[Ed note: For more on advanced Agile at insurers, pre-register for Novarica’s upcoming webinar on February 20.]
Most insurers have already begun their Agile journey. They have completed multiple development efforts with scrum masters leading multi-disciplinary scrum teams and reaped the benefits of closer business and technology collaboration. And now they believe they are ready to take their Agile practice to the next level; however, to successfully transform into an Agile organization, certain long-standing practices require change.
Funding. Even though a project’s development may have been Agile, it may still be getting funded as though it were Waterfall via a traditional IT governance model. This funding approach borrows from pre-Information Age capital funding models. For example, let’s say an organization is going to build a shoe factory or drill an oil well. The costs of the project can be well-known in advance, and revenue estimates based on production can be estimated with a level of certainty. Agile development does not pretend that technology projects in a dynamic marketplace can be forecast with such certainty. Thus, Agile organizations fund products rather than projects. Product owners are allocated product budgets and make decisions about functional priorities based on current and evolving business needs. These product budgets fund one or more scrum teams, and team capacity is measured in sprints.
Culture. Bringing the rest of the organization along on this Agile transformation journey will require changes in deep-seated practices that may never have been questioned before. The shift from funding projects to products will necessitate strong persuasion capabilities and the identification of like-minded senior executives. Ideally, there will be strong sponsorship and active leadership from the top. One senior IT executive we spoke to was finally able to convince the CFO by reminding him that project budgets and expected ROI tended to diverge significantly from forecasts.
Metrics. Metrics that made sense when IT organizations were attempting to rigidly adhere to business requirement documents, budgets, and schedules are no longer applicable. As IT and business grow more closely aligned, especially around products, metrics that measure the performance of the product begin to dominate. Thus, a data product may be measured by the number of users or productivity and impact of a science team, and a claim product may be measured by duration, adjuster case load, or claim cost metrics.
Novarica’s recent research brief, Agile Maturity Model for Insurers, provides a framework for insurers to evaluate their capabilities across multiple dimensions, including funding, culture, and metrics. The evolution toward Agile may not be without its challenges, but its value seems to outweigh the cost as it is rare indeed to find the insurer that abandons Agile and reverts to Waterfall.
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