Future Trends 2017: The Shift Gains Momentum IASA Spring Meeting April 2017 1
People Market Trend: Pressure on insurance industry driving new expectations, innovations and competition Changing customer demographics Impacts of economic conditions Shifts in needs and risk profiles Technology Changing customer expectations Psychology / Behavioral Economics Market Boundaries Emerging Technologies Pay-As-You-Need Insurance Enterprise Explosion of New Data Platform Solutions NEW INNOVATIONS INSURANCE COMPANIES New Competitors and Product Innovation Shifting and expanding Channels Shifting and changing Market Boundaries InsurTech Competition for talent and capital 2 Source: Future Trends A Seismic Shift Underway
CHANGE AND DISRUPTION Market Shift Market Shift We are in the midst of a revolution Evolutionary Revolutionary INDUSTRIAL AGE INFORMATION AGE DIGITAL AGE Defined Industry Boundaries Single-Purpose Products Competition as Zero-Sum Game Producer + User Roles Buying Economy Platforms Business Ecosystems Connected Multi-Purpose Products Strategic Cooperation User as Producer, Co-creation Sharing Economy Artificial Intelligence Blockchain IoT Innovation Autonomous Vehicles Effectiveness Wearables Efficiency Automation PCs Internet SOA Open- Source Cloud Apps Mobile Client-Server Gen Z 3 Adding Machine Teletype Silent Punch Cards IBM 305 RAMAC Mainframe Boomer Calculators Gen X Millennial
A major market shift Driving a revolution of disruption and change Market Shift and Separation - Shift in Fundamental Business Models Evolutionary Revolutionary INDUSTRIAL AGE INFORMATION AGE DIGITAL AGE Business Model designed to support a traditional market, technology and demographic assumptions for Silent, Boomer & some Gen X Digital Age Business Model designed to support a new market, technology and demographic assumptions for Gen Z, Millennial & some Gen X Silent Boomer Gen X Millennial Gen Z 4 Source: 2016 Future Trends A Seismic Shift Underway
Market Trend: Insurance value chain deconstruction and disruption Traditional Carrier Strengths: Brand & Agent Network Traditional Carrier Strengths: Large, Historical Data Sets Marketing Distribution Pricing Underwriting Risk Transfer Policy Service Claims Aggregators, Compare Sites MGAs If adjacent players are successful, this could be what is left for traditional insurers. Non-traditional competitors can also get capital and contracts with third parties. External Data and Content Providers Hedge Funds, Venture Capital TPA, BPO 5 Source: Reinventing Insurance: Leveraging the Power of Data, Analytics and Cloud Core Systems Report
New entrants and companies leveraging digital channels and technologies for new business models Product Sales & Marketing Distribution Quote Underwriting Issue & Service Claims Reinsurance 6
Customers: Insurance is not easy to do business with Consumers Small-Medium Businesses Research Buy Service Online retailers (e g Amazon com) "Ease" Rank 1 1-9 10-99 100-499 Online retailers (e g Amazon com) Buying "Ease" Rank 1 National retail stores (e g Wal Mart) 2 National retail stores (e g Costco, Home Depot) 2 Local retail stores (e g clothing, grocery, drugs, etc ) Mobile phone providers Banks 3 4 5 Local services / retail stores Banking Services Credit card rewards / frequent flyer programs 3 4 5 Streaming TV / video / music service Cable TV providers Credit card rewards / frequent flyer programs Insurance Auto or Home/Renter Insurance Life or Annuity 7 Source: The Rise of the New Insurance Customer, The Rise of the Small-Medium Business Insurance Customer 6 7 8 9 10 Mobile phone providers Insurance Property, auto, general liability, workers comp Office Services (HR, Legal, Taxes, etc ) Insurance Life Employee benefits providers health, disability, life, voluntary benefits 6 7 8 9 10
Client Journey and NPS Impact 8 Source: The Rise of the New Insurance Consumer Research
Implications for Insurers Demographics Simple Affordable Economic challenges Trusted Tailored Technology New expectations New behaviors New needs Fast Personal 9
Market Trend: Interest in New, Innovative Products & Channels Rapidly Growing for Consumers 100% 90% 80% 70% A large swing group could accelerate adoption Pay per mile Behavior Based Bundled Lifestyle & Prevention Behavior On-Demand 60% 50% 40% 30% 20% 10% 0% Gen Z Gen Y Gen X Boomer Silent Gen Z Gen Y Gen X Boomer Silent Gen Z Gen Y Gen X Boomer Silent Gen Z Gen Y Gen X Boomer Silent Gen Z Gen Y Gen X Boomer Silent Gen Z Gen Y Gen X Boomer Silent Get charged for auto insurance based on how many miles you drive 10 Source: The Rise of the New Insurance Consumer Research Let your auto insurance price be Have insurance integrated into the next Let your life or health insurance price be partially based on data you share from acar, house, or other item you purchase partially based on data you share from a device that tracks your driving performance and not purchased separately fitness tracker Very Likely 5 4 Swing Group Let your home or renters insurance price be partially based on data you share from a connected device like a thermostat, smoke detector or home security system On-demand insurance - Buy insurance for a specific item or event (like a rental car, camera or a trip) for a set period of time (like an hour or a day) whenever you need it
100% Market Trend: Interest in New, Innovative Products & Channels Rapidly Growing for Small Medium Businesses A large swing group could greatly accelerate adoption 90% 80% 70% Pay per mile P2P Prevention Connected property Pay how you drive On-Demand 60% 50% 40% 30% 20% 10% 0% 1-9 10-99 100-499 Get charged for auto insurance based on how many miles you drive 1-9 10-99 100-499 Join a group of other businesses to share the costs of insurance premiums and small claims, but also share rebates if the group doesn t file any claims in a year 1-9 10-99 100-499 Buy services that prevent accidents or claims instead of buying insurance that pays you after you ve had an accident or claim 1-9 10-99 100-499 Let your commercial property insurance price be partially based on data you share from a connected device like a thermostat, smoke detector or home security system 1-9 10-99 100-499 Let your auto insurance price be partially based on data you share from a device that tracks your/ driving performance 1-9 10-99 100-499 On-demand insurance - Buy insurance for a specific item or event (like a rental car, camera or a trip) for a set period of time (like an hour or a day) whenever you need it 11 Source: The Rise of the New Insurance SMB Research Very Likely - 5 4 Swing Group - 3
Insurer s response to business trends is growing 12
Technology Trends: Advance Innovation Autonomous Vehicles Premium Decline Embed insurance in Subscription Rental Fleets Commercial Fleets Internet of Things Vehicle/Property Lifestyle Safety Rehab / Recovery Cognitive / AI Digital Intelligence Customer Engagement Game-changing knowledge Learn & adapt Talent expansion Alternative Payments Mobile (Apple Pay) PayPal Messenger Services Bitcoin Drones Underwriting Claims Vehicle & Property Cat Events Blockchain Claims payments Life and Group markets Commercial & Wholesale markets Reinsurance & London Market Chatbots / Robotics 80% business use by 2020 New native app & replace mobile apps Robo Advisors / Agents Customer Engagement Virtual / Augmented Reality Claims Loss Control Rehab / Recovery Customer Engagement Training 13
Insurer s response to technology trends is weak 14
Market Trend: Shift to innovation & InsurTech - new brands end of 2016 NA represents 61% of 2016 funded entities EU represents 24% Asia represents 11% Africa represents 1% Australia represents 1% 15 Source: Coverager
Funding by innovation and technology 16 Source: Coverager
% who said their company Growth and innovative businesses model transformation 100% 90% 3x 80% 70% 4x 17x 1.5x 60% 50% 40% 30% 20% 10% 0% Expanded/were expanding channels Developed/were developing new business models Developed/were developing new products Replaced/were replacing legacy systems Companies that had Lower Growth in past year (1-6) Companies that had Higher Growth in past year (7-10) 17
Market Trend Disconnects: Knowing vs. Planning vs. Doing REALITY KNOWING What companies are worried about PLANNING What companies priorities are DOING Companies responses to changing market Hits Hits Hits NEW INNOVATIONS New Issues Traditional Issues Pace of change Emerging tech Customer expectations Business models Competition from outside the industry Digital Legacy systems Data & Analytics Security Talent Misses Competition from inside the industry Customer experience Digital strategy Product innovation Channel expansion Legacy replacement Data & Analytics Cost reduction Borderline Business model dev. New market segments New LOBs Misses InsurTech engagement Product innovation Channel expansion Legacy replacement Borderline Customer experience Business model dev. Demographics Misses Sharing economy, Tech for wellbeing, Gig economy, Healthcare Chatbot, Payments, AI, Wearables, Blockchain, Drones, Gamification, Connected cars & homes, Driverless cars, 3D printing 18
M A R K E T D R I V E R S Race to the Future Implications & Options Keep & Grow Existing Business - Transform & replace legacy Insurance ranks at the bottom overall as compared to other businesses / industries Online and national retailers set the standard for all industries, creating the Amazon Effect Modernization / Transformation Programs & Cloud Traditional business models, processes, channels and products rapidly irrelevant, opening door to fresh, culture-savvy competition Insurance NPS ratings are 40-60 points behind other industries like online retailer Amazon Millennials, Gen Z and increasingly Gen X highlight a gap between traditional insurance and what is needed today and in future Digital first, multi-channel model is critical for insurers to remain relevant, let alone competitive Optimize existing business while creating new Digital Front-End and Engagement Use and behavior drive needs and expectations toward new, innovative products 19 Insurers who do not develop new products risk loss of market share and customers at a an increasingly rapid pace New Business Model for New Generation of Buyers Greenfield & Startup Initiatives
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Thank You Denise Garth denise.garth@majesco.com www.majesco.com info@majesco.com 21