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How Innovation Is Disrupting the Insurance Marketplace

As digital and data become key innovation enablers, insurers face new threats and opportunities. New entrants are disrupting long standing paradigms of how insurance risk is assessed, how products are distributed, and how insurers service customers.

Digitalization and Analytics acquire new strategic relevance in this context and will fundamentally alter the relationship insurers have with customers and agents. This panel will discuss some of these trends and options available to insurers to address these opportunities.

Presented at Pegaworld 2016.

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How Innovation Is Disrupting the Insurance Marketplace

  1. 1. Mahendra Nambiar Vice President, Global Insurance Solutions & Innovation Head This information is not a commitment, promise or legal obligation to deliver any material, code, or functionality and the development, release and timing of any features or functionality described for our products remains at our sole discretion. 2016. Confidential. Pegasystems, Inc. ©2016 Pegasystems Inc.
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  3. 3. 3 1990’s •Early 90’s: Credit- based insurance scores (CBIS) introduced •Online/direct channel opens •Late 90’s: CBIS’s widely adopted by P&C insurers 2000’s •NCOIL regulations introduced •Data, analytics, modeling become major part of process •3rd party data introduced 2010’s •Telematics/UBI •Behavioral data •Connected economy •Sharing economy •Comparing economy
  4. 4. 4 The Insurance Industry is about to change radically and rapidly, creating a massive opportunity for innovative companies to emerge and improve massively on the way insurance is built, bought, and experienced.
  5. 5. Leading insights on global insurance industry 15,500 150+ Survey responses in the Customer Experience Index executive Insurance Interviews 9 th year of publication ■ Customer Experience ■ Spotlight on Future of Insurance in a Connected World ■ Country Snapshots 30 Insurance markets covered 3Report Features
  6. 6. 6 48.8% 51.6% 59.3% 56.6% 64.7% 56.2% 33.9% 36.0% 35.4% 34.6% 40.3% 35.5% Developing Asia-Pacific Developed Asia-Pacific Latin America Europe North America Global OthersGen Y 40.7% 44.7% 47.3% 49.9% 51.6% 48.2% 33.3% 29.0% 32.3% 29.0% 36.2% 30.5% Developing Asia-Pacific Developed Asia-Pacific Latin America Europe North America Global Positive Experience in Traditional Channels, by Age and Region (%), 2015 Positive Experience in Digital Channels, by Age and Region (%), 2015 PP Gap 24.4 22.0 23.9 15.5 14.9 20.7 15.3 20.9 15.0 15.7 7.3 17.7 PP Gap
  7. 7. Connectivity and Artificial Intelligence Customer Centricity Transparency
  9. 9. Largest Taxi Service That Owns No Taxis - Founded in 2009 Largest Accommodation Provider That Owns No Real Estate - Founded in 2008 Largest Phone Company That Owns No Telco Infra - Founded in 2003 Most Valuable Retailer That Has No Inventory - Founded in 1999 Biggest Media Owner Creates No Content - Founded in 2004 World’s Largest Movie House Owns No Cinemas - Founded in 1997
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  11. 11. Within the US, Approximately 70% of insurance tech deals went to non-health insurance areas
  12. 12. For Insurance Carriers For Policy Holders  Self selected pools offer lower risk profiles  Less likely to report small claims  Reduces moral hazard of insurance  Premium Discounts if there are no claims  Ability to pool risk with cohesive groups to minimize risk  Have a vested interested in spreading the word and getting friends to join
  13. 13. Using anonymized social and search engine data. BBM identifies unmet insurance needs. Builds affinity groups and negotiates deals with insurers. Sells through social networks. Bought By Many was named Fintech Innovation of the Year in 2015. Partnership with Ping An in China Acquired an Insurance Broker in the UK Social Distribution This is an online life insurance company underwritten by Scottish Friendly Assurance Society. Beagle Street started in 2012 and is designed to allow people who have experienced a major life moment such as buying a house, getting married or having a baby to get affordable life insurance quickly. This company has refocused the relationship with the insured to that of an advisor, a life events guide. The model is tuned to reinforce trust with the end customer. Events Partner This is an example of bringing insurance products to the customers journeys rather than creating a new insurance journey. Alibaba and ANT achieve this by offering products that are integrated into the ecommerce journey, shipping insurance for example. In 2013, Ant Financial set up its own insurance company called Zhong An. Integrated Insurance
  14. 14. Whatever path you chose to accelerate the transformation of your business, three things are of paramount importance: 1. Fully Understand Your Starting Point (& Your Target!) 2. Focus More On Management Intensity Than Technology Intensity 3. Capability Optimization Is Not Innovation 4. Leverage Data And Insights As The Fundamental Catalyst For Innovation