Download Technology Strategy is Not Always Aligned With the Business

Platforms for Growth:
Technology Innovations in the Insurance Industry
State Street 2014 Insurance Survey
21 October 2014
Richard Fogarty, Head of Insurance, Asia Pacific
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
Respondents by
Area of the Business
Type of Insurance Company
4%
2%
3%
Diversified
Asset management unit
18%
Health
13%
Life
6%
72%
Property &
Casualty
Reinsurance
42%
Non-asset management
unit
39%
My role spans both asset
management and nonasset management
Although Innovation is Mostly Seen as “Moderate,” There are
Pockets of Excellence
Technology-driven innovation has been
How would you characterise the overall pace of
innovation across the insurance industry?
16%
31%
7%
evident in recent years in some areas,
mainly product development and
distribution:
Rapid
Examples:
• Usage-based auto insurance
Moderate
• Interactive online needs-analysis tools
Sluggish
• Mobile apps enabling users to
inventory personal property, submit
claims
Don’t Know
• Mobile imaging to capture vehicle IDs,
drivers’ licenses
46%
55% of Asia Pacific
respondents considered the
pace ‘Rapid’
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
But data is the next battlefield
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
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?
Global Respondents
APAC Respondents
39%
Target new customer segments in existing markets
33%
14%
11%
Enhancing product offerings
GLOBAL APAC
13%
Strengthening distribution model
20%
Entering new geographic markets
10%
10%
Optimising investment portfolio returns
8%
10%
Unlocking new customer segments will require fresh insights from
data – and significant investments in technology
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
% expecting these factors will
be a major driver of technology
investment
Changing customer
78%
demands
84%
Growth in business volume 75%
81%
Actions of competitors 64%
63%
New regulation 64%
65%
New Technologies Enable Deeper Understanding of New Customer
Segments and Innovative Product Development
% who are prioritising for investment in next 3 years
Global
APAC
Technology to improve pricing and underwriting decisions
21%
20%
Tools to improve investment decision making
21%
21%
Digital distribution and customer servicing channels,
including mobile platforms
Tools to strengthen risk management
Technology to capture new customer insights (e.g., from
telematics)
Social media tools to build stronger engagement with
customers
Improved customer relationship management systems
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
27%
45%
38%
43%
41%
50%
57%
42%
52%
59%
Asset Managers’ Data Priority is Real-time Access to a Cross-portfolio View
New investment strategies and increasingly
complex portfolios will require better data and
advanced risk and performance analytics
% Planning to Expand
Existing Investment
GLOBAL
APAC
Emerging Markets
53%
28%
Alternatives
21%
20%
ETFs
21%
14%
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
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.
Legacy Systems are a Major Impediment to Digital
Transformation
Please indicate the extent to
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 modernisation.
which you agree or disagree:
“We spend little or no time
addressing legacy IT issues”
3%
11%
Strongly agree
41%
Somewhat agree
26%
Neutral
18%
Global respondents
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
Data Silos – a By-product of Disparate Legacy Platforms
Overall, how effective is your business today at turning
multiple data sources into actionable insight?
6%
4%
Very effective
37%
Somewhat
effective
Not effective
Don’t know
53%
Total
Asia Pacific Respondents
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
• 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
Legacy Systems and Silos Need Not Paralyze Insurers
Some options advanced by practitioners for overcoming, or circumnavigating, these bottlenecks:
Legacy Systems
Data Silos
• Modernise in small pilots, or a series of
“small bets”
• Prioritise interoperability over integration; only
integrate where absolutely necessary
• Invest in new businesses to innovate
“outside the core”
• Leverage external data (e.g. from social media
and governments) to reduce dependence on
internal data
• Use a private cloud to pursue selected
initiatives
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
Technology and Business Managers Do Not Always See Eye-to-Eye
How Non-Tech Roles View
How Technology Managers View
Technology Managers:
Non-Tech Roles:
Not Flexible
Only 36 percent of non-tech respondents
strongly agree that technology managers
are flexible in the face of changing
business needs
Not Innovative
Only 22 percent of non-tech respondents
strongly agree that technology managers
are proactive in proposing new,
innovative solutions
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
Not Capitalising On Technology Only 26
percent of tech respondents strongly
agree that business managers readily
take advantage of new technologies
No Senior Buy-In
Only 18 percent of tech respondents
strongly agree that senior leaders in their
company give technical initiatives the
priority they deserve
Technology Strategy is Not Always Aligned With the Business
But alignment is better on the asset management side
Objectives
of the business …
Only
36%
of Asia Pacific
respondents believe there is complete
alignment between their technology
strategy and the top strategic priority
of their 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%
Asset management
Non-asset
unit
management unit
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
28%
All respondents
“Technology Leaders” Stand Out When It Comes to Innovation and
Alignment
APAC RESPONDENTS
Technology
Leaders*
Total
Sample
85%
55%
• Characterise the pace of innovation at their firm as rapid
80%
43%
• Strongly agree their technology strategy is aligned with the business objectives
70%
23%
• Strongly agree their technology managers are proactive in proposed new, innovative solutions to the business
65%
31%
65%
26%
50%
29%
• 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
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 analysing insurance data and
generating insight
 Prioritising data visualisation (because, when it comes to analytics, visualisation is almost as important as
the analysis itself)
 Striving for interoperability rather than integration of systems in order to ease legacy
modernisation 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 customerfacing sides of the business.
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