CREATIVE DISRUPTION AND EMERGING TECHNOLOGIES SUSTAINING CHANGE IN INSURANCE ORGANIZATIONS

1. CREATIVE DISRUPTION AND EMERGING TECHNOLOGIESSUSTAINING CHANGE IN INSURANCE ORGANIZATIONS JANUARY 26, 2012 Craig Weber CEO Mike FitzgeraldSenior AnalystBoston

2. Fostering Creative Disruption Emerging Insurance Technologies Contents

3. Section 1 FOSTERING CREATIVE DISRUPTION CREATING BUSINESS VALUE September 1, 2014

4. Tradeoffs in performance of activities that define a business model (Porter) Disruption (big “D”) primer 1 STRATEGY 2 Breaking those tradeoffs(Raynor, Christensen) INNOVATION A theory of innovation, where: • Technology changes the “productivity frontier” • Success in fringe markets sets the stage for “up-market march” 3 DISRUPTION

5. “Disruption!? In insurance?” The non-price attributes of “insurance” are gaining prominence Tools to deliver better performance are now available More, better data Competitive pressures Consumer expectations Traditions Regulatory demands Non-captive distribution Project overload “The numbers are the numbers” Corporate, personal risk aversion FOR AGAINST

6. Celent view of disruption (big “D”) • Necessary part of competing. Betting on the status quo is not viable, long-term. Nor are purely incremental improvements • Led from the top, supported from the middle. The c-suite drives it, managers sell it, the front lines execute it • In balance with operational concerns. Project outcomes (see Celent framework) will tend to land in all three rings. But most companies need at least a handful in the Disruption ring • Mostly a mid-term opportunity. Managing technology and culture change is never a quick fix

7. Do they buy into the value? For insurers, do you think there is inherent business value in fostering creative disruption? YES. Creative disruption has value and should be fostered. NO. Creative disruption has limited value and should be minimized. I don’t know. Source: Celent report planned for December, 2011: The Case for Creative Disruption in Insurance

8. A disruption framework Improvement Innovation Disruption Risk and Compliance Growth and Retention Efficiency and Expense Control STATUS QUO Claims Indemnity Control User Experience Business Model Enablement

9. Mapping initiatives Improvement Innovation Disruption Risk and Compliance TELEMATICS Growth and Retention Efficiency and Expense Control PRODUCT CONFIGURATOR BUSINESS PROCESS MANAGEMENT STATUS QUO MULTI-MEDIA, REAL-TIME SERVICE FRAUD ANALYTICS Claims Indemnity Control User Experience DIRECT TO CONSUMER PORTAL Business Model Enablement

10. A disruption frameworkCelent 2012 Model Insurer Components Risk Managementand Compliance Improvement Innovation Disruption Business Model Enablement User Experience STATUS QUO Market and Product Agility Partnerships Cost

11. Section 2 EMERGING INSURANCE TECHNOLOGIES CREATING A BALANCED PORTFOLIO September 1, 2014

12. Managing emerging technologies • Adoption of new technologies varies – source of competitive advantage • New technologies’ link to business levers / key strategies • Model for planning and managing adoption of new technologies in insurance

13. Celent emerging insurance technologies Adoption LOW MIDDLE HIGH Sentiment Analysis Key to Current Adoption

14. Celent emerging insurance technologies Map to business strategy LOW MIDDLE HIGH Growth and retention Risk and compliance Sentiment Analysis Efficiency and expense control Claims indemnity control Key to Current Adoption

15. Celent emerging insurance technologies Portfolio management LOW MIDDLE HIGH Growth and retention Risk and compliance Sentiment Analysis Efficiency and expense control Claims indemnity control Key to Current Adoption

16. Celent emerging insurance technologies December 2011 LOW MIDDLE HIGH Growth and retention Risk and compliance SOCIAL DATA – U/W BIG DATA TELEMATICS REAL-TIME ANALYTICS ENTERPRISE CASE MGT PRODUCT CONFIGURATORS MASTER DATA MGT MOBILE WEB BUSINESS RULES MGT SOCIAL MEDIA – MARKETING PREDICTIVE MODELING – U/W PORTAL GEOSPATIAL DATA VIRTUALISATION FRAUD SCORING CLOUD FOR NON-CORE SYSTEMS CONTACT AND CUSTOMER MGT SOCIAL AND COLLABORATION PLATFORMS BUSINESS PROCESS MGT ADVANCED FRAUD ANALYSIS SOCIAL DATA – CLAIMS HTML 5 Efficiency and expense control Claims indemnity control CLOUD FOR CORE SYSTEMS PREDICTIVE MODELING – CLAIMS Key to Current Adoption

17. Prioritizing technologies: Case 1US$1 billion US general insurer seeking growth • Mix of business: personal 65%, small commercial 25%; mid-market 10% • Distribution method(s): independent agent distribution • Business trends: declining revenue; stable loss ratio • Emerging technology decisions driven by • Growth imperative • Customer service/intimacy • Omni-platform • Pricing sophistication

18. Prioritizing technologies: Case 1 LOW MIDDLE HIGH Growth and retention Risk and compliance TELEMATICS PRODUCT CONFIGURATORS MASTER DATA MGT MOBILE WEB BUSINESS RULES MGT SOCIAL MEDIA – MARKETING PREDICTIVE MODELING – U/W PORTAL FRAUD SCORING CONTACT AND CUSTOMER MGT BUSINESS PROCESS MGT Efficiency and expense control Claims indemnity control Key to Current Adoption

19. Summary • Fostering creative disruption becomes necessary for insurers that want to lead in the industry • Map of Model Insurer projects demonstrate most are in improvement and innovative ranges, some disruptive • Managing emerging technology link involves decisions on adoption rate required based on links to business strategy • New skills and behaviors necessary to execute on creative disruption and emerging technologies

20. Research inquiries mfitzgerald@celent.com Sales inquiries - Asia maquino@celent.com