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Themes from Insurance Strategy Insights event

02 December 2013

During two days of intensive presentation and debate chaired by PwC, there was argument, interesting information and engaging speakers. Promoted as ‘addressing the latest strategic and operational affairs shaping the global insurance market’, the event offered a wide remit, but five notable themes emerged across the discussions:

  1. The need for change
  2. Technology
  3. Regulation
  4. Big Data
  5. Challenge of shareholders

1. The need for change in the Insurance world

To start with an interesting question and the responses from one of the panel discussions:

If you could wave a wand and change one thing for the better in the Insurance Industry, what would it be?

Answers:

The first two points became a recurring topic of discussion and, despite the Insurance Sector talking about putting the customer first, it is obvious we are a long way off at the moment.

Audience research:

What statement most closely fits the approach to change with respect to your business model?

We have undertaken most of our change 4.1%
We are part way through a programme of transformation 33.3%
We are assessing what changes to make 16.7%
We are always making transformational change 43.8%
We do not need to change 2.1%

What is your most significant driver for change?

Capturing new growth opportunities 46%
Regulation 14%
Cost reduction to reduce margins 10%
Managing capital and risk 22%
Other 8%

Key discussion points:

2. Technology

A great quote from one of the speakers underlines importance placed on technology:

The evolution of technology offers the greatest opportunity. Insurers still do not embrace new technology well – I dread to think how old our technology is in this room

3. Regulation

Consensus that ‘compliance’ is a big burden, but general agreement that the FCA is more collaborative and constructive than its predecessors:

4. Big Data

Big Data is transformational:

How you gather, manage and use information will determine whether you win or lose

Bill Gates

Interesting case study from PwC:

Methodology of using data to gain insight is the key to success. Traditionally masses of data is analysed to try and draw insightful conclusions to inform the strategy of the business.

PwC alternative method – targeted approach:

  1. Predetermine hypothesis
  2. Determine necessary insight to prove the hypothesis
  3. Determine data needed to get the insight
  4. Collect and manage only the data that has been pre-determined

In the case study the hypothesis to prove was:

Is there a sustainable revenue and profit consumer proposition in a non-commission world?

Outcome:

Identified and quantified an approach for customers that would deliver the desired result:

Audience research

How important is ‘Big Data’ in informing and shaping strategy?

At the heart of our strategy 44%
Important but not crucial 56%
Not at all important 0%

Do you think ‘Big Data’ (analytics) is and will be a main source of competitive differentiation?

Definately 41%
Probably 50%
Possibly 6%
Unlikely 3%

Where do you think ‘Big Data’ can create the greatest impact going forward?

Underwriting effectiveness 24%
Customer Insight 55%
Pricing optimisation 15%
Other 6%

Key discussion points:

5. The challenge of shareholders

The consensus was that there is a real challenge of balancing the needs of shareholder and customer.

Audience research

Which of the following best summarises your view of the ultimate impact of the business model change you are currently making?

Our customers benefit not our shareholders 12.5%
Our shareholders benefit not our customers 14.9%
Both benefit 59.6%
Neither benefit 8.5%
Don’t know 4.3%

Key comments

Interestingly – the majority agreed that if there is a choice between shareholder and customer, the shareholder would win, which does lead to ‘short-termism’

Key message

The one big ‘take’ from two days of discussion is the need for the insurance industry to become truly customer centric. Easy to say, but obviously a huge challenge to deliver.

An example to me of how far off we still are came from one of the speakers who works for a global brand offering a wide portfolio of products from life and pensions through to GI. His particular responsibility was motor insurance and he talked about putting the customer first. When asked about investing in ‘Big Data’ he replied that his challenge was funding such projects as the margins in his product are ‘softening’ and he is under pressure to return profits for the shareholder. To me that is a real example of ‘product thinking’ not ‘customer thinking’.

It seems obvious that the first Company to get really joined up thinking and customer centric strategy across the whole organisation will have a great advantage.

To finish with another great quote from PwC:

It is important to START – it is the ‘doing’ not the ‘thinking’ that delivers results and real insight

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