Back to the Future Thriving in a World of Digital Disruption - - PowerPoint PPT Presentation

Back to the Future

Thriving in a World of Digital Disruption

Authors: Jenna Cooke, Scott Duncan, Dean Marcus and Amy You

Agenda

• 1. Industry overview
• 2. Disruptors / innovations in other

industries

• 3. Are insurers prepared?

1. . In Industry try Overv rview

• 1. Automotive Industry
• 2. Entertainment Industry
• Zero growth in profit over

the last 12 years

• Gross written premium

static by class of business

• ver the last five years
• Insurance related to motor

vehicles makes up close to 40% of GWP

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015

Percentage of Industry Gross Written Premium Year Ending December

Direct Insurer - Percentage of Industry Gross Written Premium

Other direct classes Employers' liability Professional indemnity Public and product liability Fire and ISR Houseowners/hous eholders CTP motor vehicle Commercial motor vehicle Domestic motor vehicle 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Dec 2002c Jun 2003 Dec 2003 Jun 2004b Dec 2004 Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007 Dec 2007 Jun 2008 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Jun 2011 Dec 2011 Jun 2012 Dec 2012 Jun 2013 Dec 2013 Jun 2014 Dec 2014 Jun 2015 Dec 2015

Millions ($M) Quarter

Direct Insurer - Gross Written Premium and Profit

Net profit / loss after tax Gross Written Premium

Conventional Business Model – Pipeline Model

• Value is created upstream
• Product or service is consumed

downstream

• Clear delineation between

buyers and sellers

• Product or service is deemed

as valuable in itself

Challenges to the Status-quo

CHOICE

Availability Connectivity Information

• Competition
• Innovation
• New ways of

doing business

2. . Dis isru ruption in in Oth ther In Industries

• 1. Automotive Industry
• 3. FinTech
• 2. Entertainment Industry
• 4. Blockchain Tech
• 1. Automotive Industry

• 91 million vehicles manufactured in

2015

• 3% p.a. growth in vehicles

manufactured over the last five years

• China is now the dominant

manufacturer

• Industry anticipates growth in

production to continue, although at a lower rate.

10 20 30 40 50 60 70 80 90 100 1970 1980 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015

Vehicles Produced (Millions) Year Manufactured

Global Motor Vehicle Production by Country

Other Mexico India South Korea Germany Japan United States China

• 1. Automotive Industry

Consumer behaviour Electric powered vehicles Autonomous vehicles

• 1. Automotive Industry
• Becoming more

affordable / practical

• Car sharing
• E-hailing
• Licensing
• Technology well

advanced

• Issues to work

through

• Uber launched a driverless

car service in September 2016*

• "Self-driving is core to Uber's

mission," - Uber's vice president of engineering

• Individual car ownership is

being challenged by the concept of “shared mobility”

• 1. Automotive Industry

Embrace technology – partner with technology firms/develop expertise in house. Technology presents both opportunities and risks to current market participants.

• 1. Automotive Industry

• 2. Entertainment Industry

Cinema Television On-demand Streaming

• 2. Entertainment Industry
• Employed nearly 60,000

employees and had over 8,000 stores at its peak in 2004.

• Filed for bankruptcy in 2010.
• Reliant on physical

distribution network and penalty fees.

• Originally offered monthly

subscriptions through a mail-

• rder distribution channel.
• Approached Blockbuster in

2000 to enter into a partnership.

• Reactive – broadcasting programs
• Proactive – driving TV programs
• 2. Entertainment Industry

Consumer behaviour New players New platforms

• 2. Entertainment Industry
• Fierce

competition

• Convenience
• Whenever and

wherever demand

• TV
• Tablets, smart

phones

• Game stations

Understand the customer, their habits and their preferences – Do not be afraid to challenge the existing business model

• 2. Entertainment Industry

• 3. Fintech Innovators
• 92% of the top 50 fintech companies focus on disrupting, rather

than enabling the existing market*

*2016 Fintech 100 report, H2 Ventures and KPMG

• 3. Fintech Innovators
• Wealth management

platform

• Risk management

services and related consulting services

• Business financing

directly from a wide range of investors

New ideas and competition are leading to better choices for consumers, and creating a need for the existing market to re-align to place the customer at the centre of their business

• 3. Fintech Innovators

Joe pays Ally $10K 2016/11/04/07:05. Signed: Joe

• 4. Blockchain Tech

$10,000

Old System Blockchain

• Centralised authority ensures that:
• Joe promised to pay Ally $10K
• Ally receives the $10K only if Joe actually

has $10K

• Joe adds to the list of all past promises

(Blockchain) with his signature. Anyone can check that:

• Joe’s signature is genuine (he made the

promise)

• Joe has the $10K, based on the list of all

past promises. $10,000

Bob pays Joe $5K 2016/11/04/06:00. Signed: Bob

Centralised authorities beware – if your sole function is to stamp and verify, you might be “Blockchained” out of existence.

• 4. Blockchain Tech

3. . Are In Insurers Prepared?

• Embrace technology and the
• pportunities created
• Better understand customer

preferences and behaviour

• Add real value

Embrace the Platform Business Model

• Creates value by facilitating

exchanges between two or more independent groups

• Brings together consumers and

producers

• Connected technology means

exchanges are now facilitated between decentralised networks

• f individuals
• Platforms can scale far more

quickly and efficiently than traditional businesses

Risk Risk Risk Risk Risk Risk Risk

Insurer Risk Engineering/ Prevention Risk Mitigation

Move up the value chain

• Re-examine the needs of individuals

and businesses in a heavily technology reliant and interconnected world.

• Sharing-economy
• What customers want and need is

changing

• Less barriers to connecting and

supplying goods and services

• Increased focus on customer service
• People love to rate experiences

and voice their concerns

• Increase trust - how?

Focus on Customer and Culture

Suncorp - Strategy

• Focus on “digital marketplace”
• Customer journey – consider

customer needs across:

• Home and property
• Mobility
• Self
• Money
• $5 million investment in Trov
• Aim is to increase customer

lifetime value

IAG - Strategy

• Deliver great customer experiences to create value
• Customer experiences, corporate partnering,

customer-led digital ecosystems are listed as the growth levers

• Digital lab’s focus is in on innovation and identifying

and harnessing disruptive technology.

• Created a start-up funding unit.
• IAG has partnered with Braintree, a payment

platform owned by PayPal. IAG’s “ShareCover”, insurance for those who rent their houses on the likes of Airbnb is using this platform.

• Insurers have recognised the need

for action

• Strategies aimed at thriving in the

new world have been devised

• Challenge is in successful

implementation and customer engagement

• Existing insurers face pressure

from new entrants who aren’t encumbered by the legacy issues.

Conclusions