Back to the Future Thriving in a World of Digital Disruption. Authors: Jenna Cooke, Scott Duncan, Dean Marcus and Amy You

Transcription

1 Back to the Future Thriving in a World of Digital Disruption Authors: Jenna Cooke, Scott Duncan, Dean Marcus and Amy You

2 Agenda 1. Industry overview 2. Disruptors / innovations in other industries 3. Are insurers prepared?

3 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) Percentage of Industry Gross Written Premium 1. Industry Overview 14,000 12,000 10,000 8,000 6,000 4,000 Direct Insurer - Gross Written Premium and Profit 14,000 12,000 10,000 8,000 6,000 4,000 Net profit / loss after tax Gross Written Premium 100% 90% 80% 70% 60% 50% 40% 30% 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 2, Automotive Industry Quarter 2, % 10% 0% Year Ending December Commercial motor vehicle Domestic motor vehicle Zero growth in profit over the last 12 years Gross written premium static by class of business over the last five years 2. Entertainment Industry Insurance related to motor vehicles makes up close to 40% of GWP

4 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

5 Challenges to the Status-quo Connectivity Availability Information Competition Innovation New ways of doing business CHOICE

6 2. Disruption in Other Industries 3. FinTech 1. Automotive Industry 1. Automotive Industry 4. Blockchain Tech 2. Entertainment Industry

7 Vehicles Produced (Millions) 1. Automotive Industry 91 million vehicles manufactured in % 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. Global Motor Vehicle Production by Country Year Manufactured Other Mexico India South Korea Germany Japan United States China

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

9 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

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

11 2. Entertainment Industry Cinema Television On-demand Streaming

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

13 2. Entertainment Industry Reactive broadcasting programs Proactive driving TV programs

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

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

16 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

17 3. Fintech Innovators Wealth management platform Risk management services and related consulting services Business financing directly from a wide range of investors

18 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

19 4. Blockchain Tech Old System Blockchain $10,000 $10,000 Bob pays Joe $5K 2016/11/04/06:00. Signed: Bob Joe pays Ally $10K 2016/11/04/07:05. Signed: Joe 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.

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

21 3. Are Insurers Prepared? Embrace technology and the opportunities created Better understand customer preferences and behaviour Add real value

22 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

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

24 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?

25 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

26 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.

27 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.