the innovator’s journey: insurance sector insights
TRANSCRIPT
The Innovator’s Journey:Pathways to Data DexterityState Street 2014 Data and Analytics Survey
Insurance Sector Insights
March 2015
Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
State Street 2014 Data and Analytics Survey
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About the Research
Insurance Companies by Country (%)
On behalf of State Street, Longitude conducted a global survey of senior executives at investment organizations during October and November 2014. We asked them to self-assess their confidence and progress across six data capabilities, including infrastructure, insight, adaptability, compliance, talent and governance. The 400 respondents were drawn from 11 countries and included insurance companies, private and public pension funds, fund-of-funds, foundations, central banks, endowments, sovereign wealth funds and supranationals. One-hundred insurance companies participated in the survey.
3 55
5
8
8
910
11
18
18
Canada South Africa Singapore
Brazil Hong Kong Australia
United Kingdom China France
United States of America Germany
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Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Insurance Companies Have The Highest Proportion of Data Innovators of All Industry Sectors in Our Survey
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Data Starters Companies at an
early stage in their data journey
Data Movers
Companies actively moving toward better
data capabilities
Data Innovators
Companies with advanced data infrastructure,
expertise and high-quality data governance
21%
34%
45%
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Data Starters
Data Movers
Data Innovators
Infrastructure• Incompatible
legacy systems
• Most data in separate silos
• Separate platforms for different asset classes
• Aggregation, visualization, other data management capabilities upgraded
• Improved data integration across investment portfolio
• Infrastructure & tools fully upgraded
• Silos broken down
• Seamless integration of unstructured data
Insight• Limited ability to
generate performance and risk analysis
• Fragmented view by asset class
• Ability to conduct scenario & stress testing across portfolios
• Integrated view of risk & performance across multi-asset portfolios
Adaptability• Capabilities take
much time & effort to adapt to any changes in investment strategy
• Capabilities can adapt quickly to support new products or investment strategies
Compliance• Systems struggle
to keep up with existing regulatory requirements
Talent• Data team can
manage data collection and basic analytics functions
Governance• Basic data
policies and processes in place, but governance is patchy; little standardization
• Data gaps, errors identified; cleaning under way
• Coherent, agreed framework for data governance
• Reduction in time to market for new product additions, or new asset classes
• Systems fully compliant with existing requirements, but slow to adapt to new rules
• Team can manage data collection & integration; some capabilities to perform & manage analytics
• Rich, partly integrated performance & risk analysis in individual asset classes
• Ability to analyzeperformance & risk of wide range of alternative assets
• Excellent data quality and traceability back to source
• Reporting systems adapt quickly to new requirements across global footprint
• Regular flow of insights; smooth interaction with fund managers
• Team has fully optimized data management; advanced Insight generation
• Large degree of standardization across internal databases; external providers aligned
• Strong leadership on data governance; policies & processes entrenched throughout
Note: Above sequencing is illustrative only; milestones may be reached simultaneously or in other sequences.
Our Survey Benchmarked Companies on Six Paths to Innovation
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Why Data Innovators Are Pulling Ahead of the Competition
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The Innovator’s Advantage
1. Robust, tightly integrated data infrastructure
2. Ability to join dots on data yields new insights
3. Adaptive architectures meet new business needs faster
4. Global solutions that are ready for regulatory change
5. World-class data and analytical talent
6. A sophisticated approach to data governance
Key Characteristics Marking Innovators Apart
• Innovators see data and analytics as the single most important strategic priority
• They invest more in technology — and translate this into a competitive advantage
• They can take regulatory compliance in their stride, so technology investments focus on value-adding activity
• They are exploring cutting-edge tools including big data and advanced analytics, and hiring data scientists to drive innovation
Why Starters Get Stuck, and Movers Have Further to Go
• Legacy systems prevent organizations from gaining an integrated view of investment data
• Weak data governance leaves these organizations vulnerable to problems with data integrity and security
• More than half these organizations fear their systems will not keep pace with new regulatory requirements
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Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Data Dexterity Gives the Innovators Much Greater Confidence For the Future
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Please Indicate the Level of Confidence You Have in Your Institution’s Current Data Capabilities in the Following Specific Areas. (% of insurance companies with high confidence)
24
27
36
29
24
33
31
19
26
23
6
10
32
19
0
13
13
4
8
0
4
Reducing investment costs across your asset portfolio
Evaluating risk and performance across the entire portfolio
Optimising our electronic trading strategies
Extracting investable insights from a large volume of data
Managing multiple internal and external data streams in varyingformats
Generating forward-looking insights from our data
Conducting comprehensive, accurate scenario and stress testing onour investment portfolio
Starters Movers Innovators
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Investing in Data
7 Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Insurance Companies Are Investing More in Data and Analytics
8 Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Which of the following statements best describes your organization’s investment in data and analytics capabilities in the past three years? (% of insurance companies)
78%of insurance companies report growth of 5% or more in the last three
years
2
28
48
16
6
Investment has increased each year bymore than 20%
Investment has increased each year bybetween 10% and 20%
Investment has increased each year bybetween 5% and 10%
Investment has been flat, or increasedby less than 5%
Investment has remained flat or declinedeach year
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4
36
42
13
4
0
29
45
19
6
0
13
63
17
8
Investment has increased each year by more than20%
Investment has increased each year by between10% and 20%
Investment has increased each year by between5% and 10%
Investment has been flat, or increased by less than5%
Investment has remained flat or declined eachyear
Starters Movers Innovators
… But Innovators Are Investing at a Faster Rate
9 Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Which of the following statements best describes your organization’s investment in data and analytics capabilities in the past three years?(% of insurance companies) 40%
of Innovators have increased investment in data
by over 10% each year
vs.
13%of Starters who raised
investment at the same rate
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37
40
41
42
51
Ability of data systems to keep pace withregulatory requirements
Data governance (e.g. clear policies, processesand leadership)
Data infrastructure
Analysis and visualisation of data
Adaptability of your data systems to new needs
Quality and availability of data talent
Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Talent is the Priority – But Governance and Regulation Must Not Be Neglected
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But are investors giving proper attention to the fundamentals?
In which of the following areas do you intend to prioritize investment in the next 3 years? (% of insurance companies)
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Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Innovators Will Outspend Their Peers Across a Broad Range of Technologies
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Over the next 3 years, what changes do you expect to the level of investment your institution makes in the following types of technology or data? (% of insurance companies)
42
13
38
27
38
16
29
38
32
10
3
19
39
32
32
13
29
25
13
17
29
25
33
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Data management system
Accounting
Compliance/reporting
Portfolio modeling/ optimisation system
Electronic trading system
Performance analytic
Risk analytics
Order management / execution management systems(OMS/EMS)
Starters Movers Innovators
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Data Strategy and Challenges
12 Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Insurance Companies Understand the Value of Data
13 Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
How do most senior leaders at your institution view the importance of investment data and analytics relative to other major strategic priorities?(% of insurance companies)
“Our investment in data and analytics capabilities
are a source of competitive advantage for us”
38%21%
Strongly agree
Somewhat agree
4
18
49
29
It is a low-level strategic priority (nearthe bottom)
It is a mid-level strategic priority
It is a high strategic priority (near thetop)
It is the most important strategic priority
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Data and Analytics as Their Top Priority
But Innovators Are More Likely to View This Area as a Top Priority
14 Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
How do most senior leaders at your institution view the importance of investment data and analytics relative to other major strategic priorities? (% of insurance companies)
44%19%
Innovators
Movers
13% Starters
0
13
42
44
0
23
58
19
17
21
50
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It is a low-level strategic priority (nearthe bottom)
It is a mid-level strategic priority
It is a high strategic priority (near thetop)
It is the most important strategic priority
Starters Movers Innovators
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Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Globalization and New Risk Standards Drive Change
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Which of the following are most likely to require changes to the way your firm manages investment data over the next 3 years? (% of insurance companies)
16
22
24
26
26
28
29
30
34
37
Increased demands from internal staff
Electronification of trading
Competitive pressure
Expansion into new asset classes
Increased demands from regulators
Growing volume of trading data
Increased demands from clients/investors
Increase in threats to cyber security
More stringent risk management standards
Expansion into new regions
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Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Many Insurance Companies Believe They Will Struggle to Cope With More Regulation
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55%
Which of the following statements best characterizes your expectations for regulatory reporting requirements over the next 3 years? (% of insurance companies)
3
10
53
34
Reporting requirements will ease
Reporting requirements will largely remain unchanged from today
Reporting requirements will increase, and our data capabilities willstruggle to cope
Reporting requirements will increase, but our data capabilities will copeadequately
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Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
More Than Half of Starters and Movers Will Struggle to Cope With Evolving Regulatory Reporting Requirements
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Which of the following statements best characterizes your expectations for regulatory reporting requirements over the next 3 years? (% of insurance companies)
4
2
51
42
3
19
42
35
0
13
71
17
Reporting requirements will ease
Reporting requirements will largely remain unchanged from today
Reporting requirements will increase, and our data capabilities willstruggle to cope
Reporting requirements will increase, but our data capabilities will copeadequately
Starters Movers Innovators
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232424
35
Finding betterways to visualise
data
Increased volumeof data
Accuracy of dataSecurity of data
Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
Data Security is Paramount – As Is Accuracy
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• 71% of insurance companies believe data security is a key strategic issue for the investment industry
• Legacy systems, siloes and plethora of providers make improving data accuracy a difficult challenge
What do you consider to be the top challenges related to investment data and analytics overall for your business today? (% of insurance companies)
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Governance Will Need to be Strong in the Highly Complex Investment Data Environment
19 Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research
What are the toughest data integration challenges your company faces? (% of insurance companies)
60%“” “The complexity of managing our data
distracts key employees from the areas where
they should be focusing most.”
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20
26
28
29
29
32
33
37
Cleaning data
Working with data warehouses that are tooslow
Accessing external data
Standardising data formats acrossdepartments
Working with data from external providers
Cost of external data
Reconciling older data from multipledepartments
Integrating legacy systems
Integrating unstructured data
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How to Become a Data Innovator
Break the “legacy trap” by replacing outdated systems that lock your data in silos
Learn how to exploit unstructured data to drive new sources of insight
Integrate your analytics across the entire investment portfolio to spot new investment opportunities and to identify hidden risks
Embrace outsourced models and the cloud to become more flexible and cost efficient
Crack the compliance challenge with systems that can cope with global regulatory changes
Create compelling career opportunities for data scientists, and learn how to knit them into existing teams
Ensure data governance and security standards are understood by, and entrenched throughout, the organization
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