Platforms for Growth: Technology Innovations in the Insurance Industry
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The State Street 2014 Insurance Survey reveals that insurers prioritize identifying new customer segments and leveraging technology for growth, with significant challenges posed by legacy IT systems and data silos. Emphasis is placed on aligning technology strategies with business objectives and investing in digital transformation tools, including social media and CRM systems. Despite moderate innovation across the industry, successful organizations are marked by proactive and strategic technology leadership.
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
- 2. 2 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
- 3. 3 INSURANCE 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
- 4. 4 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
- 5. 5 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
- 6. 6 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
- 7. 7 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
- 8. 8 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
- 9. 9 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
- 10. 10 INSURANCE 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
- 11. 11 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
- 12. 12 INSURANCE 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
- 13. 13 INSURANCE “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
- 14. 14 INSURANCE 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
- 15. 15 INSURANCE This document is for marketing and/or informational purposes only, it does not take into account any investor's particular investment objectives, strategies or tax and legal status, nor does it purport to be comprehensive or intended to replace the exercise of a clients own careful independent review regarding any corresponding investment decision or review of our products and services prior to making any decision regarding their utilization. This does not constitute investment, legal, or tax advice and is not a solicitation to for products or services or intended to constitute any binding contractual arrangement or commitment by State Street and/or any subsidiary referenced herein to provide securities services. State Street hereby disclaims all liability, whether arising in contract, tort or otherwise, for any losses, liabilities, damages, expenses or costs arising, either direct or consequential, from or in connection with the use of this document and/or the information herein. This document contains certain statements that may be deemed forward-looking statements, which are based on certain assumptions and analyses made in light of experience and perception of historical trends, current conditions, expected future developments and other factors believed appropriate in the circumstances. © 2014 State Street Corporation CORP-1099