Digital Transformation Delivering Real Impactfiar.ro/downloads/2019/digital/McKinsey.pdf · ROPO1 and Pure online customers % 65+ ~60 ~12. McKinsey & Company 15 12 14 300 2008 10

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company

is strictly prohibited

Alexandru Filip, Oskar Sokoliński

FIAR Conference

Sinaia, May 20, 2019

Digital Transformation –Delivering Real Impact

McKinsey & Company 2

Today’s speakers

Alex has extensive experience serving

clients in the insurance industry,

helping them tackle issues related to

strategy, risk management,

organization, and business planning

Alexandru Filip

Partner, Bucharest

Oskar advises clients of leading global

and regional companies from the

insurance sector and is an expert in

loss adjustment, sales, pricing and

strategy transformation

Oskar Sokoliński

Associate Partner, Warsaw


Contents

1Taking stock –

a realistic view

of the industry’s

progress

2Taking aim –

the new

insurance

business model

3Taking action –

the journey

toward real

impact



The industry’s digital maturity is progressing


Note: Total DQ™ score is calculated on a scale of 0 to 100 as the average of the 4 dimension scores.

Therefore, Culture, Strategy, Capabilities, and Organization have the same weight in the calculation of the total DQ™ score.

To calculate a dimension score, we average the scores of the management practices that pertain to that dimension (as per slide 4)

Global average: 34 Digital leader: 61

+ 3

McKinsey’s Digital Quotient

(out of 100)

42

40

37

35

34

30

29

28

23

Banking

Hightech/telecom/media

Travel/hospitality

Retail

Insurance

Consumer goods

Transport and logistics

Automotive

PMP

Industrials

36


5-10 0-5 15-20

-10

0

10

20

GPW growth

CoR

Investing in growth

at what price?

35%

Leading

the market

40%

Managing for

profitability

5%

What

happens next?

20%

Digital outperforms the market –yet heterogeneity persists

Direct motor performance vs. local market, 2015-16

Source: National statistics; McKinsey McKinsey & Company 5


Productivity differs to an extreme

Source: McKinsey insurance database

70

50

0

30

10

Unit costs1, EUR

22

19

9

GPW growth p.a. 2010-15

(23.4 million contracts)1. Average costs (administration and acquisition) per in-force policy

Low (1.2%) Mid (1.9%) High (3.4%)

Home content insurance, Germany

~2.5x


The team needs to follow


Transformations…

73

82

46

57

8979

9483

9483

… failed … successful

CEO

Senior leaders

Leaders of transformation initiatives

Line managers

Frontline employees

Engagement throughout

the hierarchy

%


5.0%

The winner takes all – profit and growth

Source: INESE; A.M. Best (statutory filings); McKinsey insurance database Germany

1. 2016 for Italy

4612

39

51

67

4844

92

101

-98

3

8.4%

Market leader Profitable players Rest of industry Premiums CAGR, 2015-17

9.1%

7.4% 5.9%

-4.1%

Profits Losses Total

Direct motor insurance underwriting profit1, 2017

EUR m

Profits Losses TotalProfits Losses Total


Contents

1Taking stock –

a realistic view

of the industry’s

progress

2Taking aim –

the new

insurance

business model

3Taking action –

the journey

toward real

impact



… while loyalty is an often

neglected profit-booster

106Despite high

share of

aggregator

customers

Analytics-powered pricing creates

flexibility beyond CoR uplift…

40

0

60

30

50

70

30 50

Age

Personal liability pricingEUR

20 40 60 70 80

Market-based pricing

e.g., tariff optimized for aggregator

rank, dynamic adjustment

Target rank (e.g., 1) Technical price Final market price


Market 100

Service and retention analytics

Well-known risks

Higher yield from CPOs

Up to 3% CoR impact


Hybrid is the future of personal advice

18

11

10

44

38

35

38

51

55

Pure offline Hybrid Pure digital

Life

Home

Motor

Personal advice here to

stay

Upside from “push & pull”

Seamless journeys

Customer journeys in the UK, 2018

%


The engines are mutually reinforcing

Customer

satisfaction,

Life/Non-Life,

Ø 2016-17, %

6161820 14 12 10 8

60

70

80

90

Administration expenses, P&C, Ø 2016-17

7258

5

68666460 7062 74 76 78 80-5

0

Customer satisfaction, Life/Non-Life, Ø 2016-17

20 -6-18 -16 -12-14 10 -8-5

0

5

10

Administration expenses, P&C, Ø 2016-17

1

Productivity

2

GrowthCustomer

satisfaction

3

1

Premium

growth, P&C,

CAGR 2015-17,

%

2

Premium

growth, P&C,

CAGR 2015-17,

%

3

Huk-Coburg



Contents

1Taking stock –

a realistic view

of the industry’s

progress

2Taking aim –

the new

insurance

business model

3Taking action –

the journey

toward real

impact



There is an increasing shift towards digital in insurance

Source: McKinsey – proprietary insurance database

1. Research online, purchase offline, e.g. just seeking information or comparing prices online

Customer pushMarket push

of European motor

insurance sold via

digital channels

24%higher interaction

frequency between digital

customers and their

insurer than in the past

x2

Digital insurance is significant…

… and Insurtechs are setting the pace

investments into

InsurTechs since

2012

$7Bof InsurTechs enable the

value chain and

cooperate

57%

Increasing

shift

towards

digital in

insurance

Customers increasingly rely on online

channels for research and purchase

Next

three

years

Today

2005

ROPO1 and Pure online customers

%

65+

~60

~12


1412

300

2008 10 16

400

18 20200

100

200

500

Moderate NPS (29-38)1

Value growth of customer experience for companies with high,

moderate and low NPS scores

High NPS (39-66)1

Low NPS (9-28)1

Great customer experiences win in today’s competitive battleground

Source: DataStream 2008-2018 (Latest); Temkin NPS players 2017

1. TRS information is only available for publicly listed companies

We live in the

experience economy

Curated experiences – and the

business models, products and

services, and types of

engagement that create them –

are increasingly driving loyalty,

differentiation, and value


Customer journeys must be radically rethought for higher customer satisfactionExample of key customer journey in insurance: Onboarding

ConfirmationComplete

application

Receive

application

Request

documents

SEPA

signature

2009

2 weeks

Receive insurance

policy by mail

Friday, 14:00

Complete and send

physical application

Saturday

Receive forms by

mail

Friday

Discuss with

sales advisor

multiple times

Wednesday

Monday, 14:00

Manually sign

insurance

documents

Monday

2019

3 minutes

Enter data by

scanning

Immediately access

documents on

smartphone

Trigger process via

smartphone

Immediately

receive policy

Click to approve

Monday, 14:00 Monday, 14:03

Customer satisfaction levels High Neutral Low


Delivering a journey requires a holistic transformation

Impact is typically

delivered in 18-20 weeks Preparation

4 weeks

Diagnostic &

design

4 weeks

Detailed

design

10-12 weeks

Development

& customer

testing

“Roll-in”

Customer centric

UX design

Clean sheet business

transformation

Rapid technology

delivery

New ways of working

& capabilities

Create unique customer

experience using research,

ideation, proto-typing and

iterative testing

Radically simplify business

requirements and scale fast

using a clean sheet

approach

Define branch

choreography and

operating team

Define target solution

architecture, IT roadmap

and build minimum viable

product quickly using

Agile/scrum and DevOps

Mobilize operational team,

instil and embed new

“digital native” ways of

working and culture across

business and technology

through capability building

McKinsey & Company 18Source: Forbes 2016 Global 2000 rankings; 2016 NRF Top 100

Dedicated pricing unit and experts

Dedicated frontend development units

with leading designers and state-of-the

art methods

Leveraging our capabilities…

We have the talent to develop

and grow digital businesses

850+ developers, designers,

data scientists and more

… we have delivered an unmatched record of helping

market leaders capture value from digital transformations

7 of 10largest U.S. banks

served

6 of 10world’s largest

auto companies

7 of 10world’s largest tech

companies served

9 of 15world’s largest

Internet companies

served

80%Fortune 500 Global

Clients served on

digital and analytics

9 of 15largest U.S.

retailers served

1,200+Companies served on

digital and analytics

transformation topics

in the last year

$20B+Client impact

delivered in the last

year from

transformations

10+Built digital attackers

in insurance

We have a broad range of internal

tools to facilitate the ramp-up of

the business

We are the leading digital consultancy

We take the number 1 position in

independent global rankings


McKinsey & Company 19McKinsey & Company 19

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Documents

Digital Transformation Delivering Real Impactfiar.ro/downloads/2019/digital/McKinsey.pdf · ROPO1 and Pure online customers % 65+ ~60 ~12. McKinsey & Company 15 12 14 300 2008 10