Accenture the Digital Insurer Life Insurance

7/28/2019 Accenture the Digital Insurer Life Insurance

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Life InsuranceThe Digital Insurer:Change now to get ahead

Industry InsightsFocused thought leadership forthe Insurance Industry


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2 The Digital Insurer

The life insurance industry iscurrently facing an unprecedentedset of challenges: game-changing

regulatory and macroeconomicfactors, and the exceptional pace ofconsumer and technological change.While the industry is used to living

with a constant stream of change,this time it is different this timethe forces of change are moreadditive and more profound.

Digital disruption is adding toinsurance industry challenges


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responsiveness. Digital technologies also reducethe industrys high xed costs and barriers to entry,increasing the threat from new start ups.

In contrast the insurance industry is facingan uphill battle. It is not an industry knownfor innovation or its pace of change.

The Digital Insurer:connected, analytic, agile

The Digital Insurer is Accentures templatefor high performance in the future.

To be a high performer in the digital age,insurers will need to innovate on three fronts:

The Connected Insurer

Reinventing the customer experience

The Analytic Insurer

Richer insights and smarter decisions

to enable better outcomes

The Agile Insurer

Staying one step ahead

Insurers require a different set of capabilities foreach of these business models. They will need tounderstand how they can differentiate themselvesand what is required for implementation.

The Digital Insurer will neednew forms of leadership andwill embrace bold change,but in a new way

The transition from legacy to digital willrequire new forms of leadership and a wholenew philosophy around the implementationof change.

Insurers need to embrace bold change.Instead of major transformation engagements,they should move towards the target visionin a nimble fashion, deploying small pilots andprojects quickly. The philosophy will be to placea portfolio of smaller bets; launching, adaptingand learning from quick, cheap failure.

Successful insurers will need to embrace theGreeneld new co approach.

Building a new co model will allow life playersto: move quickly, avoid the traps of trying toattach a digital front end onto existing businessmodels, and embrace the fundamentally differenteconomics of a new build in the digital era.

The future of insurance is digital

Digital offers a once in a generationopportunity to embrace the future and gainsustainable advantage in the marketplace byshifting to new, more sustainable economicmodels, while simultaneously stepping upto better satisfy real consumer demand.The future of insurance is digital. We believe

the winners will be those organisations thatapply digital technologies to be connected,analytic and agile. And if the incumbentscannot get this right then new entrants will.

The digital revolution;transforming the wayinsurers do business

The digital era is set to radically transformthe insurance industry, not only changingexisting business models, but also creatingnew opportunities for protable growth.

Digital is not simply a new distributionchannel. Digital offers an entirely new wayof doing business, affecting all strategicand functional areas.

Clever application of digital technologieswill therefore be critical for insurers tosurvive and prosper.

The digital age brings threatsas well as opportunities

Life insurers need to learn the lessons fromthe recent disruptions in the P&C insuranceindustry; if they fail to innovate and seize theseopportunities, new competitors will steal theircore markets.

Players from other industries can enter this marketand press home their advantages in customerproximity, retailing experience and market

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Digital disruption is adding to insuranceindustry challenges

The insurance industry is facingfundamental challenges

The life insurance industry is currently navigatingan unprecedented set of challenges. In additionto navigating ever-more stringent regulations,insurers are grappling with an exceptionallyturbulent business environment, the ongoingimpact of the nancial crisis, and a bleakeconomic outlook.

In addition to these regulatory andmacroeconomic factors, the pace of consumerand technological change is like nothing everseen before. The dawn of the digital age, alongwith many powerful forces of change, arecreating an entirely new operating landscape.

The life insurance industry has lived witha constant stream of change over the last30 years. It has survived an ever-changingregulatory framework, new distribution models,changing tax regimes, new competitors, andtechnology advances.

However, this time it is different. This timethe forces of change are more additive,more profound.

Forces of changeunderpinning

digital age

Changingtechnology

Changingcompetition

Changingregulation

Changingconsumer

Forces of change battering the industry


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The digital revolution; transformingthe way insurers do business

Digital offers new opportunitiesfor protable growth andchanges to existing businessmodels

The dawn of the digital era is transformingthe way that we all live and work and is setto radically transform the insurance industry.

The explosion and convergence of newtechnologies, combined with the pace ofchange and the accessibility to both consumersand industry, is underpinning a cycle ofcontinuous innovation and dynamic change.

New digital technologies are combiningwith changing consumer attitudes, allowinginsurance companies to change existingbusiness models, and creating newopportunities for protable growth.

It is now possible to do things that were previouslyunimaginable, allowing businesses to completelyrethink the way they go to market.

Digital is not simply a newinsurance distribution channel

The impact of digital extends across

the entire value chain

The insurance industry has to grasp thefact that digital is not simply a newdistribution channel.

More fundamentally, the digital era offersan entirely new way of doing business affecting all strategic and functional areasacross the entire insurance value chain,including engagement and interactionwith customers, distributors, suppliers andemployees. It offers a new lens throughwhich to view the business model.

To give just a few examples of the waysin which digital can transform the insurancevalue chain, it presents opportunities for:

improved brand management and socialmedia engagement

optimised and personalised web experiencesfor consumers

seamless multi-channel sales and serviceacross phone, online and new channelssuch as mobile and social media

a collaborative digital workforce culture,harnessing techniques such as crowd-sourcing

products and services that can bedeveloped, marketed, distributed andunderwritten in entirely new ways,underpinned with powerful analyticsand personalisation techniques.

Clever application of new technologies

will be critical

Clever application of digital technologieswill therefore be critical for insurers to surviveand prosper in the new world. In Accenturesview, several key digital technologies standout as having the potential to reshape thefuture of insurance:

Mobility Social Media & Gaming Digital Platform Optimisation Collaboration Analytics Cloud computing


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Several digital technologies stand out as having

the potential to reshape the future of insurance

New Technologies

Social Media andGamication

Digital platformoptimisation

Analytics

Collaboration

Cloud

Mobility andsensors


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The digital revolution brings threatsas well as opportunities

Other industries are likely tofurther encroach on insurancemarkets

Digital increases competitive threats,

particularly the risks from players outside

the industry or new start ups

In addition to some of the opportunitieshighlighted on page 6, the digital revolution bringssignicant threats for the insurance industry.

Life insurers need to learn the lessons fromthe recent disruptions in the general insurancesector; if market incumbents do nothing theycan get unseated. Twice in recent history newentrants to the P&C insurance market haveproved that incumbency and supposed scaleare no barrier to entry. First it was the explosionof the direct channel, and then the more recentemergence of aggregators.

The warning for life insurers is clear. Theirexisting business models, distribution reachand sheer size may offer no defence and insteadmay simply act as a constraint. Todays perceivedstrengths and barriers to entry may in fact be

nothing of the sort. In truth, todays strengthsmay in fact be weaknesses.

Our message is a simple one. Life Insurers willneed to embrace the digital era or get beatenby it. When gaps in the market and consumerdemand are not being met by incumbentinsurers, external parties or new playerscan step in, with transformational impactson the industry.

In particular the digital age:

heightens the competitive threat fromplayers in other industries who can presshome their advantages in customerproximity, retailing experience andmarket responsiveness.

further reduces barriers to entry, particularlyas the falling cost of technology solutionsmeans new competitors can accesssolutions cheaply.

Control of digital distribution could

give players from outside the industry

powerful advantages

Control of digital distribution will providemore valuable customer insights and datathat will create powerful advantages inmanufacturing. For example, the sophisticateduse of data to analyse and segment markets,to create the right products, and to understand

pricing sensitivity.

We therefore see scope for organisationsthat control access to the consumer, suchas aggregators, banks, home servicecompanies and retailers to exploit theirdigital vantage point.

Currently the focus of such organisations is onleveraging their brand and retail distributioncapabilities in conjunction with the manufacturingstrength of traditional insurers.

However, if they are able to derive more valuefrom distribution and consumer access, thereis a risk that these organisations will at the veryleast be able to demand more favourable termsof trade. At the most extreme end of the


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spectrum, the digital revolution threatensto change the role of traditional insurancecompanies and undermine their share of value.

The nightmare scenario for industry incumbentsis that the organisations moving ahead in digitalwill shift from distribution to dominatingmanufacturing and will gain a substantial shareof the most protable parts of the business.There is a real risk that new competitors will

take the initiative, and if insurers fail to embracethe digital era, they risk being pushed into therole of commodity risk carriers or worse, riskbecoming obsolete altogether.

The insurance industry is facingan uphill battle

In contrast, the insurance industry is facingan uphill battle in innovating and effectivelyapplying digital strategies.

Although the digital era is providing a oncein a generation opportunity to embrace thefuture and gain material competitive advantage,many companies lack the technologies, analyticscapabilities, leadership and organisation structures

to capitalise on this. While some insurers havemade tactical enhancements, most simply donot have the infrastructure to meet thechallenges of the digital age.

The insurance industry is also not known forinnovation. While pockets of innovation exist,they are generally not transformative and typicallyinvolve tinkering around the edges, such as bolton ecommerce systems.

On the whole, many core products and processesare still very recognisable from 1020 years agoand it is generally accepted that the pace ofchange is much faster in other industries, whichare shaping and meeting consumer perceptionsand expectations. The danger is that a real gapemerges between consumer demand and insurerscapability to deliver. Winning in digital thereforerequires a fundamentally different mindset as wellas new capabilities.


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The Digital Insurer: connected, analytic, agile

High performance insurers in thedigital age will demonstrate threefundamental characteristics

Accentures research into the componentsof success in the insurance industry hasshown that the key attributes commonto high performance insurance businessesworldwide include:

Effective customer-centric distribution Responsiveness to the market Operational excellence Relentless pursuit of cost reduction Focus on risk management

However, in the context of the ever changingdigital world, and game-changing shifts intechnology and consumer attitudes, thesehigh performance characteristics will needto be overlaid with further capabilities.

The Digital Insurer is Accentures templatefor high performance in the future. To be a highperformer in the digital age, insurers will needto innovate on three fronts:




Richer insights and smarter decisionsto enable better outcomes

The Agile Insurer


While by no means mutually exclusive, eachof these characteristics represents a distinctapplication of digital technologies.

In the immediate term these differentcharacteristics or archetype business modelsmay represent distinct strategic choicesfacing insurance executives. Insurers requirea different set of capabilities for each. Theywill need to understand both how they candifferentiate themselves and what is requiredfor implementation.

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Breaking free from the oppressiveconstraints of legacy

Operational excellence built aroundlean core business processesand strong process management

disciplines Intelligent sourcing approach,

making cost effective and exibleuse of supplier capabilities

Early warning and rapid responsemechanisms to constantly scan,assess and initiate changes based onmarket movements and opportunities

Deliverying greater, faster andcheaper change through agile

methods Fostering a culture of innovation

and entrepreneurship.

Reinventing the customer experience;the customer is put at the heart ofthe business

Physically and emotionally connectedwith consumers, staying in tune

with changing customer sentiments,behaviours and expectations

Multi-channel sales and service asa standard offering; fully integratingold channels with a new digitial core

Embracing and actively engagingthrough relevant media, such associal and mobile platforms

Harnessing deeper collaboration andconnection with a much broader

group of stakeholders, includingcustomers, employees, partners,distributors and suppliers.


Tapping into and exploiting valuefrom the explosion of data

Harnessing the power of next

generation predictive tools andtechniques

Wiring analytics into core processesan decision making

Integration of real-time decisionsupport, driving more value fromeach customer interaction

Customising and personalisingproducts and services

Continuous learning and improvement.

Connected Analytic Agile

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The Digital Insurer will need to embracebold change, but in a new way

The transition from legacy to digital will requirenew capabilities and a whole new philosophyaround the implementation of change.

Success in the digital worldrequires new forms of leadership

Leadership within the Digital Insurer willbe different. A digital insurer is one that:

Is led by visionary executives who areuent in both business and technology

Recognises that the game hasfundamentally changed forever

Acknowledges that the changingconsumer is central to the new world

Understands the potential of keytechnology enablers

Focuses on business value creationrather than gimmicks

Understands that mere tweaks toa 1990s business model are insufcient

Adopts a nimble, exible approach to change

Embraces innovation as a standardpart of business as usual

Embrace bold change, but ina new way... And learn fromcheap, quick failure

Life insurers have never been shy of majortransformation engagements. Kicked offas strategic big bets these transformationprogrammes are usually multi-year, multi-million pound endeavours. From policyadministration systems to distributor platformsto customer service solutions, the industry haschased the big idea or solution. And very fewhave delivered the promised results. Oftenmany have just failed to deliver.

In the digital era no-one can be sure asto what the winning digital plays will be.Accentures experience suggests that theapproach of making one or two big, multi-year bets is not the right way forward.Instead insurers will need to embracea whole new approach to delivery.

While aiming for bold and fundamentalchange, the Digital Insurer will move towardsa wider portfolio of smaller bets. It will startwith relatively small pilots and projects tounderstand the potential, and then movequickly to back the winning ones. It will

move towards a target vision in a nimblefashion, deploying quickly, adapting andchanging course where required, and learningfrom quick, cheap failure.

One way to start is by selecting areas ripewith opportunity and conducting high-impactpilots to demonstrate the value and buildstakeholder buy-in. Pilots should be quicklydeployed, demonstrate the value propositionand galvanise support towards the digitaltransformation journey.

Start again or tackle legacy?

At least twice in recent memory the lifeindustry has embraced the concept of a newco and old co split: rst in response to thedot.com boom, and then as a result of the1% world and stakeholder pensions. The newco concept was founded on the idea of buildinga set of Greeneld capabilities unencumberedby the constraints of the existing business.

Both times this concept has proved to beunsuccessful. The problems were manifold.Typically the new co tended to replicate theoperating complexities and mistakes of the oldcompany. With large investments in the setup of the new co that were difcult to justify

based on the volumes of new business, insurersoften unsuccessfully attempted to migrate theold company onto the new co business model.

Accenture believes that the new co and old cosplit was the right concept, but that it tendedto be badly implemented and launched atthe wrong time. However, the challenges anddynamic changes of the digital age merit anotherexamination of the new co old co model.

Key lessons on buildinga new world

Hard earned practical experience suggeststhat there are 3 key lessons to learn in gettingdigital right:

1. Digital is not a distribution channel, it isa whole new way of operating. Digitalis not simply a front-end on the existingbusiness. Products and processes are so

radically different that building afresh isin most cases is unavoidable. The simplerebadging of existing capabilities is tooeasily replicated by competitors.


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Conclusion

We are still waiting for true customer centricinnovation in insurance. The fundamentalneed of consumers to protect their assets andlivelihoods is as strong as ever, yet insuranceas a whole remains a grudge purchase in theminds of most customers.

Digital offers a once in a generationopportunity to embrace the future and gainsustainable advantage in the marketplace byshifting to new, more sustainable economicmodels, while simultaneously stepping upto better satisfy real consumer demand.

History has shown that where market gapsand failures persist, they are soon lled bynew entrants that transform the landscape.Can insurers really afford not to play this game?

The future of insurance is digital. We believe thewinners will be those organisations that applydigital technologies to be connected, analyticand agile. And if the incumbents cannot get this

right then new entrants will.

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2. If mothership can let you down it will do.From the moment a company embracesdigital and the need to build afresh, thebusiness will work consciously or sub-consciously to kill it. Well intended attemptsto reuse existing in-house capabilities ordigital investments to solve other relatedbusiness problems quickly derail progress.From the moment insurers announce adigital project, the clock is ticking. Withevery month the chances of successdramatically reduce.

3. Economics of a new build are fundamentallydifferent today. Digital technologies donot just present the opportunities, theyalso present the means. Cloud computing,software as a service and huge advancesin packaged software have created anopportunity for leading insurers to get newdigital ideas to market quicker and at a pricepoint unheard of even a decade ago.

Accenture therefore believes that successfulinsurers will need to embrace the Greeneldnew co approach.


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How can Accenture help?

Accenture is well positioned to help insurersrespond to the opportunities and challengeslikely to arise in the digital age. As the leadingprofessional services provider in the insurancemarket, Accenture is able to bring extensiveexperience of addressing strategicand operational change.

We have a suite of capabilities that canhelp insurers on their journey to digital highperformance, including:

Connected

Accenture Interactive platform Digital marketing optimisation Customer experience / Social CRM Multi-channel digital contact Next generation contact centre Proposition development Workplace collaboration

Analytic

Predictive analytics Systems integration Master data management Data warehousing

Agile

Application consolidation and rationalisation Next-generation insurance platforms:

Accenture Life Insurance Platform

Business process management Organisational Change / Journey

Management Sustainable innovation service Cloud services



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Industry Insights

This point of view is Accentures templatefor how The Digital Insurer can achieve highperformance in the future. It explores howservice providers in the digital age will still needto master the fundamentals, but will also need toinnovate on three fronts. These three archetypebusiness models encapsulate how insurers candifferentiate themselves using digital:





The Agile Insurer


History has shown that where market gapsand failures persist, they are soon lled by newentrants who transform the landscape. Caninsurers really afford not to play this game?

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16 | The Digital InsurerAccenture Experts

If you would like to hear more aboutAccentures views on this topic or would liketo discuss how you can address the strategicand operational questions highlighted in thispaper, please contact:

Graham Jackson

Head of UK Life Insurance

+44 (0)20 7844 [email protected]

Jeremy Lefebure

Senior Principal, General Insurance+44 (0)20 7844 [email protected]

Vicki Summerhayes

Head of UK Insurance Research+44 (0)20 7844 [email protected]

About Accenture

Accenture is a global management consulting,technology services and outsourcing company,with more than 246,000 people servingclients in more than 120 countries. Combiningunparalleled experience, comprehensivecapabilities across all industries and businessfunctions, and extensive research on theworlds most successful companies, Accenture

collaborates with clients to help them becomehigh-performance businesses and governments.The company generated net revenues ofUS$25.5 billion for the scal year ended Aug.31, 2011. Its home page is www.accenture.com.

Copyright 2012 Accenture.All rights reserved.

Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture.

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Accenture the Digital Insurer Life Insurance