Finity Director Forum Ian Chisholm 10 August 2016 InsurTech What Directors need to know
Topics for today 1 Digital disruption across industries 2 Fintech s impact within Banking 3 InsurTech : Level and growth of investment 4 Where is InsurTech evident in A/NZ? Examples 5 Where is the next frontier? 6 What does this mean for Directors? 2
Technologies shaping business today Cloud Blockchain / Bitcoin Network effects 60 4
FinTech in Australia too soon to see impacts Fintech puts customers first, instead of the banking business model Technology is enabling new players (PayPal, Google and Apple) and start-ups to disrupt the traditional banking business model Large Australian banks are hiring digital skills to work in innovation hubs and/or partner with entrepreneurs or start-ups, to produce new products and services It s a little too early to tell the actual impact on Australia s Banking industry 7
https://www.ondeck.com.au/au-landing/ On Deck CBA collaborated with On Deck Capital to provide business loans to its retail Small-Medium Enterprises with revenue <$1m. Streamlined application process, loan size of $10k-$150k, 6-24 month terms, decision in 1+ days, funding in 1+days, competitive rates and fees $4b in loans globally since OnDeck opened in 2008; a serious competitor to large banks
http://reinventure.com.au/ $5m SocietyOne Westpac have partnered with entrepreneurs to set up Reinventure, investing in new companies at the formation stage SocietyOne was one of their first investments https://www.societyone.com.au/
tp://www.irobo.com.au/ irobo Another Robo Adviser, providing Australian consumers with a free analysis of their financial product needs, saves time searching multiple product sites, and returns products that suit a customer s needs and budget 64
Stockspot The first robo adviser in Australia, which is computer generated financial assistance, or automated investing. A customer completes questions around their financial needs, and Stockspot provides product suggestions 65 https://www.stockspot.com.au/
What is InsurTech? Growth of Investment Deal Participation No. First in Financial Services FinTech, now in insurance InsurTech - insurers are questioning, and in some cases changing, the direction and nature of insurance technology investment. 30 25 First 4 months of 2015 20 15 10 5 2010 2011 2012 2013 2014 Jan-Apr 2015 0 Source: CN Insights, Insurance Industry Ramps Up Start-up Investing, June 2015 66
Why is InsurTech attracting so much interest? 75% of US insurers* expect that they will have to redesign their business value chain over the next 5 years due to the impacts of technology change. InsurTech provides the opportunity to get ahead of the game Specific reasons for InsurTech investments include: Meeting customer expectations - new consumer technologies are have created new needs for and expectations of insurance solutions and interaction channels The pace of innovation the shared economy, usage based models and the internet of things are disrupting the insurers business model incremental change is no longer enough Access to personal data policyholders are willing to trade some personal data in exchange for tailored lower cost coverage * Source: Insurance Networking News, Insurers Investment in Tech Start-ups, John Cusano. Oct/Nov 2015 67
Brolly Join the revolution! Brolly is developing a free personal insurance concierge that will be available online and on our mobile phone. Powered by artificial intelligence, Brolly promises to tell users if they re over or underinsured, whether they have duplicate or missing cover, and whether they can get the cover they need at a better price. The service will allow people to purchase new cover, manage policies in one place, and provide instant access to documents, prices, and contact numbers. Source: www.heybrolly.com. April 2016. 68
Friendsurance Make insurance easier and more affordable Based on a shareconomy approach, policy owners with the same insurance type form small groups. A part of their premiums is paid into a cashback pool. If no claims are submitted, the members of the group get some of their money back at the end of the year. In case of claims, the cashback decreases for everyone. Small claims are settled with the money in the pool. Copyright Source: www.friendsurance.com. April 2016. 69
Lemonade Insurance that doesn t suck Lemonade, yet to commence, is advertising as the world s first peer to peer insurer to go back to basics for insurance and use behavioural economics within its business model / data driven innovation Source: http://www.lemonade.com/. 70
PeerCover Whether to prefund risk via insurance/savings or post fund losses via levies/borrowing?. Many discretionary mutuals and government insurers use a 100% postfunding Donation based crowdfunding fits in this category, like many insurers who use a number of postfunding options to complement their core prefunding model, such as deductibles, copays, burning cost premium adjustments etc. Source: http://www.peercover.co.nz/ 71
Trōv Save your stuff on trōv because it pays to back up your stuff Protect just the things you want - exactly when you want - entirely from your phone. Trōv is a new technology platform created by an InsurTech start-up, designed to give consumers insurance for their individual possessions whenever it's needed. Digitising the process from identification of what is to be insured, through premium quote to payment and finalisation of the claim. Source: www.trov.com. April 2016. 72
FendaMenda Have a little crash without involving your insurance FendaMenda provides help to customers to recover from small incidents that are less than their excess record incident details, obtain repairer quotes and negotiate settlements Source: http://fendamenda.com/ 73
Zurich DigitalResolve join forces to resolve cyber incidents Zurich DigitalResolve is a lateral move by Zurich into another industry - the cyber response industry in competition with cyber security companies http://zurich.com.au/content/dam/australia/general_insurance/security_and_privacy_ protection_insurance/20160608-zu23166_digitalresolvefactsheet_final.pdf 74
How should we respond? Depending on their size, scale and risk profile insurers will respond differently. However, at minimum all insurers should maintain a watching brief as part of a balanced approach to technology investment. Re-examine business models to test its vulnerability to disruption Improve Board and C-suite technology related strategy discussions Adjust your culture to allow innovation, fast fail and taking calculated risks Keep your eyes firmly on your customers and their changing needs Consider investing in InsurTechs if your capital and risk appetite allow it 75
Why and How much should we be investing? There are no clear benchmarks for direct investment in InsurTech, it should be treated like any other strategic business investment. The benchmark range for overall spend on operational insurance technology remains steady at 3% to 4% of revenue*. Global and large local insurers are getting directly involved through acquisition, direct financial investment. For small and mid-sized insurers access will be through partnerships Investment is starts-ups or emerging technologies need to be based on specific needs or strategic objectives. Understanding the change to the customer value proposition and business operating model is a critical part of any investment in technology. * Source: Gartner, IT Key Metrics Data 2014 76
Steven Walker Director Consulting Level 15, St Martins Tower Sydney NSW 2000 Australia M 0412 412 712 T 61 2 8220 8096 Steven.walker@frazerwalker.com www.frazerwalker.com Ian Chisholm Director Consulting Level 15, St Martins Tower Sydney NSW 2000 Australia M 0401 316 004 T 61 2 8220 8096 Ian.chisholm@frazerwalker.com www.frazerwalker.com Thank you for your attention