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 Direct Insurer - Gross Written Premium and Profit Direct Insurer - Percentage of Industry Gross Written Premium 14,000 14,000 100% Other direct Percentage of Industry Gross Written Premium classes 90% 12,000 12,000 Employers' liability 80% Professional Net profit / 10,000 10,000 indemnity 70% loss after Public and product tax 60% liability 8,000 8,000 Millions ($M) Fire and ISR 50% Gross 6,000 6,000 Houseowners/hous Written 40% eholders Premium CTP motor vehicle 4,000 4,000 30% Commercial motor 20% 2,000 2,000 vehicle 1. Automotive Industry Domestic motor 10% vehicle 0 0 0% 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 2011 2012 2013 2014 2015 Year Ending December Quarter • • Insurance related to motor Zero growth in profit over the last 12 years vehicles makes up close to 40% of GWP • Gross written premium 2. Entertainment Industry static by class of business over the last five years

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 Connectivity  Competition Information  Innovation  New ways of Availability doing business CHOICE

2. . Dis isru ruption in in Oth ther In Industries 3. FinTech 1. Automotive Industry 1. Automotive Industry 4. Blockchain Tech 2. Entertainment Industry

1. Automotive Industry • 91 million vehicles manufactured in 2015 Global Motor Vehicle Production by Country 100 • 3% p.a. growth in vehicles 90 80 manufactured over the last five years Vehicles Produced (Millions) Other 70 Mexico 60 India 50 • China is now the dominant South Korea 40 Germany manufacturer Japan 30 United States 20 China 10 • Industry anticipates growth in 0 1970 1980 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015 production to continue, although at a Year Manufactured lower rate.

1. Automotive Industry Consumer Electric powered Autonomous behaviour vehicles vehicles • Technology well • Car sharing • Becoming more advanced affordable / • E-hailing • Issues to work practical • Licensing through

1. Automotive Industry • 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.

2. Entertainment Industry On-demand Streaming Cinema Television

2. Entertainment Industry • Employed nearly 60,000 • Originally offered monthly employees and had over subscriptions through a mail- 8,000 stores at its peak in order distribution channel. 2004. • Approached Blockbuster in • Filed for bankruptcy in 2010. 2000 to enter into a • Reliant on physical partnership. distribution network and penalty fees.

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

2. Entertainment Industry Consumer New players New platforms behaviour • Fierce • Convenience • TV competition • Tablets, smart phones • Whenever and • Game stations wherever demand

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

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 • Business financing platform directly from a wide range of investors • Risk management services and related consulting services

3. Fintech Innovators 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

4. Blockchain Tech Old System Blockchain $10,000 $10,000 Joe pays Ally $10K Bob pays Joe $5K 2016/11/04/07:05. 2016/11/04/06:00. Signed: Joe Signed: Bob • Joe adds to the list of all past promises (Blockchain) with his signature. Anyone • Centralised authority ensures that: can check that: • Joe promised to pay Ally $10K • Joe’s signature is genuine (he made the • Ally receives the $10K only if Joe actually promise) has $10K • Joe has the $10K, based on the list of all past promises.

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

3. . Are In Insurers Prepared?  Embrace technology and the opportunities 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 of individuals  Platforms can scale far more quickly and efficiently than traditional businesses

Move up the value chain Risk Risk Risk Risk Risk Risk Risk Risk Engineering/ Prevention Risk Mitigation Insurer

Focus on Customer and Culture • 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?

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.

Conclusions  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.