digitally driven change in insurance · digitally driven change in insurance fernando casanova...

Digitally driven change in insurance

Fernando Casanova Aizpún, Swiss Re Institute, Nov 2018

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Swiss Re Institute | Nov 2018

1990

s

Intellectual Property

2000

s

Networks 2010

s

Data (collected & curated)

Drivers of value in the technology sphereData is the new oil

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Data is the new pork belly

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• Roughly 90% of available data are qualitative and unstructured e.g., articles, blogs, e-mail, regulatory filings, slide presentations, social media, etc.

Key is finding novel data

• Transforming qualitative data into indicators and combining with quantitative data may be a path to improving existing models

Key is ensuring data is reliably retrievable in the future

Marrying qualitative and quantitative data

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Swiss Re Institute | Nov 2018 5Source: Psychological Language on Twitter Predicts County-Level Heart Disease Mortality. Psychol Sci. 2015 February ; 26(2): 159–169. doi:10.1177/0956797614557867


Any tool – that using technology – brings innovation to the insurance industry.

It can:

1) Make clients happy

2) Minimize costs

3) Generate higher growth

InsurTech

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Venture investors put $102B into FinTech related startups over the last six years, of which $8.4B was in InsurTech

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$23.3b

$10.3b

$8.4b$8.4b

0%5%10%15%20%25%30%35%40%45%50%55%

0% 20% 40% 60% 80% 100% 120%

Growth in funding (CAGR 2012-16)

Gro

wth

in #

of d

eals

(C

AG

R 2

012-

16)

Cybersecurity

$35.3bDigital Health

$102.1b FinTech

AutoTechInsurTech

Industrial IoT

Global Tech Financing Trends (2012 to 2017)

The bubble size represents funding in $ billions

Source: CB-Insights, Tech Review Report 2016, Swiss Re Institute


Insurers are investing in or partnering with InsurTech start-up firms

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0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016 2017

Deals not involving insurers

Deals involving insurers

Proportion of investments in InsurTechstart-ups with re/insurer involvement

Note: This is based a wider sample of approximately 500 InsurTech deals compiled by CB Insights.Source: CB Insights data.

Share price appreciation for insurers, classified by InsurTech strategy, 2013-2018 (cumulative)

0%

10%

20%

30%

40%

50%

60%

70%

Jan-13 to Feb-18

Jan-14 to Feb-18

Jan-15 to Feb-18

Jan-16 to Feb-18

Jan-17 to Feb-18

Little known investment in InsurTech start-upsSome investment in InsurTech start-upsActive acquirers of InsurTech start-ups


Incumbent insurers' view on potential competition

BigTech is ready to disrupt

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• BigTech is perceived a biggest potential threat for new entrants.

• Advancements in connected cars could turn car manufacturers into potential competitors.

• Non-traditional players are more likely to act as new distribution channels rather than become full carriers.

• Travelers, the 6th largest U.S. Homeowners writer, has created the first insurance industry “digital storefront” on Amazon.

81.0%

59.5%

59.9%

54.4%

35.4%

25.3%

0% 20% 40% 60% 80% 100%

Amazon

Other Big Tech (e.g. Alibaba)

Manufacturers

Alphabet (Google)

Retail firms

Apple

Source: Capgemini, World Insurtech Report, 2018


Technology is affecting the insurance value chain

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• Usage-based insurance• New business

models; sharing economy• Emerging risks

such as cyber• Social-network

insurance groups; peer-to-peer

• Use of Big Data/analytics to identify new claims drivers• Predictive/

Prescriptive underwriting techniques• Artificial

intelligence (AI) to hone risk assessment

• Position insurance as more customer-centric• Customer

experience driven• Increase frequency

of interaction• Micro market

segmentation and personalization

• Customers prefer multi-touch, omni-channel interaction• Smart devices• Less face-to-face

engagement• Scope for gains in

efficiency in offline channels• AI-driven Robo-

advisors

• Use of Big Data to reduce fraud and improve claims processes• Self-service apps

to improve post-sales experience• Blockchain

applications for smart contracts and claims administration

Information capture and analysis

Physical value chin

Dig

ital

izat

ion

Virtual value chain

Product development Underwriting Marketing Distribution

Policy & claims

management

Source: Swiss Re Institute.


Technology applications have been mostly focused in distribution

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Distribution37%

Pricing14%

Services14%

New Risks14%

Claims13%

Operations8%

Aggregators

Lead generation

Customer engagement, social media ecommerce platforms

Workplace benefits platforms

Auto telematics and connected car data

Data consolidation and visualization

Underwriting algorithms

Early warning systems

Damage and loss estimation

Rent protection, smart home

Cyber risk

Niches, eg, 3D printing, sensors, wearable robots,

Online or sharing economy

Home services

Lifestyle services

Niche wellness services

Auto services

AutomationThreat intel

Robo-advisors

Small business tools for brokers

Risk and security ratings

Investment focus in InsurTech (% share by number of start-up investments), 2014-2016

Note: Data relate to a sample of 300 of the best-known and well-funded InsurTech start-ups. Source: Swiss Re Institute, based on information from company websites and media reports.


Where insurtechs are focusing

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3% 2% 9% 5% 2%

5% 3% 11% 8% 6%

8% 4% 17% 10% 7%P&C

Health

Life

Number of innovations as % of total1

[1]~ 500 commercial cases registered in McKinsey’s Panorama Insurtech Database. [2] includes policy issuance. Source: McKinsey, "Digital disruption in insurance: Cutting through the noise", 2017

Product developm’ Marketing Distribution Underwriting2 Claims


Omnichannel customers: higher NPS, higher penetration… …. and digital interactions matter!

Digital interactions are driving NPS and product penetration

13Source: Bain & Company (2014) Customer Loyalty in Retail Banking – Global Edition 2014

2.4 2.6 3.0 3.2 3.2Productpenetration*

# digital interactions

0%

10%

20%

30%

22

1011

2731

Single-Channel

Digitalonly highmediumlow

Omnichannel

NPS Score traditional US banks2014, NPS score in percent

Branch Phone ATM Online Mobile

ᴓ Number of interactionsAverage number of interactions in last quarter, traditional bank respondents, in US, 2014

0

20

40

60

9

24

68

26

13

Branchonly

Digitalonly highmediumlow

Omnichannel

# digital interactions

digital

* average number of products owned NPS = Net Promotor Score

The evidence from the banking sector


Online self service isn’t working for life products … yet …

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agent costs 492 agent costs 574

lead costs2000 lead costs

579 lead costs 83

Online Call center MGA Agent

$20 per lead for paid search40% lead to application yield60% placement rate70% agent commission



• The cost per acquisition is significantly higher in self service online channels despite commission savings

• MGA /call center distribution outperforms digital only because they actively manage yield at each step

Note: effective distribution cost using the three most dominant models and typical lead costs.


… in line with life consumers’ preferencesabout digital distribution

15

0%

10%

20%

30%

40%

18-36 37-52 53-64 65+Interacted with carrier, agent, or advisor onlineSought information about life insurance onlineUsed the internet to find an agent or advisorPurchased/attempted to purchase online

28% 33% 33%22%

54% 42% 37%40%

14%14%

12%13%

4% 11% 18% 26%

0%

20%

40%

60%

80%

100%

18-36 37-52 53-64 65+Wouldn't use the internet at all Research online, buy directly via phone or mail Research online, buy from agentResearch and complete the purchase online


• Technological leadership and innovation: Winning companies will need to go beyond following technological trends and innovation; high speed of obsolescence.

• Customer ownership: Customer access and “ownership” are key to profitability; success depends on offering better value (products, services, customer experience) to customers; technical underwriting skills alone will not be enough.

• Efficiency (cost savings) and effectiveness (better products): Digital technology puts margins under pressure; need to make operations more efficient and products more relevant for clients.

• Scale and network effects: Digital platforms provide the potential for scale economies; network effects help with better access to clients, data, talent etc; become a barrier to entry.

• Speed and agility: Incumbents need to move quickly to compete with digital competitors.

Outlook: The new value drivers

16Source: modified from McKinsey: Facing digital reality, March 2017


• Data is the new oil – extract, refine, distribute

• InsurTech startup scene is maturing; digitally-driven innovation is arising from within incumbents; BigTech is ready to disrupt

• Most visible changes to the insurance value chain center around distribution; biggest potential lies in underwriting, claims & fraud, operational efficiency and new products

• Accelerating disruption in P&C, harder to be achieved in L&H in the short term

• The share price of those insurers with InsurTech strategies has fared better than those without

Summary

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Legal notice

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The information and opinions contained in the presentation are provided as at the date of the presentation and are subject to change without notice. Although the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage or loss resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial or consequential loss relating to this presentation.

digitally driven change in insurance · digitally driven change in insurance fernando casanova...

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