Business Capability Model

Introduction

Building on the post Dan Fiehn FBCS CITP has mentioned I think its important to add to the business capability model as the cornerstone of elevating a tech strategy in today’s fast-paced insurance industry. As customer expectations shift, and regulatory demands grow more complex, technology has become an indispensable force driving competitive success.

In every facet of the insurance business—whether underwriting, claims processing, or customer service—an effective tech strategy can give companies the edge they need to thrive. However, having a good strategy isn’t enough. What distinguishes a good strategy from an outstanding one is how well it aligns with the business and how effectively it is executed. This is where a business capability model becomes critical.

So, what exactly is a capability model, and how can it transform your tech strategy from merely good to exceptional?

In this article, we’ll explain the concept, explore why it’s essential for insurance companies, and show how it ensures your business goals and IT efforts are fully aligned, delivering tangible value.

PART I – What Is a Business Capability Model?

Simply put, a capability model is a high-level blueprint that outlines the key competencies your organisation must excel in to succeed. It identifies the essential skills, processes, and resources your company must develop and maintain to deliver value to customers and achieve business goals.

Unlike operating models, which focus on day-to-day activities, a capability model takes a broader view, concentrating on what your organisation needs to do exceptionally well. These capabilities range from underwriting risk to processing claims efficiently or delivering personalised customer experiences through digital channels.

Key Components of a Business Capability Model

A typical capability model in the insurance industry includes the following:

1. Business Capabilities: These are the core competencies critical to the business, such as underwriting, claims management, policy issuance, and customer service.
2. Supporting Capabilities: These encompass areas like finance, HR, and IT systems and payments that enable core business functions to operate smoothly.
3. Enabling Capabilities: These include technologies, data systems, and infrastructure that empower the business and supporting capabilities to function effectively.

A business capability model aligns technology investments with business objectives, ensuring resources are focused on what matters most to the organisation’s success.

Why a Business Capability Model Is Essential for Insurance Tech Strategies

The insurance industry is complex, with insurers constantly balancing customer needs, regulatory compliance, competition, and operational risks. IT departments must juggle everything from claims systems to digital customer experiences—often under intense pressure to deliver results fast. This can quickly become overwhelming without a clear structure to guide decision-making.

A well-defined capability model offers this structure. It enables companies to align their IT efforts with business priorities, ensuring agility, efficient resource allocation, and sustained success in a rapidly evolving industry.

Without a capability model, IT teams risk losing focus. Misaligned priorities and inefficient use of resources can result in solutions that fail to meet business needs. A capability model provides the clarity and focus needed to ensure that every tech initiative aligns with business goals, creating real value.

For instance, if the business priority is enhancing customer experience by speeding up claims processing, the capability model will highlight this as a critical objective. IT teams can then focus on developing technology solutions like automating claims workflows. Without this alignment, IT could invest in areas that don't directly address the company’s core goals, leading to wasted time and resources.

PART II – Key Benefits of a Business Capability Model in Tech Strategy

Implementing a capability model yields substantial benefits, transforming how businesses approach their tech strategies. Here are some of the key advantages:

1. Improved Decision-Making

Many organisations make technology investment decisions based on intuition or short-term needs, often missing the bigger picture. A capability model removes much of the guesswork, providing a clear understanding of the business’s critical capabilities and aligning tech investments accordingly. This helps ensure that every technology decision is strategic, long-term, and focused on delivering maximum value.

2. Risk Mitigation

Risk management is central to the insurance industry, not just in terms of products but also in internal operations. A capability model helps companies mitigate risks—such as data breaches, regulatory non-compliance, or failed IT implementations—by providing a structured framework that ensures technology decisions meet both business and regulatory requirements.

For example, when implementing a new customer portal, the capability model ensures that IT understands how the system integrates with broader customer service functions and regulatory standards. This approach reduces compliance risks and improves the chances of a successful technology rollout.

3. Optimised Technology Investments

With budgets often under pressure, prioritising tech investments can be challenging. A capability model ensures that resources are allocated to the most critical areas, preventing the common pitfall of spreading resources too thin across too many initiatives. This focus maximises the ROI of tech investments and ensures that technology supports the company’s most pressing business needs.

PART III – How to Build a Capability Model for Your Insurance Business

Building a capability model might seem daunting, but by following a structured approach, it can be done effectively:

Step 1: Identify Core Business Capabilities

Start by identifying the core capabilities critical to achieving strategic objectives. In an insurance company, these could include underwriting, claims management, risk assessment, and customer service.

Step 2: Define Supporting and Enabling Capabilities

Next, break down the supporting and enabling capabilities that make the core business capabilities possible. These include functions like IT systems, HR, and finance, as well as critical technologies such as data management and cybersecurity particularly when we are looking at complying with DORA.

Step 3: Align Technology with Capabilities

Once you understand the core, supporting, and enabling capabilities, align your technology initiatives with these areas. For example, if underwriting is a core capability, consider investing in AI tools that enhance risk data analysis. If customer service is a priority, look at technologies like CRM systems or chatbots.

Step 4: Evolve the Model

A capability model is not static. As your business grows and adapts to changing market conditions, the model should evolve too. Regularly review and update it to ensure it stays aligned with the company’s current needs.

Real-World Example

A global insurance company was facing challenges with outdated claims systems, inefficient customer service workflows, and growing regulatory pressures. Despite heavy investments in technology, IT efforts weren’t delivering the needed results.

By implementing a capability model, the company was able to refocus its IT strategy. The core capabilities of underwriting, claims management, and customer service were identified, and IT efforts were realigned to support these areas.

The result? The company upgraded its claims systems, introduced AI tools for underwriting, and launched a customer portal that streamlined service interactions. Customer satisfaction improved, operational costs dropped by 15%, and the company regained its competitive edge.

PART IV – Conclusion

In the competitive world of insurance, having a solid tech strategy is no longer optional—it’s essential. But the difference between a good strategy and an outstanding one lies in alignment and execution. A business capability model is the key to achieving this alignment.

By clearly identifying and prioritising the organisation’s capabilities, a capability model ensures that technology efforts are focused on the areas that matter most. This alignment boosts decision-making, mitigates risks, and optimises tech investments, driving long-term success and agility.

If you’re ready to take your tech strategy to the next level, a business capability model might just be the missing link that transforms your organisation’s approach to technology.

Ready to Transform Your Tech Strategy?

Having worked in both technology and business leadership, I’ve seen firsthand how organsations struggle to align IT efforts with business priorities. The result? Wasted resources and missed opportunities. A well-designed capability model can change that.

If you’d like to explore how a tailored capability model can drive real value for your insurance company, contact me today.