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Ripe for disruption: from insurance #hashtags to unicorns, the who, what and why of frontier innovation in insurance

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"Creating value through customer centricity - Leveraging data, analytics and technology". Insurance company forum – 29-30 September 2016, Cologne.

Insurers are operating in a rapidly developing environment, and three key global trends are set to fundamentally impact on the insurance industry over the next four years. First, there is new social interaction paradigm, driving different consumer needs and expectations as to the type of interactions they have with insurers. Secondly, the nature of risk is changing, with new sources of risk, new ways of mutualising risk, new interconnection, and new ways of measuring and tracking risk in real time. And finally, the completive environment is changing drastically, with an acceleration in insurtech as both new and old players invest heavily in new technology.

In this session at the Willis Towers Watson ‘Creating value through customer centricity’ forum, Magda explored in detail these key trends and their implications for insurers. She also explored how the GAFA management models compare with traditional insurance management models, exploring the impact of customer centric approaches on innovation, and the move towards the omnichannel. Finally, Magda considered why to date the industry hadn’t seen more new entrants and disruption, and how this was likely to change dramatically in the medium term.

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Ripe for disruption: from insurance #hashtags to unicorns, the who, what and why of frontier innovation in insurance

  1. 1. Ripe for disruption? © 2016 Willis Towers Watson. All rights reserved. from insurance #hashtags to unicorns, the whose, whats and whys of frontier innovation in insurance Dr. Magdalena Ramada (Willis Towers Watson) Research and Innovation Center)
  2. 2. Insurance 2020: three key global trends affecting the insurance industry in the next 4 years © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 2 1 Change in the nature of Risk Acceleration in #insurtech New (social) interaction paradigm 2 3
  3. 3. #TrendOrReality1 – New (social) interaction paradigm © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 3
  4. 4. 4 Baby Boomers Age in 2015 52 - 69 Estimated population size (U.S.) 76 million – 79 million Individualistic Loyal Career-focused Generation Z Age in 2015 5 - 19 Estimated population size (U.S.) ~25 million (and growing?) Realistic Aware Technology native Generation Y Age in 2015 20 - 35 Estimated population size (U.S.) 80 million – 90 million Group-oriented Idealistic Socially conscious Generation X Age in 2015 36 - 51 Estimated population size (U.S.) 34 million – 40 million Entrepreneurial Self-reliant Globally minded New demographics: Gen Y has arrived — Gen X are emerging leaders -– Gen Z is on the cusp 1946 - 1963 1964 - 1979 1980 - 1995 1996 - 2010 New interaction paradigm © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.
  5. 5. What will 2018 workforce look like? © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 5 Illustrative company demographic shift Global company population — By age Pre-Boomer Boomer  Individualistic  Loyal  Career-focused Gen. X  Entrepreneurial  Self-reliant  Globally minded Gen. Y  Group-oriented  Idealistic  Socially conscious Gen. Z  Realistic  Aware  Technology native New interaction paradigm
  6. 6. 6 Technology native Generations Y and Z are accelerating the interaction paradigm shift The number of text messages sent and received in one day exceeds the population of the planet Before age 40 the average U.S. student today will have had 10 to 14 jobs By 2025, they’ll constitute 75% of global workforce Generation Y (Millennials) are first generation born with technology They are more inter-connected, harder to please, have a holistic view of experience and need seamlessly integrated interaction systems that are quick and versatile 24%Is the customer satisfaction gap between Gen Y and others cohorts in the US when asked about the insurance industry 40%of Gen Yers in the US uses digital channels at least once a month for insurance needs, twice as much as consumers from other generations 73%would prefer new financial services products from Google, Amazon, Apple, PayPal or Square than from traditional players Is likely to buy insurance from technology companies such as Google 1/3 New interaction paradigm © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.
  7. 7. Source: Sparks & Honey, 2015 © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 7 Generation Y (“Millennials”) Generation Z Tech savvy: 2 screens Tech innate: 5 screens Think in 3D Think in 4D Radical Transparency: Share all Judiciously share (GeoLoc OFF) Slacktivists Active volunteers Multi-cultural Blended (race & gender) Tolerance Togetherness Immature Mature Communicate with text Communicate with pictures Share stuff Make stuff Have low self-confidence Have humility Now focused Future focused Optimists Realists Want to be discovered Want to work for success Team orientation Collective consciousness New interaction paradigm
  8. 8. Employees aren’t just looking for a career; Customers aren’t just looking for a product; they’re looking for a personal Experience It’s no longer about segmentation, it’s about personalization
  9. 9. #TrendOrReality2 – The nature of risk is changing © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.
  10. 10. Global Risk report 2016 © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 10  Increase in social and technological risks  Increase in interconnection of global risks  Why does it matter?  Insurance Industry insures against those risks!  How is your talent base prepared to understand and deal with complexity?  Social innovation and sharing economies are “Uberizing” the global economy to deal with economic uncertainty and inefficiencies  Millennials and Gen Zers are socially conscious and the latter are anxious to work on tackling these risks Evolution of Risk
  11. 11. The nature of Risk and how we measure it are evolving with technology © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 11 Technology also has had an impact on risk and how it can now be measured:  Multiple, measurable, interconnected sources of risk  Risk transparency is increasing with Internet of Things and data sharing  Risk sharing is increasing  New sharing economy models have different risk transfer consequences  Dealing with risk is no longer a low-frequency business: real-time risk assessment and adaptive insurance pricing is expected  From compensating losses to avoiding them: data based risk mitigation services are expected from consumers Risk type varies and can be measured for the same person on an hourly basis: “Uberization” of economy, geo-location, on-off and hybrid products necessary Evolution of Risk
  12. 12. #TrendOrReality3 – The acceleration of #insurtech © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.
  13. 13. The insurance industry is ripe for disruption… © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 13 Very large global market, with established traditional players facing obsolete systems and strong inertia US P/C net premiums sold by agency writers. 67% for commercial P/C lines. Too many different types of actors and intermediators – agents, brokers, reinsurers; expensive distribution in highly regulated industry While personal banking has a consumer satisfaction score of 15.2 with respect to online experience/offering, insurance’s score is only 4.0, ranking very poorly on digital satisfaction (bottom three of all industries’ surveyed) Rise in #insurtech investments from 2014 ($740B) to 2015 ($2.7T). Main areas of #insurtech: online distribution, personalization/flexibility, IoT/Big Data for optimized pricing/risk measurement, sharing economies 4.8T 47% 4.0 258% …and here is why $ #insurtech acceleration
  14. 14. The take-off of #insurtech © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 14 3.5x YoY increase of #insurtech financing in past 12 months $60+M Average funding for Product insurance technology ventures 76% of #insurtech deals happened in the U.S. $2.7B Invested in #insurtech start-ups in 2015 24% Of #insurtech ventures are innovating in marketplace platforms and 17%is seeking backend innovation 51% Non-health #insurtech investments in the US in 2015, up from 30% in previous year 311 Insurance and Technology companies investing in #insurtech in 2015 16 #insurtech start-ups are looking exclusively at P2P insurance #insurtech acceleration
  15. 15. #insurtech areas 15 Regulation & Legal framework Wealth management Data & Analytics Information security Health Internet of things Customer engagement #insurtech acceleration Vehicle telematics Environmental Sensors Provenance / Asset tracking Home security CRM Price aggregation Omni channel acquisition Digital claims processing Online policy purchasing Digital contracts Blockchain KYC Identity verification Automated compliance processes Algorithm asset management Digital savings plan Pension management Wearables Genetic data Chronic condition management Preventive healthcare Claims fraud detection Cyber breach insurance Risk management Personal data storage Real time risk mitigation Pay per use insurance Dynamic underwriting Personalized premiums Source: StartupBootcamp #insurtech © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.
  16. 16. The Future?Early adoptionIn progress The waves of #insurtech change 16  Big data  Predictive analytics  Internet of Things  Blockchain  P2P  Comparison platforms  Automation  Artificial Intelligence  Instantaneous billing  Real-time adaptive pricing based on changing customer needs and shared data  Per-use and personalized products Ongoing Developing Disruptive #insurtech acceleration  Globalization  Mobile technology  Medical advances  Integration with social media © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.
  17. 17. Some tweets from the #insurtech world © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 17  2014 AXA Data Innovation Lab - SciencesPo Paris Joint Research Initiative "Understanding and Enhancing Individuals Trust in Data Sharing"  @FinLeap now offers #fintech in an exchange platform through its new venture #SolarisBank to empower start-ups  Oscar tries to untangle the giant hairball called American Healthcare #InsurTech  Together, the five most well-capitalized insurance tech startups including Zenefits and Oscar have raised $2.5B in aggregate funding  Sept 2015: AXA launches Kamet, a €100m InsurTech incubator  Next Insurance Matches Lemonade for Largest US Tech Seed Round Since Start of 2015  March 2016: @ShareSafeGlobal first insurer to use #blockchain in a hybrid insurance product for the #sharingeconomy #insurtech #insurtech acceleration
  18. 18. HitFox © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 18  Founded in 2011 as a game distribution platform  2012: becomes a company builder  35 employees, 10 nationalities, 3 locations: Berlin, San Francisco, Seoul  2014: Enters the #fintech market by founding a company builder devoted to Financial Technology start-ups called FinLeap.  2015 FinLeap launches 5+ new companies, hires 150 new employees. The first company to be launched was Savedo, a retail investment marketplace.  2016: 600+ employees of 45 nationalities, 15+ companies and 6 international offices make up the HitFox Group. #insurtech acceleration The quick evolution of an outside player
  19. 19. © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 19 “In 2010, the founders of the FinTech company, Friendsurance, realized that insurance is expensive and lacks transparency: people pay high premiums each year and get nothing in return. This is why Friendsurance has developed a revolutionary peer-to-peer insurance concept, which rewards small groups of users with a cash-back bonus at the end of each year they remain claimless. The claims- free bonus is available on our website www.friendsurance.de. The vision of Friendsurance is to make insurance easier and more affordable for customers, helping to save customers time and money that can better be spent on the finer side of life. Fifty people work passionately daily toward achieving these goals in Friendsurance’s Berlin Headquarters, which is hiring. Friendsurance currently operates as an independent broker in the German market with approximately 60 domestic insurance partners.” (From the welcoming homepage of Friendsurance) #insurtech acceleration The traditional insurance brand problem
  20. 20. P2P Healthcare UBI/Auto Sharing Economy Spot Insurance Product insurance Backend Marketplace & online consumer platforms Data, Software & Analytics Accelerators Reinsurance IoT Recognize these logos? Here are 1/3 of #insurtech players © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 20 #insurtech acceleration
  21. 21. Gafanomics and customer centricity © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 21 http://www.slideshare.net/faberNovel/gafanomics/34-34_GAFA_are_really_managing #insurtech acceleration
  22. 22. Customer Centricity call for the Omnichannel © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 22 Seamless integration and synchronization Physical World Big Data Social Media Online & Mobile  Customer analytics  Risk analytics  Internet of Things  Artificial Intelligence  Real time pricing  Social dimension of risk sharing and risk mitigation  P2P  Social Media Distribution Channel  Multiple devices in synch  providing same, personalized experience  Concierge  Real time risk mitigation services  Physical location  CRM  Call centre #insurtech acceleration
  23. 23. Going for the Omni-Channel: When Mobile technology meets #insurtech © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 23 Selling platform apps & pay-per-use insurance Mobile Insurance Management & Concierge UBI & Telematics Mobile enabled claims processing Sources: CBInsight.com, Allstate.com, TelematicNews.info, InternetofBusiness.co.uk #insurtech acceleration
  24. 24. Why haven’t we seen more new entrants and disruption (yet)? Historic claims data is private and owned by incumbents Understanding people is not the same as understanding risk Regulation makes entry more difficult Cost of entry, capital and balance sheet requirement are high We do know, what we do know © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 24 #insurtech acceleration
  25. 25. Questions? © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 25 Magda Ramada Magda.Ramada@willistowerswatson.com @MagdaRamada Magdalena @WTWrisk Ramada Sarasola, PhD

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