill served as the Global Chief Operating Officer of Marsh, responsible for the firm’s global operations. He also served as Senior Vice President and part of the Office of the Chairman at State Farm, and as Aon’s Senior Vice President and Global Chief Information Officer, with global responsibility for operations across retail, wholesale, and reinsurance brokerage. His extensive insurance and financial services background also includes time as General Manager of IBM’s insurance business, a partner at Accenture, and consultant with McKinsey & Company.

Bill earned his Bachelor of Science in accounting with University Honors & Distinction from the University of Illinois. He also received his MBA with Highest Distinction from Harvard University School of Business Administration, where he was named a Baker Scholar.

Bill regularly presents the results of ACORD research at dozens of conferences, board meetings, and executive sessions hosted by industry-leading organizations across the globe. His areas of particular expertise include digitization, change management, and the strategic and capability imperatives for high performance in the insurance industry.