The Future of Insurance Technology: Risk or Opportunity

Transcription

1 The Future of Insurance Technology: Risk or Opportunity Dr. Ralf Widtmann Hamburg

2 Big Picture to understand the impact of Digitalization and the degree of freedom insurers face Four Drivers of the Future Regulation R S Solvency II Increased customer protection More supervision Strive for self-actualization Ambiguous relationship to privacy Changes in demographics by urbanization, immigration and ageing Society REST-Model E T Economy Slow to no recovery (EU zone) from financial crisis lower growth rates Quantitative Easing by ECB and Zero interest policy Digital innovations increasingly accepted in professional & personal context ( Digitalization ) Customer insights and risk assessment ("Big Data") Technology Of course everything is interconnected Registered Trademark 2

3 Before we move forward One step back to the basics Risk management is currently reinvented Technical Basics of Risk Management & Current developments 1) Diversification by Pooling: Same (but more & other criteria) except self selected pools! 2) Diversification over Time (catastrophes, low risk high impacts, hurricanes..): Not in the focus 3) Risk Management (loss prevention, loss minimization): A lot of innovation!! Time Risk Pool Risk Pool Risk Pool Risk Pool 3

4 Overall situation Weakens the Weak, Many players don t have the resources to focus on Digitalization Impact of the four drivers on the industry Regulation Economy Society Technology This drivers lead to... Higher capital requirements Higher regulatory costs (running) costs Lower RoEs Low to now premium growth (mixed picture across Europe) Low interest rates, but insurers role as new asset managers? Competition is under control (underwriting discipline) & low claims Pay to go policies (also in the context of new mobility concepts) Simpler products unbundling Individualized risk pools: New trend? Lower organizational costs (if investments are conducted) Lower premiums/margins due to more price comparison New competitors and more proactive risk management Impact ~? 4

5 More threats then opportunities especially if listened to smaller insurers Technology: Opportunities vs Threats Technology 1. More and more consumers begin to handle their insurance transactions online/apps 2. More web connected devices then people 3. Growing amount of personal data available to individuals & comp. 4. Cheap processing & storage & devices (e.g. sensors) 5. Breakthrough on mobile payments expected - smartphones (or the included NFN chips, smart cars ) will become the main payment device 6. The unknown Opportunities 1. Reduction in organizational costs Direct sales Self service platforms 2. Improved loss prevention (telematics, fire, theft, illness, ) 3. Improved claim assessment and pricing (big data) Threats 1. Pressure on prices and margins 2. New competitors Reduction in high fixed costs & entry barriers Data quality & experience in the handling become more important opens the field for entrances of new players (Tech comp, Automotive, all owners of customer/object data) 3. Devices in cars tell us how to drive more carefully and watches optimize our lifestyle: New forms of risk management evolve 4. Loosing the access to the customer and the data (mobile paym.) Require investments vs Will happen 5

6 Short term options regarding usage of channels and apps but not regarding securing primary data (if this is possible) Strategic options towards digitalization This drivers lead to.. Option A Ignore Option B React I Option C React II Option D Plan B? Ignore the trends// minimize investments into Shift decision to a later point of time (there are not only digital natives) Develop roadmaps for digitalization Fully integrate digital world into brick and mortar business model Form alliances, partnerships and joint ventures with companies from outside the industry and start ups, Create spin offs //invest = secure data/client access If we find some additional time As soon as we are talking about more then opening a direct channel it is becoming a critical size topic (in terms of knowledge, financial capabilities) 6

7 Right strategy is driven by capabilities and urgency Different strategies required Market Share 20% 15% Strategy Large players React I & II What reduces the urgency? Provides some protection against the digitalization wave? Products: Complex claim mgmt. Clients: SME, Corporates, Affluent.. Secure access to data via global/country wide alliances/partnerships, Invest in start ups Full digitalization 10% 5% Strategy Small players React I Buy standardized solutions, Integrate online channels Wait till some technology is cheaper 0% Insurance Companies 7

8 Another way of re-positioning (and innovation) for local insurers: Repositioning as risk transformer in the community Example from an "Austrian-Experiment": New life insurance//option B Owner of the Farm Equity Farm Students from the Agricultural university who want to buy a farm (many without successors) but lack financial resources Delivers Vegetables Company, which delivers weekly "Bio Vegetable Boxes" to the Viennese Households Delivers Vegetables Consumer receives weekly vegetable delivery now (and in the future) One of the structures currently discussed structures Basic life insurance No inflation risk Long Term Credit Insurance Financial Institution Sets up complex structure Provides insurance Provides Credit Kredit Option B Pledge Insurance Guarantees/Cash Collateral Found association as vehicle 8