On behalf of State Street, the Economist Intelligence Unit conducted a global survey of 321 senior executives at insurance companies (June and July 2014), to examine the technology challenges facing the sector.
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Platforms for Growth:Technology Innovations in the Insurance Industry
1. INSURANCE
Platforms for Growth:
Technology Innovations in the Insurance Industry
State Street 2014 Insurance Survey
Global Results
September 2014
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INSURANCE
State Street 2014 Insurance Survey
About the Research
On behalf of State Street, the Economist Intelligence Unit conducted a global survey of 321 senior
executives at insurance companies (June and July 2014), to examine the technology challenges facing
the sector. 36% of respondents were from Europe, Middle East and Africa (EMEA), 34% from the
Americas and 30% from Asia Pacific. 82% represent firms having $1 billion or more in annual revenue.
Respondents by
Type of Insurance Company
13%
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
Respondents by
Area of the Business
72%
6%
4% 2% 3%
Diversified
Health
Life
Property &
Casualty
Reinsurance
Other, please
specify
18%
39%
42%
Asset management
unit
Non-asset
management unit
My role spans both
asset management
and non-asset
management
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Platforms for Growth: Key Points
Insurers’ foremost strategic priority is identifying and penetrating new customer segments
This will be a major driver of technology strategy and investment over the next 3 years
Delivering on data to generate actionable insight is the top technology challenge
Investment priorities include social media, technology to capture new customer insights, CRM & risk management tools
Technology strategy is not always aligned with the business objectives
28% of global sample say there is full alignment; 41% of asset management respondents say the same
Legacy IT issues and data silos are big impediments to transformation
86% of global sample is affected by legacy IT Issues
Technology-savvy market entrants will inevitably disrupt the
industry – insurers cannot postpone digital transformation
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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INSURANCE
Insurers are Again Turning to Growth, With a Focus on New Customers in
Existing Markets
What is the top strategic priority for your business today?
% expecting these factors will
be a major driver of technology
investment
78%
75%
64%
64%
Changing customer
demand Changing customer demands
Growth in business volume
14%
13%
10%
8%
Target new customer segments in existing markets
Enhancing product offerings
Strengthening distribution model
Entering new geographic markets
Unlocking new customer segments will require fresh insights from
data – and significant investments in technology
Actions of competitors
New regulation
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
39%
Optimizing investment portfolio returns
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INSURANCE
New Technologies Enable Deeper Understanding of New Customer Segments
and Innovative Product Development
% who are prioritising for investment in next 3 years
57%
Social media tools
to build stronger
engagement
50%
Technology to capture
new customer insights
(e.g., telematics)
59%
Improved customer
relationship management
systems
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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INSURANCE
Asset Managers’ Data Priority is Real-time Access to a Cross-portfolio View
Asset managers need real, prime
data on the composition of the
portfolio – how much is in cash, how
much is settled and what the current
portfolio looks like. They want tools
that allow them to view or model
different scenarios and perform
‘what-if’ types of analysis. Most
importantly, they want it online now,
not when a report is produced.
New investment strategies
and increasingly complex
portfolios will require better
data and advanced risk and
performance analytics
% Planning to Expand
Existing Investment
Emerging
Markets 53%
Alternatives 21%
ETFs 21%
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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INSURANCE
Technology Strategy is Not Always Aligned With the Business Objectives
Only28%of total
respondents believe there is
complete alignment between their
technology strategy and the top
strategic priority of their business
But alignment is better on the asset
management side of the business …
Thinking about the top business priority you selected,
how aligned do you believe your firm’s current
technology strategy is to support that objective?
41%
24%
28%
Asset management
unit
Non-asset
management unit
All respondents
Failure to fully align IT and the business will weaken carriers’ ability to counter
the threats certain to come from nimble, technology- and data-savvy rivals
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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INSURANCE
Technology and Business Managers Do Not Always See Eye-to-eye
36%
19%
26%
22%
31%
51%
25%
38%
% who “strongly agree” with
each of these statements:
Our technology strategy is aligned with our business
objectives
Our business managers readily take advantage of new
technologies
Our technology managers are proactive in proposing new,
innovative solutions
Our technology managers are flexible in responding to
changing business needs.
Technology roles Non-technology roles
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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INSURANCE
Although Innovation is Mostly Seen as “Moderate,” There are Pockets
of Excellence
How would you characterise the overall pace of
innovation across the insurance industry?
31%
46%
7%
16%
Rapid
Moderate
Sluggish
Don’t Know
Technology-driven innovation
has been evident in recent years
in some areas, mainly product
development and distribution:
Examples:
• Usage-based auto insurance
• Interactive online needs-analysis
tools
• Mobile apps enabling users to
inventory personal property,
submit claims
• Mobile imaging to capture
vehicle IDs, drivers’ licenses
But data is the next battlefield
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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Legacy Systems are a Major Impediment to Digital Transformation
Please indicate the extent to
which you agree or disagree:
“We spend little or no time
addressing legacy IT issues”
3%
11%
26%
18%
41%
Strongly agree
Somewhat agree
Neutral
Somewhat disagree
Strongly disagree
It’s a massive investment requiring
probably hundreds of millions of
dollars over several years. Insurers
can’t just shut down the business
and stop everything they are doing
while they are putting technologies
in place. That is a huge hurdle to
modernization.
However … legacy issues are less of an issue on the asset management side of the business
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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INSURANCE
Data Silos – a By-product of Disparate Legacy Platforms
Overall, how effective is your business
today at turning multiple data
sources into actionable insight?
38%
54%
4% 3%
Very
effective
Somewhat
effective
Not effective Don’t know
• Just 41% of the overall sample
strongly agree that all
departments share relevant
data with one another
• 35% of asset management
respondents say the same
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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Legacy Systems and Silos Need Not Paralyze Insurers
Some options advanced by practitioners for overcoming, or circumnavigating, these bottlenecks:
Legacy Systems
Data Silos
• Prioritize interoperability over integration;
only integrate where absolutely necessary
• Leverage external data (e.g. from social
media and governments) to reduce
dependence on internal data
• Modernize in small pilots, or a series of
“small bets”
• Invest in new businesses to innovate
“outside the core”
• Use a private cloud to pursue selected
initiatives
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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“Technology Leaders” Stand Out When It Comes to Innovation and Alignment
• Characterize the pace of innovation at their firm as rapid
• Strongly agree their technology strategy is aligned with the
business objectives
• Strongly agree their technology managers are proactive in proposed new,
innovative solutions to the business
• Strongly agree their technology managers are flexible in responding the
needs of the business
• Strongly agree their business managers readily take advantage of
new technologies
• Strongly agree they regularly mine data to extract relevant information that
informs operations and strategy
Technology
Leaders*
Total
Sample
82% 53%
83% 35%
70% 23%
67% 43%
69% 22%
50% 31%
* These are the 17% of total respondents who “strongly agree” that they are “technology leaders within their peer set”
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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Steps Some Insurers are Taking to Achieve Technology Leadership
Recruiting CIOs and other senior technology managers from outside the industry, to bring new ideas
and help accelerate cultural change
Hiring data specialists in from other industries, to provide new ways of analyzing insurance data and
generating insight
Prioritizing data visualization (because, when it comes to analytics, visualization is almost as
important as the analysis itself)
Striving for interoperability rather than integration of systems in order to ease legacy
modernization pains
Exploring the cloud and investment in new businesses as other means of innovating outside of the
core legacy systems
Leveraging external data to help to overcome data silos within the company
Increasing the coordination of technology strategy between the asset management and customer-facing
sides of the business.
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit