digital disruption in insurance - fst · adoption of sensor-based technologies and connected...
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Digital Disruption
in InsuranceAndy Parton
Partner, Ernst & Young AustraliaMob: 0404 810 676
FST Future of Insurance, 10 March 2016
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The Digital Decathlon
A ten point plan for the digital insurer (circa 2013)
Analytic
Agile
Connected
Asking the right questions, getting the right data
Wiring analytics into core processing and decision-making
Customising and personalising products and services
Anticipating possible or likely changes
Analysing anomalies, trends, competitor moves
Responding faster than competitors
Adapting to changes when they happen
Putting the customer at the heart of business
Connect personally and emotionally
Stay in tune as things change
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EY Global Megatrends
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Digital
future
Entrepreneurshiprising
Globalmarketplace
Urban world
Resourcefulplanet
Healthreimagined
Several key
megatrends are
converging to
shape the future
of the global
insurance
marketplace.
Select predictions
Adoption of sensor-based technologies and
connected devices (the Internet of Things) will
become widespread.
Implementation of data driven underwriting techniques
will transform insurance, e.g. the elimination of medical
exams for all but the largest cases.
FinTech will drive huge disruption and enable
disintermediation of the market.
Evolution of new funding models will provide
opportunities for new entrants into the insurance
market.
Market shifts with Asian insurers accounting for a
larger share of the North American market. China and
Brazil will be classified mature, as new emerging
markets come to the fore.
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Digital Future – Global Megatrend
Declining PC usage and
increasing mobile device adoption
is driving a “mobile first” world
Workforce and work is
changing
We’re only using 20% of
the available customer
data
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Insurance has a long way to go in building good digital experiences
The rise of Digital
In a world where digital devices
are becoming a necessity, and
not just an indulgence, it is
important for insurers and
brokers to stay in tune.
The vast majority (95%) of
digital opinion leaders agree
that a poor digital experience
risks losing customers.
57 %
89%
79 %
have operating models that
do not facilitate digital
say they are “not setting the
baseline” for digital or are
“still learning”
81%
of insurers believe they could
lose competitive advantage if
they fail to embrace digital
don’t consider past interactions
when recommending products
or services to online customers
“Those caught in inertia will
wake up one day and
wonder: ‘Where has my
market gone?’ If you reach
the tipping point, you have
negative time to respond.”
– Jenny Young, Partner, Ernst &
Young Australia
Insurers are viewing digital as a priority,
but are lagging behindTV, films and media
Entertainment
Travel
Music
Computer/Console Games
Financial services
Newspapers
Sport
Real estate
Telecommunications
Hotels and restaurants
Lifestyle
Clothes and footwear
Education
Groceries
Gambling
Government
Automotive
Beauty and health products
Magazines
Utilities
Investment and superannuation
Insurance
30%26%
24%24%
18%18%
15%15%
14%12%11%
10%10%
7%6%6%
4%4%3%3%3%
2%2%
Best sector digital experiences
EY Research: Digital Australia – State of the Nation 2015-16
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Disruption is happening…
52% of the Fortune 500 firms since 2000 are gone
Source: Perspectives: TCS Consulting Journal, Vol. 05: The Digital Enterprise:
A Framework for Transformation. Tata Consultancy Services, 2013.
“Half a century ago the average
Fortune 500 Company was living about
75 years – it could live that long.
Today, the average Fortune 500
company is lasting about 14 years
and declining… the world is not
becoming faster – it is faster.”
Source: Geraldine McBride, The Edge of Innovation, Auckland Today,
Issue 114, September 2015, pp 10-11
By 2018, 1/3 of the top 20 firms in most industries will be disrupted by industry-specific data platforms
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Characteristics of Disruptors
► Disintermediation: use digital technology to break-
down value chain and achieve direct connection
between demand and supply
► Customer value proposition: create a delightful user
experience that makes people want to use service
more not less
► New business models: customer self-service options
that people enjoy and which they feel that they control
► Brand: Leverage novelty value of new brands as an
exciting alternative to ‘stale’ legacy incumbents; brand
voice defined by what your customers say not
your adverts
Many disruptors, e.g. Uber, possess all of
these characteristics
Large number of intermediaries
Generally poor user experience
High number of human touch points
and little self service
Largely old brands dominating
+
Grudge purchase
Applies in Insurance
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Sensors are an insurers eyes and ears…
Wearable or personal
technology, sometimes
called “fit tech,” often
used in the context of
monitoring heart rate and
other health-related
metrics. This technology
is rapidly developing, with
prototype patches already
performing blood work,
ECGs and automatically
administering drug doses.
Sensors on objects,
including personal and
commercial vehicles and
shipping containers, that
measure distances
travelled, speeds and
frequency and level
of braking.
Location-based sensors,
such as those in factories,
warehouses or offices
and in-home sensors,
including “smart”
thermostats and security
technologies, such as
alarms and cameras.
Other geographic
information systems (GIS)
that provide geophysical,
topographical,
climatological and
hydrological data, as well
as information about utility
grids and flight path, and
which may include drone
and satellite imagery.
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Gartner says the Internet of Things will be at the plateau of productivity in
5-10 years along with the Connected Home and Autonomous Vehicle.
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The driverless car is on it’s way…
One Car =
100 TB/day
US Market
5,000,000 PB/day
(Facebook currently
stores 500 PB)
Google have
completed
500,000+km
Fleet of 10
different cars
Driverless car
4 US states
have
approved
Image source: still from Google video on Driverless Cars circa. April 2013 and republished
…and it will be
parked outside
the “Smart Home”
Image source: The Engineering and
Physical Sciences Research Council
(EPSRC) – REFIT Research Project
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Blockchain technology has the potential to disrupt insurance through multiple applications
Identity and
underwriting
Fraud preventionBusiness model
innovation
Medical records
Driving history
Biometric data
Asset ownership tracking
and verification
Peer to peer insurance
Self-governed insurance
communities
Extend insurance
coverage
Genecoin.me – storing DNA Everledger.io
Smart contracts
Event triggered policies
(e.g. Farmers, life
insurance)
Smartcontract.com
Counterparty.io
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Blockchain and IoT
Two cars are involved
in an accident
• Both cars are registered
as known assets on the
Blockchain and were so
by the manufacturer at the
point of production.
• GPS sensors know that
Car A pulled out from a
side road in front of the
Car B, causing the
collision.
Telematics sensors in the cars know
that both are incapacitated and write
this information to the Blockchain
The Blockchain
knows that Car A
is insured
A smart contract
immediately executes
approving the claim
Initiating a tow and scheduling
a motor repair slot to fix the
issue which is undeniable
Policyholder communicated to
electronically. Claim is processed
straight through electronically, no
claims handler is involved.
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Purpose galvanises people to ignite long-lasting positive change, driving growth and innovation
‘Purpose activated’ is the implementation of purpose
Purpose is an aspirational reason for being that is grounded in humanity and which inspires a call to action
The business world is placing a spotlight on purpose…
“Purpose: The secret
ingredient that drives
business success”,
Forbes
“Profits with purpose:
How organising for
sustainability can benefit
the bottom line”,
McKinsey & Company
“A shared purpose drives collaboration”, Harvard Business Review
“What Millennials
want most:
A career that
actually matters”,
Forbes
“How purpose drives revenue”,
Forbes
“Instil a sense of
purpose, unleash
better performance”, Wall Street Journal
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Harvard Business Review Executive Survey commissioned by EY
indicates that Purpose is valued but underleveraged
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Smarter customers
How are our customers changing?
What is the effect of a new “born digital” generation
of consumers on my market?
In a rapidly changing world, it’s
crucial for companies to be more
able to respond to change.
The only real answer is agility
Does your business strategy work in the digital world?
Globalisation and the ability to scale
How do we adapt our IT landscape to
support digital business models?
New business models
How can companies in my industry take
advantage of emerging business models?
How do we best deploy our capital with the
rise of digital assets?
New channels and routes to market
How have the boundaries of my
organization/value chain changed in the
digital world?
Are there opportunities in adapting new
delivery or pricing models for my
products/services?
New ways of working
How can digital technology accelerate
my business processes?
How should I be thinking about talent
and performance in our workplace?
Confidence in our digital future
How do we build greater awareness of our
cybersecurity risks and assess which threats
affect my business goals?
How do we keep up with the pace of
technological change and have the agility to deal
with threats as they arise?
Regulation and tax changes
How do we navigate the complexity of changing
regulatory and tax environments that can be
multi-regulator and multi-jurisdiction?
Constant change and innovation
How do we adapt our products and
services to a fundamentally digital future?
What is the new basis of competition
in my sector and market?
How can we create a new digital
revenue stream?
Lower barriers to entry
What will hyper-disintermediation/
specialisation mean in our market?
How do we protect our market share in
this new age of interconnectivity?
Access to resources
How do we leverage open
innovation and crowdsourcing?
Digital creates
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Type of growth
Disruptive
New customers
New to the world
TransformationalNew to you
New to you
Incremental
Existing
Existing
Where should you focus your digital and innovation efforts?
And what levels
of investment
and return
should you
expect?
10%
70%
20%
20%
70%
Ideal level of enterprise
investment
10%Return on investment
Illustrative figuresProducts / business models
Cu
sto
mers
/ m
ark
ets
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Plan for Disruption
Define and activate Purpose1.
Hire the right people who can think disruptively2.
Invest in Transformation and Disruption3.
Do the Decathlon5.
Oh, and you still have to…
Partner, partner, partner4.
The better the question. The better the answer.
The better the world works.
Is your business
strategy fit for
the digital world?
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