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4th Annual RiskMinds Insurance Conference
Stream B: The future of Insurance Regulation
“What will the market look like and...
Drivers Of Change and Opportunities for Big Insurers
Agenda
Major trends, risks and opportunities to address
1
What should...
Market trends & perspectives
Big Insurers Face an Unprecedented Business Context
Pressure on
profitability
Perfect
storm
R...
Market trends and perspectives
1 - Fast-changing economic environment
Big Insurers face a deep evolution of clients’ utili...
Market trends and perspectives
2 - Pressure on Profitability
Through Innovation CFO and CRO are changing their mission fro...
More accurate performance
management
• Faster, richer, more relevant MI
• Improved decision-making
New prospective capabil...
Market trends and perspectives
4 - Regulatory escalation
Increasing regulatory complexity tackling both Finance & Risk
Man...
Drivers Of Change and Opportunities for Big Insurers
Agenda
Major trends, risks and opportunities to address
1
What should...
Required capabilities
High performance insurers in the digital age demonstrate four
fundamental characteristics
Agile
Clie...
Required capabilities
1 - The ‘Agile’ Insurer shall reshape its organization to reconcile
management of stocks and flows
C...
Required capabilities
2 - The ‘Analytic’ Insurer will drive business impact from big data and
advanced analytics
Copyright...
Required capabilities
3 - The ‘Client-centric’ Insurer will leverage Digital enablers of the
customer-centricity journey
C...
Required capabilities
4 - The ‘Innovative’ Insurer will develop offers, services and sales
approach that address changing ...
Drivers Of Change and Opportunities for Big Insurers
Agenda
Major trends, risks and opportunities to address
1
What should...
Key enablers and helpers
Big Insurers will leverage on 4 key enablers to develop the capabilities allowing
them to navigat...
Key enablers and helpers
1 - Leverage regulatory efforts to improve performance, reduce costs and
complexity and generate ...
In order to make use of digital enablers Insurers will have to respond to
Digital Enablers
Key enablers and helpers
2 - Te...
Key enablers and helpers
3 - The transformation can only be delivered through a workforce with the right
culture, skills a...
Key enablers and helpers
4 - An integrated approach to compliance will leverage on synergies between
frameworks and ensure...
Conclusion
Proper management of risk & regulatory evolutions is key to harvest benefits
from new technologies and operatin...
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4th Annual RiskMinds Insurance Conference - Stream B: The future of Insurance Regulation

Eric Jeanne & Markus Salchegger discuss ”What will the market look like and how will it behave? Drivers of change and opportunities for Insurers” at the 4th Annual Risk Minds Insurance Conference in March 2015.

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4th Annual RiskMinds Insurance Conference - Stream B: The future of Insurance Regulation

  1. 1. 4th Annual RiskMinds Insurance Conference Stream B: The future of Insurance Regulation “What will the market look like and how will it behave? Drivers of change and opportunities for Insurers” Eric Jeanne & Markus Salchegger
  2. 2. Drivers Of Change and Opportunities for Big Insurers Agenda Major trends, risks and opportunities to address 1 What should Insurers be capable of to face this? Key enablers and helpers 2 3 Copyright © 2015 Accenture All rights reserved. 2
  3. 3. Market trends & perspectives Big Insurers Face an Unprecedented Business Context Pressure on profitability Perfect storm Regulatory escalation Digital revolution (SMAC) Fast changing economic environment Copyright © 2015 Accenture All rights reserved. 3
  4. 4. Market trends and perspectives 1 - Fast-changing economic environment Big Insurers face a deep evolution of clients’ utilization of insurance, and a corresponding reshuffling of market forces and regulation Revamping of market forces Radical evolutions in clients behavior Building industry boundaries Pressure on profitability Emerging regulation (data privacy) New competitors in the digital era Insure profiles & uses, not persons & goods Increased client volatility Copyright © 2015 Accenture All rights reserved. 4
  5. 5. Market trends and perspectives 2 - Pressure on Profitability Through Innovation CFO and CRO are changing their mission from excellent Business Operator to Trusted Advisors, helping CEOs to navigate current industry challenges “Back to Insurance basics” Better pricing, underwriting discipline, portfolio management… Low-yield environment Persisting low yields in most traditional asset classes, limiting financial performance Capital Management Optimization Investment / Disinvestment decisions, Risk Portfolio’s deleveraging…. Lack of profit opportunities ‘Saving glut’, heavy capital charges for traditionally profitable investments Flexible Operating Models Innovative sourcing arrangements, industrialization and cost-effectiveness… Additional performance levers necessary Sourcing & flexible cross-industries collaboration / internal cost effectiveness Copyright © 2015 Accenture All rights reserved. 5
  6. 6. More accurate performance management • Faster, richer, more relevant MI • Improved decision-making New prospective capabilities • Anticipate social / customer trends and expectations Market trends and perspectives 3 - Digital revolution Digital pervades all business domains, and its implications carry new opportunities and risks Copyright © 2015 Accenture All rights reserved. 6 In-depth client understanding • Customer behavior and habits • Customer expectations and new products / services • Customer interactions Embedded Risk Management • Informed understanding of risk • ‘Natural’ inclusion in key business decisions
  7. 7. Market trends and perspectives 4 - Regulatory escalation Increasing regulatory complexity tackling both Finance & Risk Management and Business sides Copyright © 2015 Accenture All rights reserved. 7 Key value drivers for insurers are: • Speed and accuracy • Implementation synergies between different regulations (e.g. Solvency II and IFRS) Selected insurance compliance areas Insurer Solvency II Financial Reporting (IFRS 4) G-SIIs ICS Unclaimed policies Data Security and Privacy Tax Fraud, AML Stakeholders- driven regulation (social protection) Financial stability and prudential- driven regulation (sustainability)
  8. 8. Drivers Of Change and Opportunities for Big Insurers Agenda Major trends, risks and opportunities to address 1 What should Insurers be capable of to face this? Key enablers and helpers 2 3 Copyright © 2015 Accenture All rights reserved. 8
  9. 9. Required capabilities High performance insurers in the digital age demonstrate four fundamental characteristics Agile Client centric Innovative Analytic Copyright © 2015 Accenture All rights reserved. 9 The ‘Agile’ Insurer • Intelligent sourcing approach • Early warning and rapid response mechanisms • Greater, faster and cheaper change The ‘Analytic’ Insurer • Richer insights, smarter decisions • Next gen predictive tools and techniques • Real-time decision support The ‘Client-centric’ Insurer • Brand new client experience • Richer, real-time interaction with clients… • …leveraged to develop client bases The ‘Innovative’ Insurer • Leverage on new capabilities • Develop innovative products (e.g. UBI) • Bring new services to the market
  10. 10. Required capabilities 1 - The ‘Agile’ Insurer shall reshape its organization to reconcile management of stocks and flows Copyright © 2015 Accenture All rights reserved. 10 Reinvent The ModelBecome A Utility Capture all growth opportunities • Differentiation of client experience • Multiple interactions, tailored solutions • Innovative go-to-market processes • Real-time analytics Optimize current business portfolio • Industrialization of key business processes • Underwriting excellence • Capital efficiency and optimization • Beyond compliance – operational efficiency
  11. 11. Required capabilities 2 - The ‘Analytic’ Insurer will drive business impact from big data and advanced analytics Copyright © 2015 Accenture All rights reserved. 11 Auto Insurer 10+ billion driving miles, more captured every second Competitive rates Low claims ratio Usage-based Pricing Life Insurer More precise risk estimates using big data (e.g. clinical, drug & customer history) Underwriting New Risks Underwriting HIV Patients Medical Insurer Leveraging extensive data (demographics, policy, surveyor, provider etc.) to identify fraud in accident portfolio 5% reduction in loss Fraud P&C Insurer Combining live weather data with historical patterns to optimize catastrophe loss rates Optimal rates Underwriting Life Insurer Predictive Models Selectively Replacing Medical Tests Lower Cost of Underwriting Automating Underwriting
  12. 12. Required capabilities 3 - The ‘Client-centric’ Insurer will leverage Digital enablers of the customer-centricity journey Customer Knowledge Copyright © 2015 Accenture All rights reserved. 12 Customer Satisfaction Organization redesign and change management Customer understanding • Social Media • Mobility • Digital Marketing • Analysis Customer-oriented offering • Social Media • Mobility • Digital Marketing • Analytics Multi-modal interaction management • Social Media • Mobility • Digital Marketing • Analytics Customer experience management • Social Media • Mobility • Digital Marketing • Analytics Digital Foundation (Global network, unified communication and collaboration, multi-channel contact center)
  13. 13. Required capabilities 4 - The ‘Innovative’ Insurer will develop offers, services and sales approach that address changing expectations in the marketplace Copyright © 2015 Accenture All rights reserved. 13 New Products & Services From “product” to “usage” approach • Usage-based insurance to account for >6% of auto premium within 3 years • Enhanced understanding of clients behaviors through utilization of internal data and/or cross-check with external sources (Google, Facebook…) New Distribution Channels From selling products to providing solutions • Comprehensive / reactive strategy for emerging social media • Integrated approach to client interactions, allowing for co-construction of client experience
  14. 14. Drivers Of Change and Opportunities for Big Insurers Agenda Major trends, risks and opportunities to address 1 What should Insurers be capable of to face this? Key enablers and helpers 2 3 Copyright © 2015 Accenture All rights reserved. 14
  15. 15. Key enablers and helpers Big Insurers will leverage on 4 key enablers to develop the capabilities allowing them to navigate this ‘perfect storm’ Adoption of new digital and technological enablers by process and technology innovation and integration in a broader risk management context Technology Value and competitive advantage generation with the development and implementation of a reactive and cost-effective approach on compliance Risk & Compliance Operating model transformation for enhanced profitability, reduced costs, increased collaboration among functions as well as value enhancing usage of digitalization trends Operating Model Workforce transformation to ensure the optimal mix of skills and talent in the “new” environment and is the precondition for future growth Talent & Organization Copyright © 2015 Accenture All rights reserved. 15
  16. 16. Key enablers and helpers 1 - Leverage regulatory efforts to improve performance, reduce costs and complexity and generate value with a Risk-Adjusted Operating Model (=RAOM) Developing and implementing a RAOM requires transformation at multiple levels 16Copyright © 2015 Accenture All rights reserved. Key components of a Risk-Adjusted Operating Model Transformation of Strategy, Risk, Capital, Financial and Performance Management by alignment of organization, processes, technology, data Tailored implementation of key measures: e.g.: risk-adjusted strategic planning, risk-based capital optimization and risk-adjusted performance management Adaptation of a centralized capital optimization and steering approach covering all phases from planning, to evaluation and monitoring, to execution.
  17. 17. In order to make use of digital enablers Insurers will have to respond to Digital Enablers Key enablers and helpers 2 - Technology is empowering Digital Transformation in client interaction Mobility Multi-devices, anytime and anywhere access are drivers for interaction and engagement * eg.: EU, Dir 95/46 EC and forthcoming EU General Data Protection Regulation Copyright © 2015 Accenture All rights reserved. 17 Cloud Enabler of operating model scalability as well as reducing transaction unit cost Analytics From transactional and open data sources enabling scientific decision making Social Manage social to influence and build communities, listen to social for needs Interactive Leverage to build new products aimed at specific segment and user experiences across digital touchpoints New regulatory developments manage compliance with upcoming regulatory frameworks in the area of data protection and privacy * Enhanced risk management methods new risk landscape such as reputation, business continuity/operational, cyber risk and IT security management as well respective risk transfer capabilities
  18. 18. Key enablers and helpers 3 - The transformation can only be delivered through a workforce with the right culture, skills and empowerment to execute the strategy Copyright © 2015 Accenture All rights reserved. 18 Optimal mix of skills & talents – precondition for the effective execution of strategy • Companywide understanding of strategic implications and “how to put the strategy into practice” for leaders and managers • Anticipate the competency demand for tomorrow and develop ad-hoc programs and recruitment plans to ensure the adequate mix of skills and talents • Empower managers and the workforce to innovate continuously Integration of regulation, compliance and risk management aspects requires the establishment of a risk and compliance culture within all levels of the organization Strategic transformation Define adapted strategic setup under consideration of new risks and challenges including top-down communication of strategic impacts Cultural transformation Implement new companywide mindset reflecting strategic changes (e.g. agility, client centricity, digitalization, innovation, new risks) Workforce transformation Competency model alignment and specific skills ramp up programs with a focus on new dimensions (regulation, digital, analytics, data, new emerging risk capabilities) as well as focus ion enhanced collaboration between risk and business functions
  19. 19. Key enablers and helpers 4 - An integrated approach to compliance will leverage on synergies between frameworks and ensure cost-effective implementation Copyright © 2015 Accenture All rights reserved. 19 A comprehensive ‘Compliance Office’ Capability • Ability to identify and assess new requirements - and design a proper response • Capability to roll-out operational solutions and revamp the ongoing operating model • Change management – ability to drive people towards new processes, tools, behaviors Infusing a companywide compliance culture, executing operational excellence in managing multiple regulatory frameworks and effectively integrate and adopt risk management capabilities can turn compliance and risk into a competitive advantage Compliance objectives and culture Defintion of rules and objectives as well as enhance importance of compliance („tone from the top“) Adopt changing regulatory landscape Implementation of effective measures and processes to ensure ongoing compliance with changing regulation Risk and Compliance framework Integrated risk and compliance organizational setup and centralization of competence Risk assessment and controls culture Identification of substantial compliance risks, systematic control and risk assessment
  20. 20. Conclusion Proper management of risk & regulatory evolutions is key to harvest benefits from new technologies and operating model transformations Copyright © 2015 Accenture All rights reserved. 20 Improve customer satisfaction Help identify gaps for products and services Maintain shareholder value Avoid legal issues Better work environment • Better client retention • Higher purchase rates • Trust in products and advertising • Improve products and services • Market and trends awareness • Maintain stock price • Lower credit cost • Better access to capital markets • Reduce risk of litigation • Reduce legal losses • Better employees retention • Higher productivity Sound risk & regulatory management

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