‘Outside Forces’ are Changing the Industry: Markel’s Kumana Has Solutions

By | May 21, 2015

Darius Kumana leads a new team with a new mission that aims to bring the re/insurance industry into the 21st century. He recently joined Markel International in London as head of IT and Digital Strategy – specialties that until recently weren’t part of the corporate agenda. He and his team provide something the industry needs – a culture of innovation that gives companies the ability to find new and better solutions to old and seemingly intractable problems. In this interview he explains his rationale, and why a successful consultant in many different fields decided to join the re/insurance industry.

“I’m not just an IT guy and I’m not just trying to build systems,” Kumana said. “What I’m trying to create is a culture. For Markel it’s not a new culture.” Markel has ‘The Markel Style,’ “which has embraced innovation, challenges, all that kind of critical thinking.”

He explained that as an industry, insurance has “found itself in a place of complacency.” It’s a world where: “We’ve always done it that way so that’s how we’ll continue to do it,” has become part of its culture. He noted that insurance started around “3000 BC when the Chinese split cargo across different vessels and things like that to make sure of safe passage.”

What’s happening now is not within the insurance industry; it’s outside of it. “Customer perceptions are changing,” he said. “People’s relationships with technology are changing. The pace and scale of change, just in terms of ubiquitous tech, is phenomenal. Google has 100 billion searches a month. People talk about big data. Huge amounts of data are being created every year – last year, 3.4 zetabytes of unique information were created – that’s 21 zeros at the end of that – more than was created in the previous 5,000 years of human history. This is exponentially climbing. We are in a data economy.”

As W.E. Deming said "you don't have to change.... survival is optional.”

Kumana also pointed out that distribution has been “massively affected through tech. People are talking about mobile, talking about the Internet, the cloud, all those kind of things. The ability for us to reach our customers and have direct, fine grain conversations with them, that’s now tremendously empowered through tech.”

The third major change he cited is customer experience, which he described as “actually the most crucial part,” but which is sometimes overlooked. Trying to understand that experience requires companies to “actually think about the real problems, and real issues, and pain points our customers are experiencing and trying to provide them with solutions that address their immediate needs.”

Kumana agreed that to do so “it can’t just be technology.” The very first thing that must be done is to “open a dialogue with your customers and actually listen. I’m not talking about focus groups or surveys. I’m talking about a combination of all kinds of tools, whether you’re using data to see how people are actually behaving, but then following that up with qualitative interviews, ongoing programs of user testing to try and uncover why. “What’s the underlying motivation for people behaving the way they do? So that you can actually attack the real core, the nubs of problems for people.”

As an example he explained that Microsoft Word with all its toolbars switched on “takes up about half the screen.” But that’s not really important as it’s “not about features. It’s not about feature completeness. There’s a guy called Dieter Rams, who is a key influencer of Jony Ive with a lot of the Apple designs, and his mantra was: ‘Less but better.’ I always try and think what’s the simplest thing I could do to make things better?”

He indicated that this underpins Markel’s “whole philosophy to iterative delivery. We embrace what are called ‘agile delivery practices,’ where we are always iterating. We have a very simple feedback loop. We talk about build, measure, learn.”

His efforts at Markel aren’t concentrated on doing “a huge up front planning exercise, and then go dark for several years building something and then releasing something,” only to find out that “the need has changed because the market’s moved on and we’ve built something that’s not quite what the stakeholders want.”

It’s actually “those small little increments. What’s the problem? Let’s build something. Let’s measure. And now, let’s learn from that. Maybe what we created was a success and we want to build upon it. Maybe it didn’t work, but let’s celebrate that as learning. Because we work in small increments, we make very small bets so that any “failure” is never catastrophic; we can learn, move on and create really, really high quality systems at scale and at speed.”

Kumana described that approach as a continuous learning process. He meets with his team every two weeks in sessions where they sit down and they talk about what they’ve been doing and how to improve. It’s called a retrospective, and he said it’s “almost a bit of a ritual that we have, where we look at what we’ve done in the last two weeks. I’m talking about very, very fine grained cycles here. We want to get that loop as fast and as tight as possible.

“What happened in the last two weeks? How can we make it better in the next two weeks? We’re on this path of continuous improvement and driving that. Before you know it, you’re operating very, very high performing teams.”

One of the key tasks for Kumana is finding and integrating the members of his team. He acknowledged that it “was much easier when he was in the high tech sector,” as the “people would find you. If I’m doing a cool startup or I’m going to work at Google or Facebook, those rising stars will self-identify and come forward.”

For the insurance industry, however, “it’s almost a marketing problem. You want to attract top talent. You want to attract those people who would otherwise go and work at the Googles and the Facebooks. Actually, this applied to me. It was the reason that I joined Markel International.

“When you look at it objectively, insurance offers some incredibly exciting opportunities,” particularly in the field of big data. People talk about Hadoop clusters and unstructured data and all that kind of stuff. Insurance is absolutely ripe for harnessing data analytics and deriving meaningful insights from that data.

“There are opportunities because we’ve got really complicated technical problems. We’ve got quite convoluted customer experiences. There’s an opportunity to simplify, to rationalize, to really get to the core and add value and instill the peace of mind that our customers so desperately seek.”

He sees an “incredible opportunity” arising. “I’m actually interested in disruption in industries. It’s one of the things that I’ve always found very exciting.” As an example he cited the rise and fall of Kodak. One of its employees actually invented the digital camera. “It was one of their engineers who walked into the boardroom and said, ‘Hey, guys. I’ve got this thing. What do you think?’ They said, ‘No, we’re not in that game. We do film.'”

As a result of that and similar experiences Kumana is convinced that “we’ve got to look at opportunities that could potentially be a little bit painful or a little bit scary or could even — dare I say it — cannibalize existing business models as we’re doing little experiments. But these things are all really, really important when you’re trying to drive disruptive change.

“When you look at the insurance industry, the fact that you’ve got those convoluted customer experiences; the fact that you’ve got intermediaries; the fact that you’ve got limited access; all of these things mean the stars are aligning for potential change.

“You only need to look at other industries to see the effect of technological disruption on them. One of the reasons that the insurance industry has been late to the party on this and has actually managed to get away with it as long as it has, is because there are barriers to that disruption.”

He explained that it’s “really hard for four kids in a garage to come in and disrupt the insurance industry, because there’s no way they’re going to wade through all the rules, regulations, or compliance. They’re probably not going to have a couple of hundred million in capital to underwrite stuff.”

He acknowledged that you have to know something about the insurance industry before you can try and change it. “That is why the key to this is ‘it’s not about entrepreneurs’ who are doing things externally.” Although they do exist within the industry as there are “peer to peer startups within the insurance industry,” and micro-insurance startups. “People are knocking on the door. They’re trying.

“But I think the real opportunity is not for entrepreneurs, but for ‘intra-preneurs.'” These are the “people within organizations who are given the creative freedom to challenge existing and incumbent processes and try and drive change from within.

“When you start that spiral of challenge and change, and you can start to demonstrate results, you’re going to get the attention of your executives. Again, this is not an IT problem. This is a business problem. The bit about innovation, it’s not about technological innovation. It’s not a social strategy or an Internet of Things strategy. This is business model innovation we’re talking about.”

He described the use of technology as an “enabler,” adding that there are opportunities currently available with that technology, and that “the door is wide open. It just takes the right organization with the right mindset to start to walk through it.”

In order to work with a team, you first have to have one. Kumana explained some of the initiatives Markel International uses to recruit. “We’ve communities of practice. We regularly go and speak at industry events. We go to meet-ups where peers from other industries gather. We regularly share knowledge. We’re known to be people who invest in the continuous learning of the individuals on our team.

“We try and create a friendly and fun atmosphere where people have that creative freedom. Word gets around. Like with most startups, it’s not like we’re going to a recruitment agent and going, ‘I’d like to hire some bright sparks.’ You get one or two or three people and then all of a sudden, people are phoning up and saying, ‘Hey, I saw your talk,’ or, ‘we worked together at a previous company. I know that if you’re here,’ because I would only work a certain way. I think when word gets around then people find you.

“There’s a lot of it through the grapevine, but tech PR is very important. We need to stand up to be counted. We recently won an award, a cross industry award, where we came second called ‘Spark the Change,’ which was about creating cultures within workplaces. I think one of the reasons that we impressed was because we’re doing that within constraints.”

He explained that there are “a lot of constraints in encumbered organizations, but we’re willing to challenge those and willing to take those head on. We’re not working around things. We’re not doing ‘skunk works.’ We’re actually saying: ‘Right, if this is a policy and we’re asked to adhere to it and we don’t think it’s a good idea, we’ll actually challenge management and we’ll try and get that changed so that it takes an obstacle away from the team and all future teams going forward.'”

For all of his efforts, Kumana is aware that bringing the needed changes to the re/insurance industry will take time “Cultural change always takes time,” he said. “It’s not something that happens overnight. Indeed, if you try and do it too quickly, if something happens, you tend to revert to type. It’s a defensive strategy. You have to make sure that this is internalized within teams.”

He also pointed out that “one of the key things” that needs to be understood is “change is not free.” Paradoxically, one of the factors that prevent the re/insurance industry from making changes is its own success. “As an industry, it’s been pretty profitable and pretty successful,” he said. Convincing people that change is necessary is therefore more difficult.

Kumana explained that because the industry has been successful “the relationship between leaders in the business and IT has been one of almost a master/slave relationship. ‘Build this. That’s what we want. Do what we say. How long is it going to take?’ As opposed to a partnership.

“We want to switch it so that IT’s not a cost-center where it’s about, ‘If I’m happy with what we’re doing, how can we do the same cheaper next year?'” We want to “know where we may need to invest to unlock potential future opportunities. It’s playing the long game, which really should be something that insurers should be able to grasp.”

He pointed out that technological change has already been “tried and tested” in other industries, “which show us how to create fast moving, responsive, high quality software delivery functions. That’s not the real challenge for innovation within insurance.

“You don’t want to just optimize one part of the system. It’s actually looking at legal, rates, compliance. It’s looking at underwriting and actuarial. There’s no point in having a really, really slick IT function if you kick stuff over the wall to another area of the business which isn’t looking at and adopting that continuous improvement culture.

“This is not about us and them. This is not about the “holes on their side of the boat.” This is about bringing people together and actually challenging and almost changing, potentially, the whole thing. But a small bit at a time.”

There are also legacy issues, which Kumana said “is a real pinch point for insurers. It’s one of the number one reasons why people say, ‘We can’t be as nimble as a green field startup because we’ve still got to honor these gazillion policies, and we’ve got on these legacy systems which are very costly to nurse, very costly to maintain.’

“Sure, that’s an issue but that is exactly why you can’t afford to ignore these things. The problem is not going away. You have to nibble away at them and you have to find the opportunities to continuously improve, or the problem’s not going to get better.” As W. Edwards Deming said: “You don’t have to change… survival is optional.”

Topics Insurtech

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