4th Annual RiskMinds Insurance Conference - Stream B: The future of Insurance Regulation
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Transcript of 4th Annual RiskMinds Insurance Conference - Stream B: The future of Insurance Regulation
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
Drivers Of Change and Opportunities for Big InsurersAgenda
Major trends, risks and opportunities to address1
What should Insurers be capable of to face this?
Key enablers and helpers
2
3
Copyright © 2015 Accenture All rights reserved. 2
Market trends & perspectivesBig Insurers Face an Unprecedented Business Context
Pressure on
profitabilityPerfect
storm
Regulatory
escalation
Digital
revolution
(SMAC)
Fast changing
economic
environment
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Market trends and perspectives1 - 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
Market trends and perspectives2 - 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
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More accurate performance
management
• Faster, richer, more relevant MI
• Improved decision-making
New prospective capabilities
• Anticipate social / customer trends
and expectations
Market trends and perspectives3 - Digital revolution
Digital pervades all business domains, and its implications carry new
opportunities and risks
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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
Market trends and perspectives4 - Regulatory escalation
Increasing regulatory complexity tackling both Finance & Risk
Management and Business sides
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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)
Drivers Of Change and Opportunities for Big InsurersAgenda
Major trends, risks and opportunities to address1
What should Insurers be capable of to face this?
Key enablers and helpers
2
3
Copyright © 2015 Accenture All rights reserved. 8
Required capabilitiesHigh performance insurers in the digital age demonstrate four fundamental characteristics
Agile
Client centric
Innovative
Analytic
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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
Required capabilities1 - The ‘Agile’ Insurer shall reshape its organization to reconcile management of stocks and flows
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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
Required capabilities2 - 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
Required capabilities3 - The ‘Client-centric’ Insurer will leverage Digital enablers of the customer-centricity journey
Customer
Knowledge
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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)
Required capabilities4 - 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
& ServicesFrom “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
Drivers Of Change and Opportunities for Big InsurersAgenda
Major trends, risks and opportunities to address1
What should Insurers be capable of to face this?
Key enablers and helpers
2
3
Copyright © 2015 Accenture All rights reserved. 14
Key enablers and helpersBig 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 contextTechnology
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
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Key enablers and helpers1 - 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.
In order to make use of digital enablers Insurers will have to respond to
Digital Enablers
Key enablers and helpers2 - Technology is empowering Digital Transformation inclient 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
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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 developmentsmanage 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
Key enablers and helpers3 - 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
Strategictransformation
Define adapted strategic setup
under consideration of new risks
and challenges including top-down
communication of strategic impacts
Culturaltransformation
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
Key enablers and helpers 4 - An integrated approach to compliance will leverage on synergies between frameworks and ensure cost-effective implementation
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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
ConclusionProper 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