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Platforms for Growth:Technology Innovations in the Insurance Industry

State Street 2014 Insurance SurveyGlobal Results

September 2014

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State Street 2014 Insurance SurveyAbout 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.

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

Respondents by Type of Insurance Company

Respondents by Area of the Business

72%

6%

13%

4% 2% 3%Diversified

Health

Life

Property &CasualtyReinsurance

Other, pleasespecify

18%

39%

42%

Asset managementunit

Non-assetmanagement unit

My role spans bothasset managementand non-assetmanagement

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Platforms for Growth: Key Points

Insurers’ foremost strategic priority is identifying and penetrating new customer segmentsThis 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 challengeInvestment priorities include social media, technology to capture new customer insights, CRM & risk management tools

Technology strategy is not always aligned with the business objectives28% of global sample say there is full alignment; 41% of asset management respondents say the same

Technology-savvy market entrants will inevitably disrupt the industry – insurers cannot postpone digital transformation

Legacy IT issues and data silos are big impediments to transformation86% of global sample is affected by legacy IT Issues

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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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?% expecting these factors will be a major driver of technology investment

78%

75%

64%

64%

Unlocking new customer segments will require fresh insights from data – and significant investments in technology

Changing customer demand

Changing customer demands

Growth in business volume

Actions of competitors

New regulation

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

8%

10%

13%

14%

39%

Optimizing investment portfolio returns

Entering new geographic markets

Strengthening distribution model

Enhancing product offerings

Target new customer segments in existing markets

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New Technologies Enable Deeper Understanding of New Customer Segments and Innovative Product Development

% who are prioritising for investment in next 3 years

57%Social media tools to build stronger engagement

50%Technology to capture new customer insights (e.g., telematics)

59%Improved customer relationship management systems

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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Asset Managers’ Data Priority is Real-time Access to a Cross-portfolio View

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.

% Planning to Expand Existing Investment

Emerging Markets 53%

Alternatives 21%

ETFs 21%

New investment strategies and increasingly complex

portfolios will require better data and advanced risk and

performance analytics

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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Technology Strategy is Not Always Aligned With the Business Objectives

Only 28% of total respondents believe there is

complete alignment between their technology strategy and the top

strategic priority of their business

But alignment is better on the asset management side of the business …

41%

24%28%

Asset managementunit

Non-assetmanagement unit

All respondents

Thinking about the top business priority you selected, how aligned do you believe your firm’s current technology strategy is to support that objective?

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

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Technology and Business Managers Do Not Always See Eye-to-eye

36%

22%

19%

31%

51%

25%

26%

38%

Our technology managers are flexible in responding tochanging business needs.

Our technology managers are proactive in proposing new,innovative solutions

Our business managers readily take advantage of newtechnologies

Our technology strategy is aligned with our businessobjectives

Technology roles Non-technology roles

% who “strongly agree” with each of these statements:

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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Although Innovation is Mostly Seen as “Moderate,” There are Pockets of Excellence

31%

46%

7%

16%

RapidModerateSluggishDon’t Know

How would you characterise the overall pace of innovation across the insurance industry?

Technology-driven innovation has been evident in recent years in some areas, mainly product development and distribution:

• Usage-based auto insurance• Interactive online needs-

analysis tools• Mobile apps enabling users to

inventory personal property, submit claims

• Mobile imaging to capture vehicle IDs, drivers’ licenses

Examples:

But data is the next battlefield

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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Legacy Systems are a Major Impediment to Digital Transformation

3%

11%

26%

18%

41%Strongly agreeSomewhat agreeNeutralSomewhat disagreeStrongly disagree

Please indicate the extent to which you agree or disagree:

“We spend little or no time addressing legacy IT issues”

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 modernization.

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

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Data Silos – a By-product of Disparate Legacy Platforms

38%

54%

4% 3%

Veryeffective

Somewhateffective

Not effective Don’t know

Overall, how effective is your business today at turning multiple data

sources into actionable insight?

• 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

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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Legacy Systems and Silos Need Not Paralyze Insurers

Legacy Systems

• Prioritize interoperability over integration; only integrate where absolutely necessary

• Leverage external data (e.g. from social media and governments) to reduce dependence on internal data

Data Silos

• Modernize in small pilots, or a series of “small bets”

• Invest in new businesses to innovate “outside the core”

• Use a private cloud to pursue selected initiatives

Some options advanced by practitioners for overcoming, or circumnavigating, these bottlenecks:

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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“Technology Leaders” Stand Out When It Comes to Innovation and Alignment

• Characterize the pace of innovation at their firm as rapid

• Strongly agree their technology strategy is aligned with the business objectives

• Strongly agree their technology managers are proactive in proposed new, innovative solutions to the business

• 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

Technology Leaders*

Total Sample

82% 53%

83% 35%

70% 23%

67% 43%

69% 22%

50% 31%

* These are the 17% of total respondents who “strongly agree” that they are “technology leaders within their peer set”Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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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 analyzing insurance data and generating insight

Prioritizing data visualization (because, when it comes to analytics, visualization is almost as important as the analysis itself)

Striving for interoperability rather than integration of systems in order to ease legacy modernization 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 customer-facing sides of the business.

Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

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