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Association Internationale de Droit des Assurances
Swiss Chapter
«Insurance in the Realm of Digital and Disruptors»
AIDA Swiss Chapter
Zurich, 30 May 2016
Program of today
Topic Speakers
Introduction to AIDA Swiss Chapter, the speakers
and the topic
AIDA Swiss Chapter Organizing Committee
Digitalization in the Insurance Industry Matt Whalley (Ernst & Young LLP)
Digital Disruption in Insurance Intermediation Julian Teicke (FinanceFox)
The Changing Legal Risk Map for Insurers Rolf Staub (Zurich Insurance Company Ltd)
Panel discussion with interactive participation of
audience
Matt Whalley (Ernst & Young LLP) Julian Teicke (FinanceFox) Rolf Staub (Zurich Insurance Company Ltd)
Moderation: Stefanie Gey (Ernst & Young Ltd.)
2
Christian Lang – ChairmanSwiss Re
Lars Gerspachergbf Attorneys-at-Law
Dr. Stefanie GeyEY
Prof. Dr. Helmut HeissUniversity of Zurich
Dr. Peter HsuBär & Karrer
Rolf StaubZurich Insurance Company
AIDA Swiss Chapter – Organizing Committee
3
AIDA Swiss Chapter Organizing Committee:
AIDA Swiss Chapter Support: David Hirzel (SCOR Switzerland) and Dominik Skrobala (PragerDreifuss Attorneys-at-Law)
AIDA Swiss Chapter – Announcements
4
Sponsoring – Please let us know should you be willing to provide acontribution
AIDA Swiss Chapter – Sponsors
We thank our donators for their constant support:
5
AIDA Swiss Chapter Insurance in the realm of digital and disruptors Digitalization in the Insurance Industry / 30 May 2016 Matt Whalley, Director Financial Services Legal, Ernst & Young LLP, London
Page 2
Insurance in a digital age
1. What is digital – and is it good or bad. 2. How digital affects the insurance industry. 3. What you need to know as in-house lawyers.
Digital Darwinism An era where technology and society are evolving faster than businesses can naturally adapt. This sets the stage for a new era of leadership, a new generation of business models, charging behind a mantra of “adapt or die.” - Brian Solis
Page 3
1. The Insurance sector is digitally conservative
Dig
ital I
nten
sity
Transformation management intensity High
Hig
h
Beginners Conservatives
Experimenters Exceeders
Pharma
Manufacturing
Consumer packaged goods
High technology
Retail Consumer Banking
Telecom
Travel and hospitality
Source: EY survey response
Utilities
Insurance
Page 4
2. How digital affects the Insurance industry
Customer lifecycle management
Competitive and Regulatory forces ► KYC ► FFIEC/BSA/AML (trans monitoring) ► Higher capital requirements ► Conduct
Customer expectations ► Intense digital innovation ► Brand truly matters ► Immense pressure from new
entrant threats Organizational
challenges
Prospect &
Acquire
Serve
Grow
Customer expectations
Investment
P&C
Pension
Life
Health
Customers
► Don’t show me something I already have or don’t need
► Present personalized, tailored, and contextualized content
► Embrace the power of networking to connect like-minded individuals, businesses
► Promote social and economic wellbeing
► Make it fun and exciting
► Make me money
I need you when I need you, not when you want “
”
Page 7
Customers – trust in your brand is critical
Competitors can copy a product, spend more on advertising, or offer a lower price. One thing competitors can never copy is a trusted relationship. --Trusted Advisors
Improve performance
► High trust companies provide 4 times the returns than the market average for comparative low-trust companies and typically experience a 50% lower turnover rate (Fortune)
4x of American customers trust businesses to “do what is right.“
of adults trust brand or product recommendations from friends or family, while just
trust ads on websites and 9% trust text messages (Forrester).
50% ► Trust management means inspiring
committed and engaged employees
► Empowered employees perform 20% better and are 87% less likely to leave an organization (Fortune)
Increased productivity
Exceed customer expectations
70%
10% 20%
Consider this…
…55% of consumers paid a premium for a product or service from a company they trust
…77% of consumers refuse to buy a product or service from a distrusted company
…91% of consumers chose to buy a product or service from a trusted company --Edelman Trust Barometer, 2011. US consumers aged 25-64
Legal & Compliance risks, e.g.
Brand protection Conduct risks
Data protection
SOURCE: US Data.
Page 8
Interest in receiving advice % of US customers who are very or extremely interested in obtaining financial advice or assistance in different ways
All channels cited can be driven, supported, or enabled by digital capabilities
Preferred approach for obtaining advice % of customers who would like to obtain advice in certain ways
20%
28%
26%
26% Advice from one
person on a broad range of accounts
and services
Advice from specialists for a particular account
or service
Prefer to do my own research and then get advice based on my
findings
Other
In person
65% By phone at the branch during working hours
47%
Use online financial management tools
38% By phone with someone in a call center any day, any time
39%
By video chat from home or work
19%
SOURCE: US Data.
Prefer to do their own research first
28%
Many customers expect specialized advice, in addition to broad services
Average (All channels)
Customer – ability to offer options
Page 9
Interest in receiving advice % of US customers who are very or extremely interested in obtaining financial advice or assistance in different ways
All channels cited can be driven, supported, or enabled by digital capabilities
Preferred approach for obtaining advice % of customers who would like to obtain advice in certain ways
20%
28%
26%
26% Advice from one
person on a broad range of accounts
and services
Advice from specialists for a particular account
or service
Prefer to do my own research and then get advice based on my
findings
Other
In person
65% By phone at the branch during working hours
47%
Use online financial management tools
38% By phone with someone in a call center any day, any time
39%
By video chat from home or work
19%
SOURCE: US Data.
Prefer to do their own research first
28%
Many customers expect specialized advice, in addition to broad services
Average (All channels)
Customer – ability to offer options
A BAT and a ball cost £1.10 between them. The bat costs £1 more than the ball.
How much does each cost?
Page 10
Interest in receiving advice % of US customers who are very or extremely interested in obtaining financial advice or assistance in different ways
All channels cited can be driven, supported, or enabled by digital capabilities
Preferred approach for obtaining advice % of customers who would like to obtain advice in certain ways
20%
28%
26%
26% Advice from one
person on a broad range of accounts
and services
Advice from specialists for a particular account
or service
Prefer to do my own research and then get advice based on my
findings
Other
In person
65% By phone at the branch during working hours
47%
Use online financial management tools
38% By phone with someone in a call center any day, any time
39%
By video chat from home or work
19%
SOURCE: US Data.
Prefer to do their own research first
28%
Many customers expect specialized advice, in addition to broad services
Average (All channels)
Customer – ability to offer options
The mind plays tricks and most people divide up neatly to £1 and £0.10.
The actual answer is £1.05 and £0.05, now
imagine a consumer trying to work out the cost of a new loan application presented with various
calculations on a small mobile screen? Could they be taking poor cognitive shortcuts?
Page 11
What do the best repeatedly do well?
The best have developed a new Organizational paradigm where experience is placed at the heart of everything they do
Experience
Platform
Content
Service - Paradigm information based New economics
Customer relationships modular
Customer value, brand
proposition, trust,
relationship
Contextual information, real time offer, products
Platforms of services including infrastructure, technology, data, and know how
Packaging, format, tailoring, service, community, tools
Copyright: Information Economics, 2013
Page 12
Old value proposition New value proposition
► Pay your premiums on time ► We’ll cover you if you need
medical care
► We’ll partner with you to keep you healthy for the rest of your life (or as long as you stay with us)
► You’ll be empowered with apps, technology, data to manage your health
► Over time, your premiums will increase more slowly than average
► You could get other benefits for proactively managing your health
EXAMPLE: The digital ecosystem
Page 13
Connected world
Advanced Analytics
Insurer Host & founding
member HC Provider network
Device & app manufacturers
Data consolidator
Retailers & supermarkets
Gyms / health clubs
Customer
Data analytics
Life Record Provider
Behavioral incentives
Other potential members: ► Governments ► Pharmacies ► Pharmaceuticals ► Social media
Promotions
Incentives
Preventative Measures
Individual Consumer Wellness Strategy
Health Servicing Strategy / Steering
Claims Management and Processing
Measuring Alignment to Wellness Strategy
Preventative Notification
Trending
Secure data storage
Customer portals
Electronic records
Workflow Customer Analysis and Preventative Data
Product Provider
EXAMPLE: The digital ecosystem
Page 14
Section 3
Competitors and Regulation
Page 15
Financial services: the digital challenge is real
Customer Ownership ► Retail companies across the
Globe selling FS products ► Insurance providing
backend, but losing direct relationship with customers
Telematics ► telematics are expected to
see exponential growth in the upcoming years reaching $ 66 billion in premium income by 2020
► Opportunities for new entrants better leverage telematics to offer differentiated products and pro-actively reduce their risk profile
Wearables ► Enormous amount of
personal data will be available due to the extensive use of devices connected to the internet
► Analysis of non-traditional data will reveal new risk factors enabling product and pricing differentiation and new value propositions
Financial Planning ► Financial planning outside of
the advisor channels losing traditional client mindshare
► Third party online advice for selecting Insurance products
Page 16
Financial services: the digital challenge is real
Company Bought By Many (Established 2012, Fintech Innovation of the Year 2015)
Friendsurance (Established on 2010) iMingle (Established on 2010)
Business model ► Works as an intermediary and enables people to come together to buy insurance. Earns a commission on the business
► It connects people with similar insurance needs to form groups and use the group's collective buying power to negotiate offers
► Friendsurance acts as an insurance broker. It works on the concept P2P insurance, which combines social networks with insurance companies.
► Customers form networks and contribute and are reimbursed from that pool. Can lower annual premiums by up to 50%.
► iMingle allows consumers to combine (or “mingle”) their policies with their friends (on social networking sites or blogging) so that they both benefit from the iMingle Network discount of 10%.
Products ► Home insurance, travel insurance, horse riding insurance and more.
► Personal liability, legal expenses insurance and mobile phone insurance.
► Home, condominiums, renters and auto insurance.
Key success factors
► Bought By Many is a pioneer in the UK market.
► The company offers niche insurance products, not likely to be available otherwise.
► The company is a pioneer in P2P insurance in the German insurance market.
► Customers get coverage even on the deductible and the insurer does not have to deal with smaller claims.
► It is the first insurance provider for the “i Generation.”
► iMingle embraces technology and social media to serve a new generation of policyholders.
Page 17
►Willing to review regulatory barriers to entry
►Aware that digitalization isn’t purely a force for good
►E.g. FCA Sandbox
Regulators are innovating too
Page 18
Section 4
Internal business structures and teams
Page 19
Strategic Priorities Customer
► Address customer needs ► Enhance customer experience ► Bolster security ,privacy and trust ► Align servicing capabilities
Digital Solution Map Digital Governance
Customer
Claims Commerce Transactions Management Research & Apply
Sales Servicing Marketing Enterprise
Lines of Business Technology Shared Services Risk/Legal/Compl. Vendors
Frequent Moderate Major Event Location Relationship Life Stage
Devices
Channels
Content Sources
Enablers
Mitigation
IT Operating Model Functions
IT Strategic Planning Solution & Service Strategy
Portfolio Management
Architecture
Risk Planning & Management
IT Governance
Organization Planning & Design
Program & Project Management Solution & Service Design
Service Delivery Management Architecture & Process Standards Management Operations Management
Information Security Management Solution & Service Support Financial Management & Reporting
Value Management
Resource Management
Sourcing & Vendor Management Quality Management
Knowledge Management Compliance Management
IT ► Evaluate new and immature vendors ► Balance build versus buy ► Optimize complex integration ► Scale and manage performance ► Execute design, development, test and deploy ► Build a strategic architecture ► Support “always on/always connected”
Business ► Adapt business models ► Support innovations ► Defend from competition ► Identify appropriate skill sets ► anticipate and react to new regulations ► manage risks with new platforms
Phones Tablets PC’s Handheld/Field Devices
Mobile App Mobile Web Online Social Media Messaging
(email, text, chat etc.)
Emerging
On Premise Infrastructure Cloud Infrastructure
TV
External/Third Party User Generated Employee Generated Business Rules Systems of Record
Applications SOA, EAI and REST Data Stores SDK’s & API’s User Interface
Security Fraud Risk Compliance Legal
NFC
Applicable areas of focus
End to end simplicity – optimize the supply chain
Insurance companies MUST think
“end to end” when optimizing customer
experience
Investment
P&C
Pension
Life
Health
Page 20
3. What you need to know as lawyers
1. Clear mandate
2. Clear responsibilities
3. Clear view of the legal risks
Page 21
Law department performance model
Governance and Control
Operational Excellence
Business Insight
Technology
Have the authority to
influence – and when necessary
control – business decision making
Deliver insight into how the business can
prosper within the current and future legal/regulatory environments
Be efficient and effective in its
management of its own use of resources,
and the business’s external legal spend
Operating Model: internal structure and relationships with business, functions and external suppliers
People: collective skills and expertise of legal department staff
Technology: tools and systems that enable legal department to deliver
Objectives Enablers
Law departments have three core objectives: ► To deliver meaningful insight to the
business, ► To influence business decision
making, and ► To operate efficiently and effectively. You have three core assets you can use to enable delivery of the three objectives: ► Your people, ► Your relationships (as structured
through your operating model) and ► Your technology. The way you leverage these ‘enablers’ is the key to improving law department performance. You can measure law department performance, and utilisation of ‘performance enablers’ on a standard maturity scale, from ‘basic’ to ‘leading’. This structured scaling helps you pinpoint where to effect change for maximum performance improvement.
Page 22
Three key points
1. Digitalisation puts huge pressure on Insurers to change their business and distribution models
2. As a legal department, to stay relevant you need to be clear about where you deliver value to your business in this new world, and how much that value costs
3. Digitalisation brings with it opportunities for in-house legal teams, to deliver transformational improvement in the insight and influence you deliver to your business.
EY | Assurance | Tax | Transactions | Advisory About the global EY organization The global EY organization is a leader in assurance, tax, transaction and advisory services. We leverage our experience, knowledge and services to help build trust and confidence in the capital markets and in economies all over the world. We are ideally equipped for this task – with well trained employees, strong teams, excellent services and outstanding client relations. Our global purpose is to drive progress and make a difference by building a better working world — for our people, for our clients and for our communities.
The global EY organization refers to all member firms of Ernst & Young Global Limited (EYG). Each EYG member firm is a separate legal entity and has no liability for another such entity’s acts or omissions. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
For more information, please visit www.ey.com.
EY’s organization is represented in Switzerland by Ernst & Young Ltd, Basel, with ten offices across Switzerland, and in Liechtenstein by Ernst & Young AG, Vaduz. “EY” and “we” refer to Ernst & Young Ltd, Basel, a member firm of Ernst & Young Global Limited.
© 2016 Ernst & Young Ltd All Rights Reserved.
www.ey.com/ch
1
The smart insurance hero
Unifying the customer experience in private retail insurance
Radical transformation of the customer experience by owning the insurance distribution
channel and the customer interface
2
Julian Teicke CEO
Former Co-Founder & COO, DeinDeal;
Ex-Rocket Internet Exec
Built fastest growing start-up in Switzerland
Increased efficiency by more than 300% in
two years with use of salesforce technologies
Dario Fazlic CSO
Former Founder & CSO, DeinDeal
Built a sales team of 100 at DeinDeal,
the fastest growing start-up of Switzerland
Jonathan Seoane COO/ CTO
Several years experience in implementing
force.com technologies (>20 implementations)
Specialist in building highly scalable operational
infrastructures; Qualifications include:
Saleforce.com Certified Administrator, Developer
A Team With Extensive Startup Background
Florian Eismann CCO (Product & Marketing)
Former Lead Fidor Bank UK
Responsible for country setup of Fidor UK
one of the most innovative banks in Europe
Fabian Wesemann Business Development & Internationalisation
Former Investment Banker at Deutsche Bank
Tier 1 rated Banker leading junior team of strongest
HC IB team in Europe
Björn Grasedyck CFO
High profile financial executive
Former CFO of ebay, brandsforfriends, fab.com
& Avenso
3
Source:CommerzVentures,SwissRe,McKinsey,Accenture,CBInsights,VentureScanner
Banking Insurance BankingTech InsuranceTech
3.7
4.7
41
4.6
Globalrevenuepool2014($tn) Startupfunding2008-2015($bn)
Massive Potential For Insurance Tech
4
Michael John CEO Switzerland
More than 20 years industry experience
Successfully exited own broker to Funk
Insurance Brokers
President of the Swiss Broker Association
(IGB2B)
Brought In Significant Knowledge That Allows For Best Service, Fast Scalability And Industry Standing
Hartmut Teicke CEO Germany
More than 30 years of industry experience
Built one of the largest German brokers
and exited
to Swiss Life Select
Excerpt of Cooperation Contracts with Insurers
Accredited Broker
Working with traditional brokers
>85%coverageinCHandGER
Workingwith>50brokersinCHandGER
Stephan Ommerborn
CEO FinanceFox Insurance Former Managing Director Zurich
Insurance
Has successfully built two insurance
companies
Headed Greenfield Insurance Project
for Zurich
5
A business model with a global need
Global Potential
6
Lack of overview
of insurance terms
in paper folder
95% of consumers have
more than one insurance
company in their portfolio
Price differences of up to 400% for
similar services
Only 20% of customers
have a positive experience
when making a claim
Capgemini Insurance Customer Survey 2014 & Insurance Europe: European Insurance in Figures, December 2014
$
71% of customers worldwide have
unpleasant experiences with their
insurance companies
The Global Problem That Drives The Need For Disruption
7
Free
to use
Personal
insurance
advisor
Get
notifications
for saving
potential
Digital
insurance
folder
Handle
claim
completely
digital
Sign
new
offers in
App
Single
point of
contact
Submit
invoices for
reim-
bursement
How FinanceFox Solves The Pain Of The Customer
8 Insurance Is On The Agenda Of Investors – But None Of The Players Has Found The Golden Nugget
Digitalentrants VerJcalInsurancecompanies TradiJonalbrokers
Pros Digitalfolders SimplerandmoreinnovaNveproducts Goodadvice
Cons Donotofferpersonalservice
Donotunifythecustomerexperience
Cannotscaleandarelimitedbysignificant
amountofadministraNon
CompInstead of looking at insurance brokers as our main competitor we have made them the major channel of acquisition
9
Many small insurance
brokers
Fragmented Insurance brokers
are Inefficient
Undertechnologised
The Traditional Broker Market Is Broken
FinanceFox offers a solution curated to traditional insurance brokers
10 The 5 Reasons Why Brokers Work With Us
Better customer
service and coverage
1.
Protect their existing customer base
2.
Reduce the administrative costs
3.
Increase efficiency and upsell potential
4. Increase revenue
through bundling quota
5.
Get new customers in your direct proximity
11 Core Metrics To Date FinanceFox guides people to feel safe by focusing on a customer-centric approach using personal advice and advanced technology
New Customers B2B2C Customers Accumulated
Churn on Customers
New Customers Marketing
108%abovetarget
103%abovetarget
428%abovetarget
CAC on Total Customers AnnualvalueMarkeNngcustomer:CHF161
AnnualvalueB2B2Ccustomer:CHF184
12 Business Model Built On Strong Unit Economics
B2B2CLifeNmeMarginisCHF413over6.4Yearsat16CHFUpfrontCosts
MarkeNngLifeNmeMarginisCHF271over3.4Yearsat73UpfrontCost
Average Margin per B2B2C Customer Average Margin per Marketing Customer
25.1xLM/CAC 3.7x
1144
413
16
549
165
0
200
400
600
800
1000
1200
1400
CLV CAC RevenueShare CSC LifeNmeMargin
522
271
73
178
0
200
400
600
800
1000
1200
1400
CLV CAC RevenueShare CSC LifeNmeMargin
MarginsrepresentSwissBusiness
13
The smart insurancehero
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AIDA Swiss Chapter Insurance in the realm of digital and disruptors May 30 , 2016 Rolf Staub
General Counsel General Insurance
Changing legal/compliance risk map Insurance in the realm of digital and disruptors
2
Legal Issues
Privacy/Data Protection & Data
Security
Prudential Regulation
Consumer Protection
Intellectual Property/Anti-
Trust
Future Regulations
• Customer facing conduct and suitability of insurance products (Profiling, Price Optimization)
• Fairness, equality, anti- discrimination (disparate impact)
• Restrictions of the use of correlation instead of causation
• Machine-made decisions (cognitive intelligence; software robotics)
• Data processing principles (purpose limitation, data retention, correctness of data, data minimization, transparency)
• Privacy by design • Individual rights (explicit consent;
right to be forgotten, data portability, disclosure requests)
• “Ownership” of data • Secondary use • Automated processing/profiling • Data security: data loss, incident
reporting; cloud security • Cross-border transfer
Digitalization may increase • focus on protecting
intellectual property rights and
• sensitivity to anti-trust issues.
• Focus on risk management and compliance with data quality standards and data security
• Cyber security assessments by regulators
• Value assessment of the quality and integrity of data
• Protection of policyholder groups due to market disruptions (solidarity principle, affordability of insurance)
• Launch of the “Ethics Advisory Group” of the EDPS
• Risk of eroding public trust triggering government intervention
• Risk of adverse regulatory intervention with respect to solidarity principle and information asymmetry/ adverse risk selection
• “Sand Boxes” • Shift from consent based
concept to use based concept in data privacy
Expand the social and economic value insurance Enhance efficiency of insurance (cost savings
through more efficient and automated processes) Expand the scope of insurance by rendering
previously uninsurable risks insurable Potential to share enhanced risk insights with
customers as a basis for mitigation and prevention Potential for pre-event intervention and enhanced
efficiency of the claims process
Big data affects the complete value chain from marketing, distribution, underwriting (pricing and risk selection), product design, claims to risk mitigation.
Opportunities and challenges of big data
3
Privacy concerns Concerns about the processing of personal
information and algorithm-based decision making may erode public trust in insurance and trigger government intervention
Traditional approaches to privacy (notice, consent, use limitation) are challenged by big data
Potential to undermine fundamentals of insurance More granular pricing challenges the solidarity
principle as highest risks may no longer be able to find coverage, triggering government intervention
Enhanced insights by policyholders (e.g. through genetic testing) may lead to information asymmetry and adverse selection
Issue description
Opportunities Challenges
1
2