the future of insurance is...

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

The future of insurance is Insurtech

Matteo Carbone

Principal Bain

Founder and Responsible of the Connected Insurance Observatory

2The future of insurance is Ins ...

The background of the thoughts I will share with you today

Principal@ Bain & Company

•Financial Service and Digital Practices

•12 years strategic consulting experience

•Focused on insurance and innovation

InsurTechInfluencer

•Speaker and writer on insurance innovation

• Insurance Thought Leader

•Top 50 InsurTech Influencer

Founder of Connected Insurance

Observatory

•Responsible of the Observatory on Telematics, Connected Insurance and Innovation

•Advisor of more than 50 international players on Insurance IoT

50


Software is eating the world

“Companies in every industry need to assume that a software revolution is coming.”

Marc Andreessen,

The Wall Street Journal 2011

Fonte: Forrester; SNL Kagan Data Services; Expert interviews; pwc; WTM; Bain analysis

2%

Travels

Traditional offline booking revenues

to decrease by ~25%over 7 years

Revenues from physical recorded music salesto decrease by ~60%

over 9 years

Music

0%

Revenues from sale of printed books to decrease

by ~25% over 9 years

Books


Is the insurance business different?

RenewalClaimsPolicy

asmioni-stration

Internet

Call center

Intermediary

PurchaseChoiceAwareness

Internet

Call center

Intermediary

Internet

Call center

Intermediary

AUTO INSURANCE

What is your preferred method do accomplish the following insurance related tasks?

Source: Connected Insurance Observatory, Bain, SSI


Digital transformation

ONLINE MARKET SHARE ON MOTOR INSURANCE BUSINESS DISTRIBUTION

Spource: Bain Analysis on IVASS data

Italian insurance market

TELEMATICS PENETRATIONON MTPL BOOK


Customer is the king

Omnichannel Ecosystemof servicies

Contextual basedinsurance covers


The customer is hybrid: he is interacting with you using multiple cannels

Note: Excluded customers who did not interact with their insurance provider in the last 12 months; multiple responses (max 3) allowed; ‘Other channels’ category excluded from analysis; Offline only are customers who used in person/phone/Employer worksite channels for interaction and research; Digital Only are customers who used E-mail/ browser/app /Social media/aggregators channels for interaction and research; Hybrid are customers who use both offline and digital channels. Source: Bain/Research Now NPS survey, 2016


Being in touch contributes to loyalty

Source: Bain/Research Now NPS survey, 2016

Global NPS Surveys Surveys '16P&C Italy market

Net Promoter Score

With interaction

Without interaction

Global NPS Surveys '16


Customers would value a platform for services beyond insurance coverage …


LifeAuto Home Health

Such as health advice and monitoring, fitness-plan

provider, doctor recommendations

Such as monitoring driving behavior, platform to buy or sell cars, getting advice on auto repair shops, antitheft

services

Such as advice and discounts on home

monitoring systems, recommendations for repair providers, real estate sales,

flood monitoring

Such as health advice/monitoring, estate planning and legal advice


… and customers view insurers as potential providers of additional services



Most customers would share personal data with insurers…

Notes: Open sharers are willing to reveal personal data with insurers, independent of the type of data; selective sharers would only share some personal dataSource: Bain/Research Now NPS survey, 2016


…and to receive personalized insurance offers

Source: Connected Insurance Observatory, Bain, SSI


Metromile is the first insurtech startup to purchase an insurance incumbent

FUNDING

• Core idea: Variably-priced, pay-per-mile car insurance provider that charges customers for the actual miles they drive. Technology and a data-driven approach to deliver lower premiums by the mile and personalized data to help customers manage vehicle more efficiently and cost-effectively. Policies underwritten by insurers in the National General Insurance Group

• Founded: Jun, 2011

• HQ: San Francisco, CA

• Markets covered: US (>Z50 states)

• Employees: >70 employees at the headquarter office; ~130 employees in new Arizona office

• Received a total funding of $206M in 4 rounds (includes Felicis Ventures, First Round, Index Ventures, New Enterprise Associates, SV Angel, Intact, China Pacific Insurance)

• The last round ($191M) will be used to acquire Mosaic Insurance

Source: Company website, Crunchbase, Literature search

BRIEF OVERVIEW

Metromile is acquiring

Mosaic Insurance


Is the software eating the insurance business?

UsePurchaseChoiceAwareness

Internet of things

Aggregators

Underwriters

Policy management

Services

Claims

P2P

InsurTech map (1000 startups, 16,5 B$)


The innovation process is not simple and linear


Strategy first!

• Strategic focus, prioritization

• Appropriate allocation of resources

• Change mindset, culture of learning, risk-taking and innovation

• Organizational relevance, proximity to CEO

• Execution, mobilize for success

Insuranceperspective

• Strategic focus, prioritization


Connected insurance is about connecting insurance with people and their risks

Connected insurance:

Use cases

Health Commercial linesAuto Home Life

any insurance solution based

on sensors for collecting data on the state of an

insured risk and telematics for remote

transmission and management of the data

collected

Source: Venture scanner, Connected Insurance Observatory


How many connected car insurance policies out there?

2012

2015

ITALY US UK

4,8 M connectedcars on'15



Source: Connected Insurance Observatory estimates

Leave-in

Roll-over


Claim certification at customer's

disposal

Fuel gas predictor

Weather alert based on geo-

localization

Antitheft service if the box registers a different-than-

usual driving style

"Live" Concierge supporting navigatioin

Alert if the vehicle exits a "safe area" (or enters an

"unsafe area") of the city, defined by the customer (e.g.

parental control options)

Alert in case speed limits are

exceeded

5

314

2

Highway/ parking area tolling

Road or medical assistance via

dedicated button

Customer assistance and

personalized case management in case

of crash

6

8

9

7

Automatic assistance to the customer on the

premises in case of severe accident

10

Simplified claim notification, including automatic form fill-in based on telematics

data

1112

Short-time theft

cover

Parking localiza-

tion

1415Alert in case the

vehicle is moved when the engine

is off (e.g.tow-away)

16Alert if the car is hit

when parked

17Alert if the car is hit

when parked

18

Antitheft service if the box is removed/ uninstalled

Bodyguard for emergency outside

the car when parked

19

20

Stolen veiclerecovery

21

During driving Accident Parked

Source: Connected Insurance Observatory , Bain & Company

Proximity – Telematics VASs will be the way to stay relevant when the auto risk will fall down

Street sweeping

alerts

13


Profitability - Telematics have an impressive self selection effect

RISK SELECTION

MTPL claims

frequency-20%

Market average(4,8%)

Market average(20%)

Claims frequency (district average)

Black box effect on claims

frequency(risk

adjusted)

Source: ANIA (2014 data), Connected Insurance Observatory

MULTIVARIATE ANALYSIS BASEDON 87% OF THE MARKET


What’s in it for insurers?

Improve insurance profit & loss through specialization and setup of partnerships

Enhance proximity and interaction frequency with the customer while creating new customer experience and offering additional services

Create and consolidate knowledge about the risks and the customer base

Frequency of interaction

Benefits on the insurance bottom line

Knowledge creation

1

2

3



“What is the ROI of the use case?"

"Does the approach make sense?"

“What is the best way to do it at my company?"

• First pilots focused on one use case

Incubation phase

Growth phase

Maturity phase

Exploration phase

Learning phase


• First pilots

• Roll out by few pioneers

• Pilot phases by greatest part of players by using a "me-too" approach

• Only few top players understand telematics full potential (UW, claims, VAS), define their own approach (e.g. big data) and push the selling phase

• Commercial offer differentiation

• Telematics potential fully understood and increased commercial push by all players

• Differentiating solutions / providers over top players

• Telematics approach is the standard for the insurance business

• Relationship consolidation between top players and providers, best practices cross-country diffusion

Don't expect insurance telematics adoption to appear overnight

FR DE SPA CANUS ZA

ITA

UK


The lack of a clear strategy limit the achievement of the full potential of the telematics

4

5 TelematicsValue

Creation

Loyalty and "behaviors

modification"

Loss Control

Risk-Based Pricing

Value-Added Services

Risk selection

1

2

3

Costs

Data managementcomplexity

Privacy

Lack of a clearstrategy

Barriers to the telematics development

11%

34%

22%

34%

Surce: Connceted Insurance Observatory


A structured and well defined approach is needed

Set strategic goals/ ambition for the introduction of telematics

Telematics approach

• User experience

• Pricing approach

• Services

• Loyalty systems and "behavior steering"

• Hardware and data gathering approach

• Make vs buy decisions

• Enablers (process and tools)

• Effectiveness and readiness of organization

• Implementation and continuous improvement

1

2

3

“Telematics is a journey, not a destination”

TELEMATICS STRATEGY

VALUE PROPOSITION

EMBEDDING TELEMATICS

VALUE CHAIN IN ORGANIZATION


The Connected Insurance Observatory helps his members to play with the Insurance IoT innovation

Objectives

Scouting and rationalizing qualitative/quantitative

knowledge on Connected Insurance

Sharing a critical point of view of key trends and spreading innovation

culture

Encouraging stakeholders discuss experiences and exchange ideas about

innovation

The scopeAny insurance solution based

on sensors for collecting data on the state of an insured risk

and telematics for remote transmission and

management of the data collected


The 2016 European Connected Insurance Observatory: the think tank in a nutshell

Insurance GroupsInvolved hundreds of

executives from more from 26 Insurers both at local

level (Italian branch) and at European Group Level

26Institutions and Partners

Selected list of heterogeneous partners contributing to the insurance discussion about innovation with different angles

18

Plenary meetings3 full days of keynote

speeches, discussions, roundtable. A

terrific networking opportunity

3Hours of workshopMore than 130 "one to one" workshops (2-3 meeting dedicated to each company joined the Observatory)

280

5Business insurance lines addressed

Unique research based on innovation thought leadership and insurance acumen on all the insurance business lines


The 2016 European Observatory edition put together an impressive line of leading players

• Generali Group and Europe Assistance

• Axa Group

• Zurich Group

• Allianz Global Assistance

• Reale Group

• Gruppo Poste Vita

• Groupama

• Gruppo Cattolica

• Sara

• Credit Agricole Assurance

• Helvetia

• HDI

• IMA Assistance

• Swiss Re

• Munich Re

• Scor

• RGA

• Cardif

• Chubb

• Ageas

• Avipop

• Filo Diretto

• ITAS

• RBM Salute

• La Parisienne

• AIOI NISSAY DOWA

• Italian National Association of Insurers (ANIA)

• Guidewire

• SSI

• DigitalTech International

• Sysdata

• Neosurance

• Portolano Cavallo

• Venture Scanner

• InfoBlu

• Italian National Association of Brokers (AIBA)

• Appian

• Octo Telematics

• Vodafone Automotive

• Aubay

• Eumetra Monterosa

• IRSA

• LoJack

• InsurTech News

Institutions and PartnersInsurance Groups


Since the beginning of 2017, we will start also the North American Connected Insurance Observatory

The two Observatories together will create an impressive opportunity tocross-fertilize the insurance innovation thoughts across geographies

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

Matteo [email protected]

+393346220378

@MCins_

Thank you

the future of insurance is...

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