Agile vs. non-iterative process models: the agility-related challenges facing insurance companies

Agility is no longer a foreign concept nowadays. Insurance companies have to be flexible and agile today and adapt to the rapidly changing requirements of customers and the marketplace. Digital market players in particular are challenging the traditional business models of insurance providers. Increasing pressure to innovate, new competitors and, last but not least, the Covid-19 pandemic have created a growing push for agile transformation and the rollout of agile methods – even at traditional insurance companies.

In the project business, the desire for agility is now a top priority for a large number of companies. It is also something demanded by management. Agile frameworks such as SAFe, Scrum and LeSS aim to provide support to insurance providers when they are carrying out their projects.

But what are the hurdles that arise when two worlds – agility and long-established insurance company business models – collide?

Compared to most start-ups, insurance companies are extremely hierarchical in terms of how they are structured. Key features of the insurance industry include silo structures, outsourced IT operations and professional specialisation, which is made necessary by the separation of insurance lines. The goal of agile approaches is to move away from these rigid structures and break up line organisational structures in order to gain maximum added value from networking, this being achieved through an interdisciplinary approach and cross-divisional cooperation. All parties involved must be integrated to ensure barriers can be identified early on and goals achieved efficiently.

If we take a closer look one layer deeper in the product development process (PDP) of an insurance provider, it is tiered and features traditional structures. Linear and non-iterative process models – such as the waterfall model – have proven successful for many years. Through the rigorous implementation of successive project phases, non-iterative process models enable a high degree of planning security, which is extremely desirable in the highly regulated insurance industry. Since they lack flexibility, primarily due to the risk of not identifying mistakes in implementation until it is too late and rigid change processes, these models are no longer up with the times in today’s world where insurers face pressure to innovate. Lengthy specification processes take up considerable resources and sometimes last several quarters. Issues such as specification and documentation take centre stage, especially in an industry under tight regulatory oversight like the insurance sector. Agile models that may not provide full and complete documentation would seem at odds with the regulations that apply and the planning certainty insurance companies seek.

What this looks like in practice: hybrid models

Nowadays, you will frequently encounter hybrid approaches that seek to combine traditional PDP processes (especially in terms of design) and agile implementation, which can lead in the real world to large-scale misallocation of resources and requirements not being met. In many cases, there is no quality control for the technical and product design, for example, until very late in the traditional PDP process, typically not until after development has begun. Starting development work without having first fully developed the requirements can therefore lead to incomplete and incorrect implementation of technical requirements, which in turn costs considerable resources to complete and correct. Similarly, planning and defining user stories in an agile context when the business requirements are not yet fully developed can also lead to misunderstandings. Since the refinement phases during the agile development process are so short, there is limited time available for design. If worse comes to worse, possible risk indicators are identified too late and the decisions made based on them are taken too late.

The goal: designing more efficient product development processes

All product development processes have to be more agile and designed more efficiently with agility in mind. It is not enough to simply adopt a framework and proclaim that we take an agile approach to our work. Agility must be actively practised. This means that everyone involved in the product development process is active throughout all phases of the process and work together in an agile manner. In the long run, it also means incorporating agility principles and values into the corporate culture as a way to create an agile mindset. Particularly in an industry that is subject to strict regulatory oversight like the insurance sector is and one that relies on tried and tested process models in order to achieve planning certainty, it is important to find a balance between the added value that agile PDPs offer and the regulatory and security requirements and to combine both approaches in an efficient manner. It is important not to set agile and non-iterative planning and implementation apart from each other. These should instead be incorporated into agile process models, taking into account the level of planning and security required from a regulatory perspective.

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