General Insurance Industry and Actuarial Profession in 2020

Sylvia Wong, Suruchi Joshi Singh, Mudit Gupta, Garth Brooker, Tony Beirne

© PricewaterhouseCoopers

This presentation has been prepared for the Actuaries Institute 2012 General Insurance Seminar. The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute

and the Council is not responsible for those opinions.

Agenda

• Five Mega Trends • How can Insurers and Actuaries respond

Five Mega Trends

Social Trends

Social Trends

• Demographic changes • Use of social media

Shanghai 1990

Shanghai 2010

Demographic Changes

Target Market Risk Profile

Use of social media

Impact on: • Product design and coverage • Marketing, sales and distribution • Underwriting, risk assessment and pricing

Impacts of use of social media

Technology Trends

• Big Data, smart analytics and sensor devices

are changing how the insurance industry harnesses information

• Personalisation of services and proactive management will impact how companies interact with consumers

Technology Trends

Speed of technology change

80’s-90’s

Multivariate Analysis

00’s-10’s

90’s-00’s

Data driven predictive modeling

Com

puta

tion

al P

ower

Type

s of

Dat

a

Analytic techniques and data sources – increasing sophistication

Interpretation, Simulation & Visualization

Database

Websites

Audio

Video

Sensors

Social Media

Structured Data and Solutions

Unstructured Data and Insights

Big Data – what is it?

NOW

YOU CAN HAVE ALL

THREE!!

Source: http://solveforinteresting.com/big-data-is-our-generations-civil-rights-issue-and-we-dont-know-it/

Big Data – why now? Lower storage costs New data sources - internet connected

devices, sensors and social media

New processing and analytical techniques

$

Source: http://vector.us/browse/154321/tower_computer_hardware_desktop_pc_mini_tower; http://en.wikipedia.org/wiki/File:Cloud_computing.svg; http://hadoop.apache.org/; http://www.mediacircus.net/ai.html; Towards 50 billion connected devices discussion paper, Ericsson, 2010

New data sources - internet connected devices

Source: Towards 50 billion connected devices discussion paper, Ericsson, 2010

Internet connected devices – current examples

Source: http://www.aami.com.au; http://www.progressive.com/auto/

Personalisation and proactiveness

Source: http://www.shannons.com.au; http://www.insuremyride.com.au;

http://www.apia.com.au; http://www.youi.com.au; http://www.justcarinsurance.com.au; http://www.budgetdirect.com.au;

Hailstorm map http://www.smh.com.au/environment/weather/hail-on-way-insurers-offer-a-headsup-from-the-heavens-20120219-1tha0.html

Barriers Too costly, where to invest? Information overload

Privacy concerns

Source: http://howtomakemoneyonlinefast.net.au/make-money-online-wout-investing/; http://www.sportchalk.com/sports-betting-strategies/understanding-r-o-i-your-return-on-investment-in-sports-betting;

http://www.cbofinancial.com/what_we_do/algae.html; http://www.authorbestseller.com/blog/2011/08/implementing-tips-to-stay-on-track-to-the-bestsellers/;

http://catalystxchange.wordpress.com/2011/07/27/nonprofits-and-social-media-taking-a-look-at-privacy-issues/;

http://www.corporate-ethics.org/new-business-ethics-case-study-delves-into-privacy-issues-related-to-facebooks-beacon-program/

Economic and Political Trends

Increase in : • differences in growth of developed and

emerging markets • interconnectivity of emerging economies

Global trends observed

Sources: WTO; PwC analysis

SAAAME

Non-SAAAME

Trade value: $2.67trCAGR 2002–10: 13.6%

Trade value: $2.16trCAGR 2002–10: 12.9%

Trade value: $6.92trCAGR 2002–10: 8.0%

Trade value: $2.82trCAGR 2002–10: 19.4%

Global trends observed Rise and Interconnectivity of Emerging Markets

Increase in : • differences in growth of developed and

emerging markets • interconnectivity of emerging economies • regulatory changes due to financial

shocks

Global trends observed

0

200

400

600

800

1000

2003 2004 2005 2006 2007 2008 2009 2010

US$

mil

lion

s

0

100

200

300

400

500

2002 2003 2004 2005 2006 2007 2008 2009 2010

£ m

illi

ons

United Kingdom: FSA1 Hong Kong: HKMA

N/A

Total FSA regulation expenditure, £ millions, 2002–2010 Total HKMA regulation expenditure, US$ millions, 2004–2010

CAGR Total2002-072007-10

10%8%15%

CAGR Total2002-072007-10

7%3%14%

CAGR Total2004-072007-10

6%4%6%

CAGR Total2003-072007-10

3%2%3%

Financial crisis Financial crisis

0

1,000

2,000

3,000

4,000

5,000

2002 2003 2004 2005 2006 2007 2008 2009 2010

Em

plo

yees

FSA regulation employees, 2002–2010

0

150

300

450

600

750

2003 2004 2005 2006 2007 2008 2009 2010

Em

plo

yees

HKMA regulation employees, 2003–2010

Global trends observed Increase in regulatory changes due to financial shocks

Sources: FSA, OCC and HKMA websites; PwC analysis Notes: The FSA is the Financial Services Authority, and the HKMA is the Hong Kong Monetary Authority, which are the main financial regulatory bodies for the UK and Hong Kong respectively; 1 The FSA’s 12-month reporting period begins in April of the year reported

Increase in : • differences in growth of developed and

emerging markets • interconnectivity of emerging economies • regulatory changes due to financial

shocks • political and social unrest • state-directed capitalism

Global trends observed

Where to from here ?

Globalisation

Significant opportunities for

growth for all players

Source: http://effective.leadershipdevelopment.edu.au/3-paths-development/leadership-development/

Where to from here ?

Twin Track growth Globalisation

• Different rates of growth continue

• Protectionism

Source: http://effective.leadershipdevelopment.edu.au/3-paths-development/leadership-development/

Where to from here ?

Twin Track growth

The Middle

Path Globalisation

Insurers continue to grow in their

respective markets

Source: http://effective.leadershipdevelopment.edu.au/3-paths-development/leadership-development/

What did people say ?

Source: Insurance CEOs taking part in the PwC 15th Annual Global CEO Survey

>80%

28%

Concerns:

• 79% Uncertain or volatile economic growth • 72% Over regulation • 36% Protectionist tendencies of governments

build up their operations in East Asia, South-East Asia, Africa and Latin America over the next 12 months new financial and/ or product regulations will largely be harmonised because of cooperation among governments

From the Australian Lens

http://en.wikipedia.org/wiki/File:Magnifying_glass_01.svg

• Existing strong trade links with Asia • Cultural understanding • Technical expertise • Existing strong regulation

Opportunity for Australian Insurers?

Next steps for insurers

• Innovators and expansionists will tend to invest

more in front-office functions

Innovators and Expansionists

Growth Strategy Innovation Operations UW & Risk Mgmt. Claims/Benefits

Information Asset & Liability

Technology Finance Capital Management

Channels Products & Services

Human Resources

Marketing Sales & Distribution

Front-office Middle-office Back-office

Primary areas of focus

• Fast followers and survivors will tend to focus

more on back-office activity

Fast Followers and Survivors

Growth Strategy Innovation Operations UW & Risk Mgmt. Claims/Benefits

Information Asset & Liability

Technology Finance Capital Management

Channels Products & Services Human Resources

Marketing Sales & Distribution

Front-office Middle-office Back-office

Primary areas of focus

Call to action

STEEP FACTORS