© 2012 CELENT, a Division of OLIVER WYMAN CONFIDENTIAL

Jamie Macgregor, Celent

DISRUPTION IN ACTIONA WAKE-UP CALL

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The pace of change in technology is not getting any slower

Verizon launches 3G in US

Quantum link for Commodore 64

2012200219921972

IBM Mainframes around since 50’s

Apple II released

First IBM Compatible PC

Commodore 64 released

PC link for IBM PCs

AOL launched

Mosaic Browser launched

Encarta launched

Apple iMac on sale

Linux runs on IBM Z

Mainframes

Internet Explorer ships with

Windows 95

Salesforce.com founded

64 bit mainframes

Amazon webservices

launches

Facemash.com

Thefacebook.com

Three network launches 3G in

UK and Italy

Youtube

Twitter

Mozilla open source browser Google

Apps

Amazon S3 and EC2 cloud services

iPhone

Facebook 100m

iOS App Store

Wikipedia

Data.gov and data.gov.uk use open linked data

Encarta shut down

Facebook 500m

Facebook like button

Windows Azure

iPad

900m

NASA shuts down it’s last mainframe

4G service advertised in

US cities

FastWeb (Italy) offers 10MB fiber optic home broadband

Hadoop BigData

0.14 released

First Intel Pentium released

Advent of personal

computing

Start of connected communities

The rise of the world wide web

Mobile, social , web, ‘as a service’ - enabling new

models

“In two years, we sold 67 million iPads. It took us 24 years to sell that many Macs and five years for that many iPods and over three years for that many iPhones.”

Tim Cook, Apple CEO, Earnings call Q12012

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Three key technology themes will change the competitive landscape by 2022

1 Ubiquitous data

2 User expectations of simplicity and technology doing more of the work

3 Industrialisation of IT at scale

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It’s not just people sharing more and more data

2012 2008

Source: Cisco, 2011

20032010

20152020

Connected things

People

20 houses today generate more traffic than the entire Internet did in 2008

The number of things connected to the Internet is greater than the Earth’s population

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Insurers face a torrent of location tagged data

Fashion

Sports

Fashion

Sports

Fashion

Sports

Fashion

Sports

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Technology will do more of the work

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Three Mega Trends impacting expectations: Social, Local, Mobile

Social media influences the life of an increasing number of people

Number of Facebook usersBN

Increasing urbanization elevates the importance of digital interaction with the environment and other users

Megacity inhabitantsMM

Proliferation of Smartphones and other intelligent mobile devices will increasingly influence user behaviour

Smartphone Penetration(%)

+216% y/y+30% y/y

+86% y/y

1. Over 50% of usage time already topics other than telephone calls and textSource: United Nations, Frost & Sullivan, Trefis, Kleiner Perkins Venture Capital, Informa Telecom, Oliver Wyman

SOcial LOcal MObile

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1970-1995 Single System

1995-2012 Distributed Systems

2013-2022 Distributed Data

• Vertical application • Bespoke build• Transaction oriented• Single channel• Internal user focused• Hosted internally• Employed internal team

• Multiple distributed systems• Mix of package and bespoke• Service oriented/open• Multi-channel• External / internal user

focused• Hosted externally• Mix of insourced/outsourced

team

• All applications are treated as external services

• Business processes orchestrated across heterogeneous services

• Software moving out of the way in favor of data

• Service selection is a joint business/IT responsibility

Moving from inside-out to outside-in

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201120101985 1989 1993 1995 1997 1999 2001 2003 2005 2007 2008 2009 2012

The UK auto insurance industry is no stranger to disruption

Disruptivefocus

Female

High risk

Web-only

Cards

Aggregators

General

Low risk

Business

Telematics

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A fiercely competitive market

Source: AXCO, Celent

Co

mb

ined

Op

erat

ing

Rat

io (

%)

Year

UK Auto Insurance

2011:~$960M

loss

Source: Deloitte, Reuters

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Enter telematics and

• Targeted at 17-25 year old drivers

• Researched in 2010, piloted in 2011, launched in 2012

• Developed with Cranfield University and Williams Formula 1

• Rapid growth– $1m GWP written in 3rd month of trading– Targeting $4m/month by Dec 2012– $85m forecast in 2013

• 25 full-time employees

• Privately funded, underwriting capacity provided through 2 international insurers

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Reflection

• Underserved niche of 17-25 year old drivers

• The technology is an important enabler. However, it’s also about:– Young driver engagement – Incentivizing the right behaviors

• Expertise and execution agility can be found in nurturing the right partnerships

• The result is a business model that delivers a fresh approach at a significantly lower cost

Options for incumbents: Emulate, partner or withdraw

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Striking the right balance

Do more of… Do less of…

• External/Business focused innovation

• Investing in new skills and relationships

• Configuring business services

• Procuring data and services from the cloud

• “Best of breed” partners, targeted outcomes

• Capacity planning attuned to business cycle rather than peak demand

• Protecting own information assets

• Internal development/bespoke build

• Reacting to business demand

• Effort on procuring commodity back-office core insurance applications

• Large-scale “all encompassing” long-term IT outsourcing deals

• Focusing the IT agenda solely on delivering efficiency and compliance

19 April 2023