The Intelligent Insurer: Creating value from opportunities in a changing world


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Presentation and discussion on trends shaping the future of the insurance industry – Louis Régimbal and Mary Trussell

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  • In this very attractive magazine style publication ‘Transforming AEGON’ the group sets out how its business is changing through:Aging populationsChanging customer behaviourRising stakeholder expectationsEconomic uncertaintyRegulatory changes
  • The Intelligent Insurer: Creating value from opportunities in a changing world

    1. 1. The IntelligentInsurer:Creating value fromopportunities ina changing worldKPMG, Toronto, December 2012
    2. 2. Demographics Technology Social valuesEnvironment and ethics
    3. 3. DemographicsEnvironment Technology KEY Social values Components of and ethics the insurance business model Mega-trends Colored Insurance text business issues Political and economic outlook
    4. 4. Opportunities arising from the roll back of state provisions Innovative models are needed to insure new technologies and emerging risks Products need to keep pace with shifts in lifestyle and retirement needs KEYDemand for insurance is Components of growing as people the insurance become wealthier business model and more urbanized Mega-trends Colored Insurance text business issues Political and economic outlook
    5. 5. CrowdSourcing Commonwealth Bank IdeaBank Disaster relief crowdfunding  Collaborate with customers  Quick-response fund raising Objective Objective  Help shape and create the future of banking  Reach a community of givers in an efficient way  Credit or debit card donations online in under a  Online platform allows customers to interact minute Description Description  Customers promote or demote ideas  “Fast community building” and easy follow-up for donors  The bank already rewarded a customer with  32-year-old Jenny Adams raised $10K in a Results $10,000 for a new purchase receipt service on Results couple of days for Sandy Storm relief in her its e-banking platform neighborhood
    6. 6. Aligning customer interaction with evolving preferences requires greater use of mobile technologySocial media facilitatesenhanced interaction withcustomers and otherconstituencies Cloud computing affords opportunities to enhance KEY agility and efficiency Components of the insurance business model Mega-trends Colored Insurance text business issues Political and economic outlook
    7. 7. Kilimo SalamaKilimo Salama Safe SafeAgriculture 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
    8. 8. Mobiliz IAAH trying to drive the right behaviours  Offer a solution to address the problem of unsafe driving by young drivers (aged 16 to 24 years old) Objective  Change incentives scheme: collaboration vs. coercion  Drivers pay monthly fee based on driving behaviour Good behaviour is rewarded by savings, as much as 25%, and vice versa Characteristics  Drivers can review their driving habits online and get personalized tips to improve their driving
    9. 9. The regulatory agenda has already changedHistorically lowinvestment yields andvolatile markets aredriving a search fornew investmentsIncreasingly wealthyUrban areas are exposedto natural catastrophesand emerging risks suchas climate changeand pandemics KEY Components of the insurance business model Is insurance investable? Mega-trends Colored Insurance text business issues Political and economic outlook
    10. 10. Regulation andcapitalmanagement
    11. 11. Good governance and responsibility are ofmounting importance Trust in financialservices is among thelowest of any industry KEY Components of the insurance business model Mega-trends Colored Insurance text business issues Political and economic outlook
    12. 12. Governance and Our business is changing…People - AEGON In response, we have set four strategic objectives… Optimize Portfolio by: Deliver Operational Excellence by:  Using capital efficiently ensuring that  Reducing costs while further it is targeted at those areas that offer improving customer services the best return and strongest growth  Encouraging greater efficiency in  Reducing exposure to fluctuations in leveraging resources and financial markets, and release more capabilities capital for reinvestment in the business Enhance Customer Loyalty by: Empower Employees by:  Building new distribution  Creating a culture of innovation capabilities and accountability  Offering simple easy to  Using greater employee understand products that engagement and drive strengthen trust and inspire improvements in efficiency and loyalty among customers customer service Source: Transforming Tomorrow
    13. 13. Governance andPeople - AEGON Focus on delivering on targets Source: AEGON Q3 results announcement
    14. 14. The Trust Factor 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 Canada Trust Indicator by industry 2011 – 2012 , % of respondents (informed publics ages 24-65) that admit to U.S. Trust Indicator in Financial institutions trust businesses (top 4 grades on a 9-point scale) 2011, % of respondents (informed publics ages 24-65) that admit to trust financial institutions 2011 2012 67% 55% 50% 49% Business 45% 43% 42% Average +6 37% 35% 56% 32% 43% Financial + 13 Investment banks Average companies Community/ Large national banks companies insurance companies regional Banks Private equity firms Brokerage firms Services Mutual fund Life insurance Property/Casualty Financial institutions 56% 52% Banks 56% +4Source: Edelman Trust Barometer Annual Global Study
    15. 15. What doesthis meanfor me?
    16. 16. Using theIntelligentInsurer Board away Preparation for days budget setting Demographics Analysing Corporate unmodeled alignment risk Environment Technology Stress and Team scenario building and testing buy in for Reverse change Social values stress Internal audit and ethics testing planning Developing the ORSA
    17. 17. Audiencepolling 17
    18. 18. Q1. Which of thefollowing do youconsider poses thebiggest threat toinsurers‟ profitabilityover the next 10years? Toronto US Latin Asia Gen Y America Pacific Historically low interest rates and significant equity 54% 55% 41% 62% 21% A market volatility 27% 16% 10% 0% 29% B Increasing impact of natural catastrophes 7% 21% 15% 28% 17% C Regulation Consumers becoming better informed and shopping for 12% 8% 34% 10% 33% D lowest prices 18
    19. 19. Q2. In a rapidlychanging world howwill the insuranceindustry best ensure itunderstands the needsof its clients? Toronto US Latin Asia Gen Y America Pacific 41% 45% 35% 22% 33% A Greater use of data analytics 45% 30% 45% 39% 50% B Building collaborative partnerships with customers Working more closely with distributors and 11% 20% 15% 37% 4% C intermediaries 4% 5% 5% 2% 13% Making greater use of a range of experts from D academics to branding consultancies and design „gurus‟ 19
    20. 20. Q3. In a world ofincreasing social inter-connectivity how willsuccessful companiesprotect themselvesfrom damage to theirbrand and reputation? Toronto US Latin Asia Gen Y America Pacific 81% 71% 88% 89% 64% Greater focus on their people and customers and A rigorous enforcement of high ethical standards 3% 5% 5% 0% 9% B Insuring against a percentage reduction in profitability Insuring against a reduction in net promoter scores and 7% 7% 3% 3% 0% C other customer satisfaction metrics 8% 16% 5% 8% 27% Working closely with branding advisers and consumer D champions 20
    21. 21. Q4. Which of thefollowing uses oftechnology do youexpect to have thegreatest long termimpact for insurers? Toronto US Latin Asia Gen Y America Pacific 5% 7% 12% 3% 21% A Cloud computing 34% 38% 32% 37% 21% B Mobile communications and payments 20% 11% 29% 18% 17% C Social media 41% 44% 27% 42% 42% D Data mining and analytics 21
    22. 22. Q5. How well placed do youconsider the insurance industryis to manage the potentialconflict between greater use ofdata and analytics to price risk,and societal trends againstdiscrimination ? Toronto US Latin Asia Gen Y America Pacific 18% 24% 17% 6% 0% A Very well placed – only minor tweaks will be needed Extensive changes will be needed to use of biometric 51% 54% 61% 65% 79% B data and customer profiling to select and price risks This is a big threat to the potential viability of personal 22% 16% 20% 18% 13% C lines insurance This could lead to wholesale restructuring of the 9% 6% 2% 12% 8% D industry and a return to tariffs 22
    23. 23. Q6. How do you thinkinvestors will respondto greater transparencyof the risks run byinsurers? Toronto US Latin Asia Gen Y America Pacific 8% 7% 5% 8% 5% A Investors will demand a higher Return on Equity B Investors will accept a lower Return on Equity 3% 6% 3% 5% 0% Insurance becomes an even more complex sector to C understand as compared with the rest of the 17% 11% 3% 13% 0% investment universe Greater value will be attributed to those insurers who 72% 76% 89% 74% 95% D can demonstrate a superior ability to manage and price risk 23
    24. 24. Q7. Do you considerthat greater use ofeconomic capitalmodelling will reduceor even eliminate theunderwriting cycle? Toronto US Latin Asia Gen Y America Pacific 6% 6% 13% 5% 0% A Yes – because of more rigorous ERM 8% 11% 5% 19% 4% B No – because regulatory oversight is imperfect C No – because of inherent limitations of models 72% 78% 58% 54% 79% Yes – because of more consistent insights into the 14% 6% 25% 22% 17% D pricing of risk 24
    25. 25. Join thedebateWe sincerely believe that insurance is a vitalsocial and economic lubricant – and its role isbecoming more important, not less. This role andthe forces shaping its future must be clearly Demographics Technologyunderstood by governments, regulators, inter-governmental agencies, NGOs – and consumers.Your views on these and other issues shaping theinsurance industry of the future would be verywelcome. You can join the conversation at:Twitter: @kpmgglobalLinkedIn: Social values“It is not the strongest Environmentof the species that survives, and ethicsnor the most intelligent thatsurvives. It is the one that ismost adaptableto change.”Clarence Darrow
    26. 26. This document is CONFIDENTIAL and its circulation and use are RESTRICTED.© 2012 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMGEurope LLP and a member firm of the KPMG network of independent memberfirms affiliated with KPMG International Cooperative, a Swiss entity. All rightsreserved. This document is confidential and its circulation and use are restricted.KPMG and the KPMG logo are registered trademarks of KPMG InternationalCooperative, a Swiss entity The KPMG name, logo and „cutting throughcomplexity‟ are registered trademarks or trademarks of KPMG InternationalCooperative (KPMG International).