The Changing Role of
Risk in the Digital Era
October 2016
The role of risk in the digital era is based on the key insights from the
World Insurance Report 2016 focusing on the need for innovation in
the underwriting process
World Insurance Report 2016
The information contained in this presentation is proprietary.
Copyright ©2016 Capgemini and Pegasystems. All rights reserved.
2
Poll
Have you already started putting in place an underwriting digital roadmap for
your customers ?
1)
2)
3)
4)
5)
Yes , we already have implemented the digital roadmap
No, still evaluating various vendors
It is too early
May be in next 6 months to 1 year
Not interested
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3
The Message and Key
Findings
The Key Message
Gen Y customer behavior is foretelling the future for insurers. With twice as many
interactions and heavy digital channel usage, ironically Gen Y has the lowest positive
experience levels. This gap is a wake-up call for insurers to improve or risk losing these
customers to emerging competition
The inevitable advance of Connected Technologies/Internet of Things (IoT) will impact how
insurers connect with customers and drive the transformation of the insurance industry.
Affluent customers, while not necessarily younger customers, show the highest propensity to
adopt Connected Technologies
Connected Technologies/IoT will require insurers to change how they fundamentally assess
and manage risk. Risk is decreasing, increasingly transparent, and more likely to be shared
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5
Gen Y customers communicate more frequently with their insurers
across all channels when compared with other age groups
Customers Using the Channel At Least Once a Month (%), 2015
PP Gap
-15.5
-20.0
-7.8
-19.1
-16.4
50%
43.0%
% of Total Customers
40%
36.2%
35.6%
32.1%
30%
27.8%
27.5%
20%
31.9%
16.2%
15.5%
13.0%
10%
0%
Internet-PC
Internet-Mobile
Agent
Gen Y
Social Media
Phone
Others
While Gen Y has high use of digital channels, these channels are not expected to replace
traditional channels as insurers will need to provide a seamless experience across channels.
Question asked: “How often do/will you use the following channels for your insurance needs? Frequency of Use: Weekly, Once a Month, Once in Three Months, Twice a Year, Yearly, Never”; The values
considered for the above chart are Weekly and Once a Month
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6
Copyright ©2016 Capgemini and Pegasystems. All rights reserved.
Source: Capgemini Financial Services Analysis, 2015; Capgemini Voice of the Customer Survey, 2015
Note:
As compared to older customers, a greater proportion of Gen Y
customers use social media and internet-mobile channels for
insurance purchase
Gen Y
Channel Usage to Purchase or Renew Insurance Policy (%), 2015-2016
Channel Used to Purchase
Insurance Policy
37.1%
Channel Likely to be Used to
Purchase or Renew Insurance
Policy in Next 12 Months
32.2%
Channel Used to Purchase
Insurance Policy
Others
8.8%
9.9%
18.5%
43.6%
Channel Likely to be Used to
Purchase or Renew Insurance
Policy in Next 12 Months
9.0%
37.5%
0%
8.8%
20%
Agent
20.7%
40%
Phone
Bank
Broker
11.9%
17.3%
11.8%
15.3%
13.1%
22.5%
14.2%
60%
Internet-PC
3.5%
1.6%
16.5%
13.2%
25.3%
2.1%
2.1%
0.8%
0.7%
1.5%
0.6%
80%
Internet-Mobile
100%
Social Media
Note: Questions asked: ”Which channel did you use to purchase your primary insurance policy”? and “How do you wish to purchase or renew primary insurance policy in the next 12 months”?
The information contained in this presentation is proprietary.
Source: Capgemini Financial Services Analysis, 2015; Capgemini Voice of the Customer Survey, 2015
Copyright ©2016 Capgemini and Pegasystems. All rights reserved.
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If the opportunity arises, Gen Y customers are more likely to
purchase insurance from technology firms than older customers
Number of Customers Likely to Purchase Insurance from Technology Companies, by Region,
and Age (%), 2015
PP Gap
-9.4
49.0%
50%
-11.0
-12.7
-8.6
-5.3
47.2%
38.6%
40%
% of Total Customers
-10.4
36.2%
30%
25.2%
23.4%
19.6%
20%
14.0%
12.5%
14.1%
11.0%
10%
8.8%
0%
Global
Latin America
Developing
Asia-Pacific
Gen Y
North America
Developed
Asia-Pacific
Europe
Others
Customers in developing markets have a high propensity to purchase from technology firms
and insurers must continuously innovate to overcome the threat posed by new players.
Question asked was ‘On a scale of 1-7, how likely would you be to purchase insurance policies from top technology brands such as Google, if they foray into insurance?’; Options 6 and 7 are considered
for the chart
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8
Source: Capgemini Financial Services Analysis, 2015; Capgemini Voice of the Customer Survey, 2014, 2015
Copyright ©2016 Capgemini and Pegasystems. All rights reserved.
Note:
Future of the Insurance
Industry in a Connected
World
Connected technologies are poised to transform insurance
underwriting and the industry as a whole
3
Key Technologies that
Will Impact the
Insurance Industry
Smart Ecosystems
 Three themes in technology driven by the Internet of
Things (IoT) – connected ecosystems, embedded
technology, and machine intelligence -- are converging in
ways that will have wide-ranging impact on how
consumers conduct their everyday lives
 The advent of connected technologies is altering the
fundamental variables of risk and may transform the very
nature of insurance underwriting
 The changing nature of risk and underwriting will lead to a
change in the insurance business as a whole, opening up
the industry to new types of players and business models
 Insurers must begin developing their short-, medium- and
long-term strategies for responding to the coming era of
connected consumer technologies
Wearables
Driverless Cars
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While most insurers are still in early stages with respect to the new
technologies, they are expected to move fastest on connected
ecosystems
Insurer’s Current and Future Maturity for Offerings Linked to New Technologies
Connected Ecosystems
Embedded Technology
Smart Ecosystems
Insurer Offerings: Maturity
Level Today
Machine Intelligence
Wearables
1
Driverless Cars
1
Insurer Offerings: Maturity
Level in Five Years
1
5
5
3
Insurer Investment Strategies for New Technologies
Smart Ecosystems
10.1%
28.0%
25.0%
36.9%
Laggards
Wearables
10.8%
32.9%
26.3%
Late Adopters
29.9%
Fast Followers
First Movers
Driverless Cars
25.8%
0%
Source:
30.8%
20%
40%
22.0%
60%
21.4%
80%
100%
Capgemini Financial Services Analysis, 2015; WIR 2016 Executive Interviews, 2015; Capgemini Voice of the Customer Survey, 2015
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11
Connected technologies are not only transforming customer lives,
but also altering the fundamental risk variables that traditionally
drove the insurance industry
Changing Nature of Insurance Variables and Their Consequences
Changing Insurance Variables
Consequences
Increasing Risk
1
Transparency
 Traditional proxy variables used by insurers for risk modeling
are being supplemented by direct risk-indicating customer data
 This is reducing the ‘unknown’ on which statistical models for
risk assessment are based
A comprehensive shift to Usage
Based Insurance (UBI) and
dynamic pricing as the prevalent
risk pricing method
2
Decreasing Risk
Incidence
 Through smart-programming and real-time connectivity,
connected technologies are creating a safer environment
 The overall impact of this may be that customers will gradually
reduce their exposure to risk over time
Reduced need for insurance due to
a more risk-free environment
3
Shifting Nature
of Risk
Ownership/
Exposure
 As the world gradually moves towards sharing and service
economies, the nature of risk ownership will also change
 Instead of traditional one-to-one ownership correlation, there
may be multiple stakeholders for a single insurable property
Change in insurance product
design and customer portfolios
Risk and Fraud
Mitigation
 Connected technologies may gradually shift insurance to a
model of risk mitigation along with risk transfer
 Data from these technologies also improve insurers’ ability for
fraud detection in claims
Change in insurance revenue
model and better control on
profitability
4
Source:
Capgemini Financial Services Analysis, 2015
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The changing risk fundamentals could lead to a significant
transformation in insurance underwriting in the long term
Evolution of Underwriting
Evolution of Risk Modeling
Evolution of Risk Pricing
Standard pricing based on customer segments
Traditional Proxy
Variables
 Age
 Credit score
 Historical claims
data
 Asset type
Historical Data
Near Real-Time
Data
New Proxy Variables
Identified through
Analytics
 E.g Level of social
activity and network
of friends
Risk Model
Near Real-Time Risk Data
Customized pricing based on additional customer
data gathered from different sources
Standard pricing based on customer segments
along with price incentives such as premium
discounts based on real-time individual risk data
Individual risk scores and dynamic pricing
based on real-time individual risk data
 Data from smart sensors, wearables, and
smartphones
Dynamic pricing at individual level based on realtime individual risk data, contextual data, and other
behavioral data
New, iterative risk models can be built that are based on a historical component
as well as a near real-time component for risk assessment
Source:
Capgemini Financial Services Analysis, 2015; WIR 2016 Executive Interviews, 2015; Text line searches
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New technologies and resulting changes in customer lives will also
bring about transformation in other areas of insurance
Change in Insurance Business Design
Shift to Mass
Personalization
 The insurance operating model may take the form of mass personalization wherein products and
services are designed for the customer as an individual rather than as a class
 This will be driven by customer demands and enabled by advanced technology and data capabilities
New Commercial
Product Lines
 With more firms storing sensitive customer information and with increase in cyber attacks,
cyberinsurance presents a huge opportunity for insurers
 The increase in automation and emergence of intelligent devices such as driverless cars provides a lot
of scope for commercial liability products
Personal Lines to
Commercial Lines
 As more functions and devices such as cars are automated, some product lines such as auto insurance
may convert from personal to commercial insurance
 For example, if a smart microwave is responsible for a fire in the home, the liability would be with the
product manufacturer and thus, the insurance may become a commercial liability insurance rather than
personal property insurance
Product to
Customer
Insurance
 Customer lives are becoming more mobile and traditional ownership patterns are changing
 This will increasingly make it necessary for insurers to design coverage around a customer for multiple
risks rather than by discrete products
 Thus, insurers may shift to packaged insurance products that cover the risks for motor, home, travel,
life, etc for a single customer
Source:
Capgemini Financial Services Analysis, 2015; WIR 2016 Executive Interviews, 2015; Text line searches
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To prepare for a transformed insurance industry and new competitive
environment, insurers should strengthen and enhance their existing
business in the near future
Implications for Insurers
Implications for Insurers
Short-Term:
Strengthening the
Business
 Streamlining the Business
 Building Capabilities in Data
and Insights
 Exploring Opportunities for
Strategic Growth
Long-Term:
Transforming the
Business
Medium-Term:
Enhancing the
Business
 Providing Improved Value
Propositions and Services
 Establishing Alliances
 Insight-Driven Strategies
 Evolution of Underwriting
 Change in Business Design
 Increased Competition from New
Entrants
In order to effectively compete in the long-term, insurers must build their competencies in data,
technology, and customer understanding.
Source: Capgemini Financial Services Analysis, 2015
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While devising their strategies, insurers should consider certain
critical questions that will help them form a comprehensive
assessment of their business and goals
Key Questions to Consider
Current Capabilities
1.
•
•
•
How suited is the firm to today’s insurance environment in terms of:
Core systems and channels,
People capabilities,
Providing superior customer experience?
Readiness for Change
2. How ready is the firm to collect and analyze real-time data, and make decisions based upon it?
3. Are business processes and technology systems agile enough to adapt to a rapidly changing business landscape?
Future Positioning
4. Does your current business model—taking into account products and services, customer segments and the brand—need to
be reengineered in any way to adapt to the changing environment?
5. What strategy will your firm deploy when it comes to potential alliances or acquisitions?
6. Is your firm well versed in how customer demands are evolving?
7. How will the firm prioritize technology investments?
8. As regulations become more stringent, how will the firm balance innovation against compliance?
9. How will the firm develop the appropriate people skills to manage the expected changes?
Source: Capgemini Financial Services Analysis, 2015
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Some insurers have already started exploring new value propositions
by leveraging data and technology capabilities, as well as new
partnerships
Value-Added Services
Risk Mitigation Services
 Allianz has partnered with Panasonic
to provide better service to customers
 In case of any danger in the customer's
home, the Panasonic sensors used by
them will send alerts to the user's
mobile device, as well as to Allianz
 Allianz will then dispatch repair teams
to address the issue quickly and
mitigate the damage caused
 State Farm’s In-Drive program offers
services such as stolen vehicle
assistance and emergency calling for a
subscription fee, following an initial free
trial period
 Customers can choose from among
various subscription packages based
on the services required
 For its customized weather insurance
product, Monsanto monitors the
weather through remote-sensing
systems, satellites, weather stations,
and radar
 Whenever a covered weather event
occurs, a payment is made
automatically without any claim
adjusters
 Aviva has a similar partnership with
HomeServe wherein Aviva underwrites
HomeServe home assistance products
 If there are any repair issues in the
home, then the HomeServe smart
device will alert both the policy holder
as well as Aviva
 This enables Aviva to assist their
customers on time as per need
 In Italy, Cardif Vita Compagnia di
Assicurazione e Riassicurazione S.p.A
has created a product called Habit@t
Homebox
 Through smart devices, it monitors
homes around the clock and alerts
emergency assistance in case of
danger
 United Healthcare has developed a
highly interactive digital payments tool
called myClaims Manager
 Through visuals and colors, the
application helps users track and
manage their healthcare claims and
related expenses online
Source:
Capgemini Financial Services Analysis, 2015; Text line searches
Streamlined Customer Service
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17
Poll
Does your underwriting teams get one single view of your customer
information ?
1) Underwriters have to access different systems to access the customer
information
2) We are transforming our underwriting systems
3) Detailed information about customers help underwriters tremendously
4) We are still thinking about how to handle the underwriting system
issues
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Change [chānj v]
the act or instance of making or
becoming different.
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Digital Is Accelerating
Carrier Challenges
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Driving Carriers
Platforms of Innovation
& Engagement
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1. Redefine The Value Chain
2. Convert Insight Into Action
3. Evolve & Innovate Risk Selection
4. Double Down On Engagement
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1. Redefine The Value Chain
2. Convert Insight Into Action
3. Evolve & Innovate Risk Selection
4. Double Down On Engagement
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Engagement
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Distribution
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Service Models
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28
Engage across the complete customer journey
The Customer Decision Cycle
Awareness
Evaluation
Selection
Purchase
Service
Claim
Renewal
Retention
Loyalty
Risk Management
Your Business Functions
Optimize
Sales Revenue
Engage with
offers of value
Always-on
Brain
Make good on your
promises
Satisfy and serve
Your Business Goals
Acquisition
Underwriting
Cross-sell
Up-sell
Service
Risk Management
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29
Accelerate your journey – start quickly and scale
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1. Redefine The Value Chain
2. Convert Insight Into Action
3. Evolve & Innovate Risk Selection
4. Double Down On Engagement
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The information contained in this presentation is proprietary.
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CONTEXT
Always-On Brain
ACTION
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“Always-on” Brain
Interaction History
Identity Resolution
Using Matching
Data
Contextual Understanding
Intent &
Journey Stage
Best
Actions
Information
Insight
Action
Arbitration & Orchestration
Using Decision Strategies
Predictive Intelligence
Finding Insights using AI,
Event Processing &
Machine Learning
Action & Offer
Management
Eligibility, Timing,
Preference, Creative,
Incentive
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One “Always-on” Brain
Knows them as
individuals
Continuously tailors to
their context &
preferences
Anticipates needs
and learns
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1. Redefine The Value Chain
2. Convert Insight Into Action
3. Evolve & Innovate Risk Selection
4. Double Down On Engagement
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Continually innovate with decision support
Data
Insight
Big Data
Integration
Third-party
Predictive
models
System
Integration
Offline
Predictive
models
Strategy
Collaborative Strategy
Design + Reuse
Deployment
Delivery
Production
Decision Hub
Customer driven
Next-Best-Action
Strategies
Agent assisted
Control
Planning,
simulation,
monitoring, and
management
Adaptive
models
Company Driven
Event Strategies
Data Flow
Text Analytics
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Operationalize data and analytics directly
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Evolve risk selection/avoidance
Mass Approach
A
B
C
Actions:
D
Risk 1
Risk 1
Risk 2
Risk 2
Risks
Risks
Offers:
Intelligent Approach
Risk 3
Risk 3
Risk 4
Risk 4
Risk 5
Risk 5
Push C to Similar Risks
Growth
Service
Renew
Risk
Opportunity to
Tailor Underwriting
Approach
A 90 degree paradigm shift
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1. Redefine The Value Chain
2. Convert Insight Into Action
3. Evolve & Innovate Risk Selection
4. Double Down On Engagement
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46
Quickly connect to data sources & systems
YOUR
PROCESSES AND
SCREENS
FETCH UPON REFERENCE INTELLIGENT CACHING BACKGROUND
RETRIEVAL
LIVE DATA
SYSTEMS OF
RECORD
AND BIG DATA
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47
Seamlessly engage across channels
Deliver coherent experiences regardless of channel
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Poll
What are your business objectives while looking at digital as a core
component ?
1)
2)
3)
4)
Improve policy issuance
Increase operational efficiency
Prove great customer experience
All of the above
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49
Whitepaper
Launching our new joint whitepaper -The role of risk in the digital era
 Joint whitepaper on Connected Technologies/Internet
of Things will require insurers to change how they
fundamentally assess and manage risk. Risk is
decreasing, increasingly transparent, and more likely
to be shared
 Innovative underwriting solutions help proactively
bridge the gap between the customer and the insurer
Complimentary copy for our attendees
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Thank You
To explore the subjects raised in this white paper in more depth, please contact us:
Capgemini: www.capgemini.com or email: [email protected]
Pega: www.pega.com/changing-role-of-risk or email: [email protected]
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©2016 Capgemini and Pegasystems. All rights reserved. Rightshore® is a trademark belonging to Capgemini.
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