A.T. Kearney: Positioning for the Telematics Tipping Point

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Here is one of the keynote presentations from the hugely successful Insurance Telematics USA 2010.

During the presentation, two Vice Presidents from A.T. Kearney answer the following questions:
- How will the insurance telematics market evolve in the next 3-5 years?
- What are the implications for insurance companies?
- How should insurance companies position themselves for success in the face of uncertainty?

To view the presentation WITH AUDIO then click here:
http://www.telematicsupdate.com/insurance-telematics/presentations.shtml

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  • This was was one of the most popular presentations at Insurance Telematics USA 2010.

    If you’re interested in the insurance telematics industry then you should join us at Insurance Telematics USA 2011 Conference & Expo (Sept 8 - 9, Chicago). According to Towers Watson, the event is “critical for players in this space”.

    Top speakers include: AT Kearney, Allstate, GM, Liberty Mutual, Towers Watson, Octo Telematics, AAA, The Hartford, Sprint, Delphi, the U.S. DOT, GMAC and Farmers Insurance.

    For more info, click here: http://www.telematicsupdate.com/insurance-telematics/
    And join us on LinkedIn: http://events.linkedin.com/Insurance-Telematics-USA-2011/pub/666137
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  • Go to http://www.telematicsupdate.com/insurance-telematics/presentations.shtml to view the full presentation with audio!
       Reply 
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A.T. Kearney: Positioning for the Telematics Tipping Point

  1. 1. 2010 Insurance TelematicsConference<br />Chicago, September 13-14, 2010<br />
  2. 2. A.T. Kearney Introduction<br />A.T. Kearney<br />Joe Reifel<br />Partner<br /><ul><li>Global management consultancy with offices in 37 countries across N. America, EU and AsiaPac
  3. 3. Recent engagements in Financial Services:
  4. 4. Business Strategy
  5. 5. Marketing, Sales and Channel Effectiveness
  6. 6. Customer Experience
  7. 7. Innovation and Product Development
  8. 8. Operational Excellence
  9. 9. Enterprise Transformation
  10. 10. Technology Strategy
  11. 11. Advised companies in the US and EU on telematics, from strategy through pilot and launch</li></ul>Mike Hales<br />Partner<br />
  12. 12. Key Questions<br />How will the insurance telematics market evolve in the next 3-5 years? <br />What are the implications for insurance companies?<br />How should insurance companies position themselves for success in the face of uncertainty?<br />
  13. 13. 0<br />Potentially large and rapidly growing market<br />Insurance TelematicsMarket Potential<br />Migration of Telematics-Based Insurance Offering<br /><ul><li>Strong consumer appetite – 30%+ of auto customers indicate willingness to adopt UBI
  14. 14. Small base but rapid growth of UBI</li></ul>Active Safety <br />Potential US market ~55M subscribers<br />From Niche to Mass Market Appeal<br />Based<br />Feedback <br />Customer Value Proposition<br />Based<br />Performance <br />Current US market ~0.5M subscribers<br />Based<br />Usage <br />Based<br />Sources: Berg Insight; Frost & Sullivan; Consumer data from US and EU insurers; Insurance Research Council; A.T. Kearney analysis<br />
  15. 15. Significant value to customers and insurers<br />Customers<br />Insurers<br />Reciprocity<br /><ul><li>Lower premiums
  16. 16. Growth
  17. 17. Quality of portfolio</li></ul>Safety<br /><ul><li>Driving improvement
  18. 18. Accident response
  19. 19. Lower loss ratio</li></ul>Claims Experience<br /><ul><li>Speed and convenience
  20. 20. Theft prevention
  21. 21. Lower loss ratio</li></ul>Customer Interaction<br /><ul><li>Value from insurer relationship
  22. 22. Retention
  23. 23. New markets and services</li></ul>US focuses on reciprocity and safety, while EU also embraces Claims<br />
  24. 24. Growth of usage-based insurance accelerating<br />Delaying Factors<br />Growth Drivers<br />+<br />Consumers <br />Affordability<br />Awareness <br />Acceptance <br />+<br />Privacy – “big brother”<br />+<br />+<br />Technology<br />Cheaper<br />Smaller<br />Embedded<br />Infrastructure<br />+<br />Installation<br />+<br />+<br />+<br />Regulatory<br />Consumer protection<br />Insurance regulations<br />Environmental<br />Safety<br />+<br />+<br />Telematics Ecosystem<br />Operating complexity<br />Supplier ecosystem<br />
  25. 25. Embedded device for safety, diagnostics & roadside assistance – extensible for UBI<br />OEMs embedding telematics<br />From premium to mass market vehicles …<br />… From optional to standard feature<br />By 2014, over 20% of US vehicles are likely to have embedded telematics<br />Source: 2009 Townsend report, Department of Transportation, Ward’s, Bureau of Economic Analysis, iSuppli , A.T. Kearney analysis<br />
  26. 26. An increasingly robust ecosystem<br />Application & Service Providers<br />Content Providers & Aggregators<br />Access Network<br />Devices<br />Distribution<br />Auto<br />Home<br />Always Connected Consumer<br />Personal<br />Winners and gatekeepers in the new space are yet to be determined<br />
  27. 27. UBI is approaching a tipping point<br />Experiment<br />Capture Advantage<br />Protect Profitability<br /><ul><li>Insurer experience
  28. 28. Consumer appetite
  29. 29. Proven offering
  30. 30. Price and value
  31. 31. Mass market
  32. 32. Adverse selection
  33. 33. Switching costs
  34. 34. Embedded technology
  35. 35. Insurers forced to enter
  36. 36. Consumers compelled</li></ul>2014?<br />Today<br />Tipping Point<br />15+ years<br />~3-5 years<br />When do you believe the industry will reach a tipping point?<br />
  37. 37. <ul><li>Disintermediation – new entrants accelerate commoditization
  38. 38. Non-insurance players dominate gateway and relationship</li></ul> Customer Ownership<br />The Insurance industry faces uncertainties<br /><ul><li>Industry profitability lower
  39. 39. Reduced rates for good drivers, but…
  40. 40. Potential limits on rate increases for risky drivers
  41. 41. Consumer backlash or poor experience impact brand
  42. 42. External data ownership reduces the ability to differentiate</li></ul>Profitability<br /> Brand Differentiation<br />
  43. 43. Suggested strategy to win<br />1<br />2<br />5<br />3<br />4<br />Manage Unique Economics<br />Establish Organizational Focus & Strategy<br />Build Holistic Offering by Target Segment<br />LeverageStrategic Partnerships<br />CreateCompelling Message & Experience<br />
  44. 44. Have a plan … but be flexible<br />1<br />2<br />5<br />3<br />4<br />Manage Unique Economics<br />EstablishOrganizational Focus & Strategy<br />Build Holistic Offering by Target Segment<br />Create Compelling Message & Experience<br />LeverageStrategic Partnerships<br />Create Strategy & Monitor the Market<br />Create Organizational Focus<br />Develop point of view on the evolution of telematics – new product vs. industry disruptor<br />Create a flexible medium-term strategy, considering a portfolio of bets<br />Understand and monitor the triggers that will impact your view on the market direction<br /><ul><li>Build dedicated team and executive sponsorship to enable speed to market
  45. 45. Adopt incubator approach to accelerate innovation and contain complexity
  46. 46. Align with core operations to enable smooth transition</li></li></ul><li>Target offering to customer segments<br />1<br />2<br />5<br />3<br />4<br />Manage Unique Economics<br />EstablishOrganizational Focus & Strategy<br />Build Holistic Offering by Target Segment<br />Create Compelling Message & Experience<br />LeverageStrategic Partnerships<br />Targetthe RightCustomer Segments<br />Develop Tailored Offerings<br /><ul><li>Define telematics segments – consider need, size of market and likelihood of adoption
  47. 47. Target both new customers and existing customer base
  48. 48. Determine launch sequence and timing
  49. 49. Define the core product & service platform
  50. 50. Customize offerings and positioning by segment (e.g. safe drivers, teens)</li></li></ul><li>Enhance the customer’s perception of value<br />1<br />2<br />5<br />3<br />4<br />Manage Unique Economics<br />EstablishOrganizational Focus & Strategy<br />Build Holistic Offering by Target Segment<br />Create Compelling Message & Experience<br />LeverageStrategic Partnerships<br />Develop Differentiated Message<br />Consistently Deliver Superior Experience<br /><ul><li>Convey reciprocity (savings), safety and convenience
  51. 51. Create simple and sufficient message to enable customers to self-select
  52. 52. Understand and manage privacy concerns
  53. 53. Exploit telematics to deliver on key customer experience attributes
  54. 54. Proactively take advantage of new and more frequent interactions
  55. 55. Ensure controls are in place to deliver consistent CE across touchpoints</li></li></ul><li>Create a partner portfolio strategy<br />1<br />2<br />5<br />3<br />4<br />Manage Unique Economics<br />EstablishOrganizational Focus & Strategy<br />Build Holistic Offering by Target Segment<br />Create Compelling Message & Experience<br />Leverage Strategic Partnerships<br />… Structure and manage the relationship<br />… Select the right partners …<br />Understand the importance and role of partnerships …<br />Operational Processes and Roles<br /><ul><li>Technology
  56. 56. Experience
  57. 57. Intellectual Property
  58. 58. Vision and Strategy
  59. 59. Organizational Focus
  60. 60. Speed to Market
  61. 61. Risk Management
  62. 62. Market Insight
  63. 63. Capabilities & IP</li></ul>IP<br />Org Structure<br />Successful Relationship<br />Relationship Governance<br />Performance Management<br />Longer term, need to partner with gatekeepers in the telematics ecosystem<br />
  64. 64. Understand and exploit the unique economics<br />1<br />2<br />5<br />3<br />4<br />Manage Unique Economics<br />EstablishOrganizational Focus & Strategy<br />Build Holistic Offering by Target Segment<br />Create Compelling Message & Experience<br />LeverageStrategic Partnerships<br />… but also additional costs<br />New sources of revenue …<br /><ul><li>Expanded markets and offerings
  65. 65. Share of customer wallet
  66. 66. Retention
  67. 67. Customer acquisition costs
  68. 68. Product costs
  69. 69. Operating costs</li></ul>Costs<br />Revenues<br />~ Margin: Underwriting revenue offset by Loss Costs<br />Profit per customer<br />+ Growth: Customer acquisition + Retention<br />Core growth<br />+ Growth: Expanded markets and offerings<br />Unregulated growth<br />
  70. 70. Key Messages<br />“Get in the market … and have a longer-term plan”– the market is evolving rapidly, by-standers run the risk of declining profitability and losing market share<br />“Know your customer” – understand how to serve the customer beyond traditional insurance and leverage increased interactions to create value<br />“Enhance your brand” – define your role in the telematics ecosystem, and take steps to differentiate and protect your company<br />“You can’t do it alone” – partnerships are required to get to market quickly, to make multiple bets in the face of uncertainty as well as ensure longer-term success<br />“Make the new economics work” – understand and exploit the economics of telematics to achieve growth while protecting or improving profitability and reduce cost barriers<br />

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