the intelligent insurer: creating value from opportunities in a changing world
DESCRIPTION
Presentation and discussion on trends shaping the future of the insurance industry – Louis Régimbal and Mary TrussellTRANSCRIPT
The Intelligent Insurer:
KPMG, Toronto, December 2012
Creating value fromopportunities ina changing world
Demographics Technology
EnvironmentSocial values
and ethics
KEY
Components of the insurance
business model
Mega-trends
Coloredtext
Insurance business issues
Political and economic outlook
PRODUCTS &
MARKETS
GOVERNANCE &
PEOPLE
REGULATION
& CAPITAL
MANAGEMENT
DISTRIBUTIO
N &
OPERATIONS
Demographics
Technology
Social valuesand ethics
Environment
KEY
Components of the insurance
business model
Mega-trends
Coloredtext
Insurance business issues
Political and economic outlook
Opportunities arisingfrom the roll back
of state provisions
Innovative models are needed to insure new
technologies and emerging risks
Products need to keep pacewith shifts in lifestyle and
retirement needs
Demand for insurance is growing as people become wealthier
and more urbanized
PRODUCTS &
MARKETS
Crowd Sourcing
Online platform allows customers to interact Customers promote or demote ideas
The bank already rewarded a customer with $10,000 for a new purchase receipt service on its e-banking platform
Collaborate with customers Help shape and create the future of banking
Objective
Description
Results
Commonwealth Bank IdeaBank
Credit or debit card donations online in under a minute
“Fast community building” and easy follow-up for donors
32-year-old Jenny Adams raised $10K in a couple of days for Sandy Storm relief in her neighborhood
Quick-response fund raising Reach a community of givers in an efficient way
Disaster relief crowdfunding
Objective
Description
Results
Components of the insurance
business model
Mega-trends
Coloredtext
Insurance business issues
Political and economic outlook
Aligning customer interaction withevolving preferences requiresgreater use of mobile technology
Social media facilitates enhanced interaction with customers and other constituencies
Cloud computing affordsopportunities to enhanceagility and efficiency
DISTRIBUTIO
N &
OPERATIONS
KEY
Kilimo Salama Safe Agriculture
Kilimo Salama Safe Agriculture
This 'pay as you plant' type of insurance allows farmers to 'try out' insurance, a product they have never bought before and which has a negative reputation in Kenya. Experience shows that as farmers learn to trust insurance, they expand their coverage and are comfortable investing more in their farm, raising their productivity and increasing their food security
Syngenta Foundation
Kilimo Salama Safe Agriculture
Offer a solution to address the problem of unsafe driving by young drivers (aged 16 to 24 years old)
Change incentives scheme: collaboration vs. coercion
Objective
Drivers pay monthly fee based on driving behaviour Good behaviour is rewarded by savings, as much as 25%, and vice versa
Drivers can review their driving habits online and get personalized tips to improve their driving
Characteristics
IAAH trying to drive the right behaviours
Mobiliz
KEY
Components of the insurance
business model
Mega-trends
Coloredtext
Insurance business issues
Political and economic outlook
The regulatory agendahas already changed
Historically lowinvestment yields andvolatile markets aredriving a search fornew investments
Increasingly wealthy Urban areas are exposed to natural catastrophes and emerging risks such as climate change and pandemics
Is insurance investable?
REGULATION
& CAPITAL
MANAGEMENT
Regulation and capital management
KEY
Components of the insurance
business model
Mega-trends
Coloredtext
Insurance business issues
Political and economic outlook
Good governance and responsibility are of
mounting importance
Trust in financial services is among the lowest of any industry
GOVERNANCE &
PEOPLE
Optimize Portfolio by: Using capital efficiently ensuring that it
is targeted at those areas that offer the best return and strongest growth
Reducing exposure to fluctuations in financial markets, and release more capital for reinvestment in the business
Enhance Customer Loyalty by: Building new distribution
capabilities Offering simple easy to
understand products that strengthen trust and inspire loyalty among customers
Governance and People - AEGON
Deliver Operational Excellence by: Reducing costs while further
improving customer services Encouraging greater efficiency in
leveraging resources and capabilities
Empower Employees by: Creating a culture of innovation
and accountability Using greater employee
engagement and drive improvements in efficiency and customer service
Our business is changing…
In response, we have set four strategic objectives…
Source: Transforming Tomorrow
Source: AEGON Q3 results announcement
Focus on delivering on targetsGovernance and People - AEGON
Trust in Canadian businesses has gone up in 2012 & financial institutions are also benefiting from this trust growth
In the U.S., Insurance companies are among the least trusted
Source: Edelman Trust Barometer Annual Global Study
Canada Trust Indicator by industry2011 – 2012 , % of respondents (informed publics ages 24-65) that admit to trust businesses (top 4 grades on a 9-point scale)
Banks56%
52%
Financial Services
56%
43%
Business Average
56%
50%
20122011
+ 6
+ 13
+ 4
Fin
anci
al in
stitu
tions
A
vera
ge
49%
Priv
ate
equi
ty fi
rms
32%
Inve
stm
ent b
anks
35%
Pro
per
ty/C
asu
alty
in
sura
nce
co
mp
anie
s
37%
Lif
e in
sura
nce
co
mp
anie
s
42%
Bro
kera
ge fi
rms
43%
Larg
e na
tiona
l ban
ks
45%
Mut
ual f
und
com
pani
es
55%
Com
mun
ity/
regi
onal
Ban
ks
67%
U.S. Trust Indicator in Financial institutions2011, % of respondents (informed publics ages 24-65) that admit to trust financial institutions
The Trust Factor
What does this mean for me?
Using the Intelligent Insurer
PRODUCTS &
MARKETS
GOVERNANCE &
PEOPLE
REGULATION
& CAPITAL
MANAGEMENT
DISTRIBUTIO
N &
OPERATIONS
Demographics
Technology
Social valuesand ethics
Environment
Board away days
Corporate alignment
Team building and
buy in for change
Stress and scenario testing
Analysing unmodeled
risk
Reverse stress testingInternal audit
planning
Preparation for budget setting
Developing the ORSA
Audience polling
17
18
A Historically low interest rates and significant equity market volatility
B Increasing impact of natural catastrophes
C Regulation
D Consumers becoming better informed and shopping for lowest prices
Q1. Which of the following do you consider poses the biggest threat to insurers’ profitability over the next 10 years?
Toronto US Latin America
Asia Pacific
Gen Y
54% 55% 41% 62% 21%
27% 16% 10% 0% 29%
7% 21% 15% 28% 17%
12% 8% 34% 10% 33%
19
A Greater use of data analytics
B Building collaborative partnerships with customers
C Working more closely with distributors and intermediaries
DMaking greater use of a range of experts from academics to branding consultancies and design ‘gurus’
Q2. In a rapidly changing world how will the insurance industry best ensure it understands the needs of its clients?
Toronto US Latin America
Asia Pacific
Gen Y
41% 45% 35% 22% 33%
45% 30% 45% 39% 50%
11% 20% 15% 37% 4%
4% 5% 5% 2% 13%
20
A Greater focus on their people and customers and rigorous enforcement of high ethical standards
B Insuring against a percentage reduction in profitability
C Insuring against a reduction in net promoter scores and other customer satisfaction metrics
D Working closely with branding advisers and consumer champions
Q3. In a world of increasing social inter-connectivity how will successful companies protect themselves from damage to their brand and reputation?
Toronto US Latin America
Asia Pacific
Gen Y
81% 71% 88% 89% 64%
3% 5% 5% 0% 9%
7% 7% 3% 3% 0%
8% 16% 5% 8% 27%
21
A Cloud computing
B Mobile communications and payments
C Social media
D Data mining and analytics
Q4. Which of the following uses of technology do you expect to have the greatest long term impact for insurers?
Toronto US Latin America
Asia Pacific
Gen Y
5% 7% 12% 3% 21%
34% 38% 32% 37% 21%
20% 11% 29% 18% 17%
41% 44% 27% 42% 42%
22
A Very well placed – only minor tweaks will be needed
B Extensive changes will be needed to use of biometric data and customer profiling to select and price risks
C This is a big threat to the potential viability of personal lines insurance
D This could lead to wholesale restructuring of the industry and a return to tariffs
Q5. How well placed do you consider the insurance industry is to manage the potential conflict between greater use of data and analytics to price risk, and societal trends against discrimination ? Toronto US Latin
AmericaAsia Pacific
Gen Y
18% 24% 17% 6% 0%
51% 54% 61% 65% 79%
22% 16% 20% 18% 13%
9% 6% 2% 12% 8%
23
A Investors will demand a higher Return on Equity
B Investors will accept a lower Return on Equity
CInsurance becomes an even more complex sector to understand as compared with the rest of the investment universe
DGreater value will be attributed to those insurers who can demonstrate a superior ability to manage and price risk
Q6. How do you think investors will respond to greater transparency of the risks run by insurers?
Toronto US Latin America
Asia Pacific
Gen Y
8% 7% 5% 8% 5%
3% 6% 3% 5% 0%
17% 11% 3% 13% 0%
72% 76% 89% 74% 95%
24
A Yes – because of more rigorous ERM
B No – because regulatory oversight is imperfect
C No – because of inherent limitations of models
D Yes – because of more consistent insights into the pricing of risk
Q7. Do you consider that greater use of economic capital modelling will reduce or even eliminate the underwriting cycle?
Toronto US Latin America
Asia Pacific
Gen Y
6% 6% 13% 5% 0%
8% 11% 5% 19% 4%
72% 78% 58% 54% 79%
14% 6% 25% 22% 17%
Join the debateWe sincerely believe that insurance is a vital social and economic lubricant – and its role is becoming more important, not less. This role and the forces shaping its future must be clearly understood by governments, regulators, inter-governmental agencies, NGOs – and consumers.
Your views on these and other issues shaping the insurance industry of the future would be very welcome. You can join the conversation at:
Twitter: @kpmgglobal
LinkedIn: kpmg.com/socialmedia
Web: kpmg.com/intelligentinsurer
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”
Clarence Darrow
Demographics Technology
EnvironmentSocial values
and ethics
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