IDC InfoBrief NOVEMBER 2017 T H E F U T U R E I S D I G I TA L Australia and New Zealand Insurers Go Beyond the Usual Empowered Customers Omnichannel User Experience Platformdriven Ecosystem Anytime, Anywhere Access Usage-based Insurance Sponsored by Sponsored by
The Fast Changing Insurance Landscape 5 KEY DRIVERS TOWARD A DIGITAL FUTURE Empowered customers with rising digital expectations Regulatory guidelines becoming pro-digital The rise of startups Integrating insurance into consumers lifestyle Toward a consumptionbased model Digital is now table stakes for anyone to compete for increasingly tech savvy customers. From allowing open data, to new standards for digital services, to fostering higher trust amongst buyers. The Australian Securities and Investments Commission (ASIC) leads among the global regulators. 2 The value chain of insurance is disaggregating, giving rise to opportunities for new third-party companies to take on activities such as product development, pricing, customer insights, selling, claims management, and so forth. Aside from the traditional loss prevention value proposition, insurers are introducing new products to meet consumers digital lifestyle helping them to enjoy life (work, amusement, and relationships) as they please. The nature of insurance is changing. The old-school, cookiecutter approach of selling occasional and transactional products are giving way to new distribution models and self-service platforms as customers want to buy, and not be sold to. 40 % ASIC sets the pace 40 % Upsurge of new insurance offerings Sales enabled by IoT of customers are expected to walk away from a business that fails to deliver a good digital experience 1 to fast-track digitalisation and use of new technologies such as robo-advisory. of Australian CEOs concerned about new, more agile competitors 3. 5-fold increase in the number of fintechs in Australia 4 : 100+ in 2014 to 500+ in 2017. From 2017 2020, 5-Year CAGR: 5% Travel insurance (Australia) 5 5% Health insurance (Australia) 6 10% Mobile insurance (worldwide) 7 By 2019, a higher percentage of insurance products sold in APeJ will be usage-based enabled by the Internet of Things (IoT). 5-year CAGR 8 : 25% Vehicle insurance; 5% Home insurance Sources: 1. Digital Australia: State of the nation, 2017 Edition, EY Sweeney report 2. IDC Research, ASIC website 3. IDC Research, C-Suite Barometer Survey 2017, Australia - FSI 4. IDC research and Australian Fintech Landscape, KPMG, 2017 2 Sponsored by 5. Travel insurance: Investor Presentation, Zurich Insurance Group, Dec 2016 6. Health Insurance: IDC research & estimates 7. Mobile Insurance: SNS Research estimates, Sep 2017 8. IDC FutureScape: Worldwide Financial Services 2017 Predictions APEJ Implications IDC InfoBrief: The Future is Digital Australia and New Zealand Insurers Go Beyond the Usual
Confronting a Lagging Legacy 5 TRAITS TO THRIVE IN THE DIGITAL FUTURE So how can Australian and New Zealand insurers respond to the fast-changing demands of the industry? IDC identifies five key digital transformation (DX) traits needed to overcome long-standing challenges TRAITS OF TRANSFORMED ENTERPRISES Meeting customers digital expectations Australian customers rank the insurance sector as fifth lowest in digital experience against 24 other sectors. 1 Greater than 50% of Australian customers are willing to use digital channels (phone, mobile apps, Internet). 2 Have full omni-channel capabilities that make data and capability available through multiple devices and applications. Proactively manage risks and achieve compliance 15-20% of IT budget is spent on governance, risk and compliance (GRC) requirements by APAC insurance industry 3 ; majority of CROs still continue to spend significant time and resources on just meeting regulatory requirements. Staying nimble and efficient Current core platforms are holding insurers back. Operating expense ratio for Australian insurance industry is estimated to be higher than similar developed countries like US, UK (14% against 11% in US and 7% in UK). 4 Modernisation can save up to 30-40% of the IT operational costs. Greater agility to respond to new rules, standards, and guidelines set by the regulator and repurposing this capability for business. Embrace as-a-service models via the cloud. Meeting consumers digital lifestyle needs Reduced ability to enable lifestyle facilitation, including new types of personalised insurance experiences and products, as IT still maintains significant control and is not agile enough to make necessary changes. Regional insurers are already showing signs of readiness to partner with startup companies for better personalisation of insurance products. Spending on public-cloud for SaaS/IaaS/PaaS will exceed CAGR of 25% by 2021 5. Gearing for a consumption-based model Insurers current time to market is too slow. It takes 12-18 months to develop a new product, whereas the global average is between 6-12 months 6. Legacy systems impede product development. Adopt open platforms-ofplatforms, allowing multiple participants to connect to it, interact with each other and exchange value. Gain faster speed to market with product development platforms. Sources: 1 Digital Australia: State of the Nation, EY Report; 2 World Insurance Report 2016, Capgemini report; 3 IDC Research, IDC C-Suite Barometer 2017, EY APAC CRO Survey 2016; 4 IDC Research & estimations, OECD Insurance Statistics 2015-16; 5 IDC Worldwide Semiannual Public Cloud Services Spending Guide, 2016H2; 6 IDC Research & estimations, published case studies IDC InfoBrief: The Future is Digital Australia and New Zealand Insurers Go Beyond the Usual Sponsored by 3
Digital Transformation Leaders in the Making LEADING LIFE INSURANCE COMPANIES RETHINK THEIR CUSTOMERS NEEDS Allianz TAIPEI, SINGAPORE Redefined the customer journey with Allianz Discover. The interactive, tabletbased digital sales tool enables customers to understand their lifestyle needs at a glance, plan for their financial and life protection goals, and discuss customised solutions with their advisers. MetLife SINGAPORE LumenLabs, MetLife s innovation unit, has partnered startups to explore the use of technologies such as robotic process automation (RPA), cognitive bots, and cutting-edge analytics. The goal is to drastically improve speed to market and achieve regulatory reporting compliance for high-volume processes. AXA SINGAPORE AXA Pay-As-You-Grab is a usage-based motor insurance policy for private hire car drivers, whose premiums start at a very low base (70% of traditional commercial insurance) and increase on the basis of miles driven, measured via the Grab app. AIA AUSTRALIA AIA Vitality is a wellness programme that encourages customers to make healthier choices by adding up the benefits. The subscription to the program can be integrated with other AIA Australian insurance products. Customers enjoy benefits such as annual cashback offers, discounts on gym memberships and health screening packages, as well as free additional coverage or premium discounts on insurance products as one becomes healthier. QBE AUSTRALIA QBE deployed a new platform as part of their digital transformation journey. Among the key functionalities: core processing, data and analytics, and digital engagement products aimed at improving customer service as well as gaining greater agility in product design and pricing. 4 Sponsored by IDC InfoBrief: The Future is Digital Australia and New Zealand Insurers Go Beyond the Usual
Digital Insurance Platform of the Future ALIGNING TO SERVE THE EMPOWERED CUSTOMER Digital transformation of insurance organisations requires a platform that is able to support them with the right systems and capabilities. IDC Financial Insights identifies 15 capabilities to help Australian and New Zealand insurers deliver a compelling digital insurance model. OMNI- CHANNEL 1 2 3 4 Increases both the number and type of customer touchpoints Makes data, applications and functionalities consistently available across all customer touchpoints and channels Has the capabilities to take on new channel types, and interaction types voice, IoT, robo-advisory Supports API-enabled services AS-A-SERVICE 5 Allows access to current technology capabilities without high capital investments FLEXIBILITY, AGILITY AND AUDITABILITY 6 7 8 9 Supports pay-per-use models of consumption Provides scalability upwards and outwards Provides 24/7 operations and managed services support Delivers speed and agility in business functions while insurers focus on core competencies. Unlike monolithic legacy systems, platform solutions help develop ecosystems for systems of engagement (particularly channel systems) and systems of record PRODUCT DEVELOPMENT CAPABILITY 10 11 12 13 Enables risk pricing to shift from mass-segmentation to tailored solutions for smaller customer segments (even a customer segment of one) Supports industrialised product rules and configuration management externalised from core engine Provides rapid product development and testing frameworks Leverages new data sources and use of advanced analytics for better product development PLATFORM OF PLATFORMS 14 15 Provides a plug-and-play business model that allows multiple participants (producers and consumers) to connect and interact to create and exchange value Supports API-enabled business processes that allow trusted third-party partners (fintechs, business partners, IT service providers) to participate in key parts of the insurance service lifecycle (e.g., policy administration, claims, and billing). IDC InfoBrief: The Future is Digital Australia and New Zealand Insurers Go Beyond the Usual Sponsored by 5
Digital Insurance as-a-service BENEFITS OF DXC TECHNOLOGY S STRATEGY PLATFORM OF PLATFORMS Linking capabilities across platforms API-enabled interactions, loosely coupled Sharing economy DXC DIGITAL INSURANCE as-a-service (DIaaS) DIGITAL PRODUCTS Product development capability Speed to market Easy to understand Configurable rules engine REGULATORY COMPLIANCE Flexibility, agility and auditability Compliance change costs shared Reducing legacy risk Real-time reporting AS-A-SERVICE Consumption-based pricing Fully integrated components Localised templates Fully managed service CUSTOMER EXPECTATIONS Omni-channel Informative Intuitive Conversational Increase reach to customers Reduce IT spend Gain agility Launch products quickly Gain access to new revenue sources Future-proof systems Support regional compliance Data analytics for actionable insights DXC s Omnichannel Digital Consumer Engagement Platform enables client interactions, any way, at any time. By at least 11%, based on IDC Financial Insights benchmarks of financial institutions moving from CAPEX to OPEX models. Ability to be implemented in 4-6 months. Shorten product development from months to weeks. By adopting lifestyle integration via open APIenabled services. An evergreen IT landscape keeps applications, infrastructure, operations always up to date. Meet regulatory requirements shared across clients. To better understand risk and create personalised customer offerings. Michael Neary General Manager Insurance Industry DXC Technology Australia and New Zealand Fundamental to DXC Technology s strategy for insurance is commitment to lead the industry s digital transformation. Insurers are in a race against time, as their competitors and new market entrants are raising the bar quickly. The breadth of DXC s capabilities, now combined with DIaaS, uniquely position DXC technology to curate and implement an insurance ecosystem which will satisfy the digitally savvy consumer. 6 Sponsored by IDC InfoBrief: The Future is Digital Australia and New Zealand Insurers Go Beyond the Usual
Self-Discovery Questions Scaling according to the needs of the business What is your time to market to launch a new insurance product? Do you know your costs across your company to launch a new insurance product? What is your strategy for launching new products faster and more cost-effectively? Are you willing to trial new products and innovative business ideas? Regulatory and compliance Are the new governance and compliance requirements putting a strain on resources and taking time away from projects that offer greater innovation potential to the business? What portion of your budget is used to address regulatory and compliance requirements? Becoming open to open insurance How are you preparing for more open integration with partners, start-ups, other data sources? How much visibility should you allow and yet maintain high security without impacting innovation? How do you reduce the cost of insurance products and services in the process? How do you stay compliant and maintain your speed-to-market and competitive advantage as open insurance services evolve? Essential Guidance ANY CHANNEL ANYWHERE, ANYTIME, ANYONE Map out your strategy and go-to-market in such a way that your clients can access your insurance services 24 hours a day via their preferred method. STAY COMPLIANT AND PREVENT SECURITY ATTACKS These include security for new channel types, analytics for claims and policies, identity and access management, and Web application protection. MANAGING YOUR PRODUCT LIFECYCLE Look for API management tools that enable you to capitalise on the open API market. AS-A-SERVICE Work with technology partners who can provide end-to-end or modular policy administration as well as a pay-per-use platform that offers digital platform integration that your clients are looking for. Michael Araneta Associate Vice President IDC Financial Insights Digital Insurance as-a-service promises to fast-track the transformation of insurers to be more agile, market-responsive, and open to a broader set of services that expands the value proposition of insurance. DXC Technology brings this vision to reality with its industry expertise and services capabilities. IDC InfoBrief: The Future is Digital Australia and New Zealand Insurers Go Beyond the Usual Sponsored by 7
Digital Insurance Platform The Secure Foundation for Today s Rapidly Evolving Market P E R S O N A E X P E R I E N C E Policyholder Broker Advisor Underwriter CSR Adjuster Digital Marketer Ecosystem D I G I T A L I N S U R A N C E F R A M E W O R K Product > Marketing > Distribution > Servicing > Billing > Claims UI/UX Security Microservices API Management Integration Mobility BPM Insurance Components Policy & Product Billing Claims Reinsurance Data & Analytics Cognitive/ML Analytics & Reporting Analytics Platform Data Platform Ecosystem Providers Platform Services Technology Services Business Services Cloud Network Service Management Security Operations Audit DR/BC ACCELERATED IMPLEMENTATION 2016 Today DXC R&D investments since 2016 Accelerated Implementation for Digital Insurance 4-6 months Launch Regional platform development Integration to industry applications Development of product templates CX/UX journey templates API enablement Insurtech ecosystem Adopt these out of the box to: Configure products Confirm CX/UX journeys Connect APIs Validate processes Other integrations (payment gateways) Configure reports Testing Your new digital insurance platform Typical customer implementation for digital insurance At least 2.5 years Typical core insurance 8 Sponsored by IDC InfoBrief: The Future is Digital Australia and New Zealand Insurers Go Beyond the Usual