Why insurance executives need to think like a decision architect

2020 will see insurers facing a number of challenges. Some of these will be ethics related, and some pretty complex. Data ethics ticks both of those boxes. So how should leaders prepare for a big, complex challenge like data ethics? What sort of lead should they give to how their firm responds?

A lot will depend on how they see their role as a leader.  With ethics, a lot of insurance executives have a sense of themselves as good people (and a great many are) and so frame their response around setting a personal example. While helpful in some ways, it usually has limited impact. That’s because leaders are rarely seen by those on the front line who face those difficult ethical decisions on a day by day basis. They’re just too remote.

So how is that gap bridged? What can leaders do to help those more front line people feel better equipped to address those ethical decisions? One approach is for leaders to see themselves as a decision architect. Their role as leaders is to shape how people in their firm make decisions so that the outcomes produced are in line with the firm’s purpose, goals and responsibilities.

Think about it this way. Those leaders are accountable for the decisions made within their firm. Here in the UK, this is central to the thinking behind the regulator’s Senior Manager and Certification Regime (SMCR). The emphasis therefore should not be on the leader seeking to be more and more ethical in what they do. It’s nice but not what they’re paid for. The emphasis should instead be on improving the decision making framework and capabilities that influence how ethical the decisions made further down the organisation turn out to be.

Forests and Trees

This can be done in one of two ways. Leaders could take steps to find the problems and have them addressed. Using the ‘forest and tree’ analogy, this is towards the ‘tree’ approach. It’s really only useful if there are big and obvious issues needing to be addressed first. Outside of that, to me, this doesn’t seem the best use of a leader’s time and energy. The other way involves more of a ‘forest’ approach, with the attention being focused on the systemic issues that help or hinder better decisions being taken.

The ‘forest’ approach is built about several of the components of leadership on ethics I’ve discussed in earlier posts. So by setting a clear ethical vision for their firm, the leader is signalling what people in their firm should be aiming to reflect in day to day decisions. By taking steps to advance the firm’s ethical culture, the leader is defining the standards around what a good decision looks like. And by tackling hurdles that might get in the way of those good decisions, the leader is lowering the resistance that can sometimes stall the delivery of more ethical outcomes.

The Challenge in 2020

Let’s bring data ethics back in as one of the big challenges that insurance leaders will be facing in 2020. If there’s one big and obvious data ethics problem that would warrant the ‘tree’ approach, it is the possibility that the firm’s data and algorithms might be generating discriminatory outcomes. Earlier this year, the FCA was told by the

in no uncertain terms that they were not to accept insurers’ word that their systems weren’t being discriminatory. The FCA had to obtain hard evidence from the market to that effect. This is a clear problem that needs to be quickly addressed.

Putting that significant problem aside though, the forest level approach that leaders need to adopt for  data ethics involves addressing the decision architecture around digital projects so that any other reputational exposures are recognised, understood and addressed as early as possible. And ‘early on’ means when the digital project is being sketched out on the drawing board. This should involve how responsibilities are distributed and coordinated. It should include the purpose and objectives that the digital project should work to. And of course, this needs to be supported with how success should be seen, measured and rewarded.

Beyond the Drawing Board

Now this can be relatively straightforward to communicate, but, to keep with our architectural analogy, remember how architects work. They don’t just design a building and leave it to the construction people to put up. They’re actively involved right through the construction and hand-over phases. Their success is in the end product, not just the drawing board.

So the leader as decision architect needs to be influencing how decisions are made on the drawing board and during the subsequent launch and delivery. They should be recognising hurdles to good decisions, and making sure they’re removed. They should be recognising the problems that pinch points and trade-off situations can create, and helping others recognise them too.

Data ethics will be a significant challenge for insurance firms over the next few years. The right type of leadership will make a huge difference to what can be achieved. Acting like a decision architect is a good model to adopt.