Efficiency and Innovation: From Regulatory- driven Risk Operating Models to Improved ECM and Client Centricity Eric Jeanne and Markus Salchegger Accenture Finance & Risk Services RiskMinds Insurance 2016 Amsterdam, March 23rd 2016
Apr 15, 2017
Efficiency and Innovation: From Regulatory-driven Risk Operating Models to Improved ECM and Client CentricityEric Jeanne and Markus Salchegger Accenture Finance & Risk Services
RiskMinds Insurance 2016Amsterdam, March 23rd 2016
Agenda
Technology drivers that require new thinking around efficiency and
innovation for Chief Risk Officers and Actuaries
Risk management to be applied beyond current corporate areas to help
improve Economic Capital Management (ECM) and increase
client centricity
Conclusion: Technology Vision 2016 – Emerging trends for
Insurers
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3
Insurers are facing increasing constraints in Finance, Risk and Regulatory areas, pushing them to rethink operating modelsHigh level challenges and trends in the insurance industry
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Regulatory Pressure• Increasing transparency • Growing financial/reporting standards• Rising complexity
Economic Pressure• Continuous low rates environment• Market pressure on financial results • Decreasing amounts of free/available
“Own funds”
Cost Pressure• Operational efficiency• Cost reductions• Value-adding services
New Technologies• Technological innovations
(Big Data, Internet of Things, Analytics)
• Standardization and automation
• Data analytics
NEWOPERATING
MODEL
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Disruptive technologies for efficiency and innovationDigital is impacting the Finance and Risk operating models
Organization
Processes
ITData
Blockchain Big Data/Analytics
Cloud Cyber
New visionWorking processes
Digital risk-awarenessNew skills
Agile methodologiesData-driven decisions
Disruptive technologies have placed Finance and Risk functions in a state of digital culture shock, facilitating the use of more technology by their people to perform more, thus gaining a decisive advantage by creating a thriving digital corporate culture
Robotics
Robust monitoring and reduction of cost of capital
Mini-bots “phantom FTE” automation of tasks and activities
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Robotics and Blockchain technology is starting to play a significant role in companies’ automation strategyHelp insurers become more efficient and eliminate unnecessary intermediaries
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Robotic process automation with focus on repetitive and rule-based processesCognitive computing – adaptive, interactive technology with ”learning“ capabilitiesDigital/virtual assistance – computer-generated conversations, question answering...
Automation of regulatory reporting and enhanced time efficiency for financial instruments settlement
Improved security and transparency of data and informationSecure transaction ledger database to reduce the overall number of applications and IT infrastructure costs
Organization
Processes
IT
Data
BLOCKCHAIN
ROBOTICS
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Navigating Finance and Risk IT operations efficiency to realize the flexibility and control to drive agilityThe new data and IT landscape for the insurance industry
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Organization
Processes
IT
Data
Shared services initiative
Data-based decisions
Reduced processing costsAgile data visualization and leveraging unstructured data
Large scale machine learning
Multi-enterprise resource planning (ERP) rationalization
Mobile enablement
Infrastructure investment avoidance
Risk reduction strategy1st line-of-defense controls, countermeasures and protections
Risk awareness, modeling and simulations
Cyber resilience and data protection
Detection, identification and operational monitoring
BIG DATA/ANALYTICS
CLOUD COMPUTING
CYBER
Agenda
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Technology drivers that require new thinking around efficiency and
innovation for Chief Risk Officers and Actuaries
Risk management to be applied beyond current corporate areas to help
improve Economic Capital Management (ECM) and increase
client centricity
Conclusion: Technology Vision 2016 – Emerging trends for
Insurers
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The evolution of Risk Management will play an important role in transforming operating models for improved client centricityThe evolution of Risk Management typically follows waves
Risk
Man
agem
ent
Evol
utio
n St
ages
Time
1. Cross-functional AdoptionsAdopted in selected, closely related corporate functions such as Finance and Accounting
2. Group-wide CentralizationCentral provision of RM methods, technology and data for company-wide usage in core insurance domains
3. Next Generation Risk ManagementImproved client centricity with new touch points
and self service
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ECM has integrated capital management framework for strategy setting, capital allocation, balance sheet and risk managementExample of ECM use to facilitate improved capital allocation
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Enhanced Underwritingto generate top-line growth
Improved Capital Managementto strengthen profitability across the company/group
Robust balance sheet and higher cash generation
+ =
OBJECTIVES
IMPLEMENTATION IN FINANCE AND RISK
ECM BENEFITS Insight on capital
performance and enhanced capitalization
Provides opportunity to pre-empt emerging regulatory requirements
Transparency of highest value creating activities to support planning, pricing, reserving, steering and strategic decision making
Capital Adequacy Risk Management• Owner of ECM,
methodology, calibration
• ECM output for external prudential reporting
Capital Allocation and SteeringFinancial Planning/Accounting• Scenario analysis to
strengthen risk-adjusted returns
• Consistent treatment of ECM output across the group
• Facilitate decision making on M&A opportunities
ENHANCEMENTSCENARIOS
CAPACITY
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The dynamic of competing for capital within groups and divisions should tremendously change in the future Capital allocation is of greatest importance to insurance groups
Across insurance groups a consolidated group-wide risk vision aligned to global capital requirements is recommended using an enhanced capital allocation process
The “new” capital allocation process should be implemented at the following organizational levels
Through the definition of one/multiple common solvency strategic indicator(s) (reflecting group-risk appetite) and which ought to be evaluated by management at each strategic decision point
Through an adequate risk limit management process aligned to the company’s global solvency indicator
Steering Level
Line of Business/Geography/ Business Unit Level
KEY SOLUTION ELEMENTS
• Usage of prospective tools/methods allowing easy, rapid and accurate capital requirement calculation in line with regulatory framework
• Ability to control risk limits at multiple levels of detail (portfolio, business unit, geography, risk module, etc.) with sensitivities conducted based upon market trends and investments choices
THE CHALLENGE
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Scenario-driven capital allocation approach can generate value in comparison to traditional approachExample of capital excess allocation: scenario-driven approach
Division IV
ECM
GroupECM
Division I
Division II
Division III
Motor Property Marine
ECM
25m 25m 25m 25m
15m 5m 5m
ECM ECM
CHARACTERISTICS • Capital steering is driven by top-down analysis from the
group• Capital is allocated to each division • Divisions subsequently allocate capital to different lines of
business• All divisions have ECM modules that are centrally
maintained and locally parameterized• ECM across divisions characterized by different levels of
sophistication• Capital is allocated on an annual basis as part of the
planning process
CHARACTERISTICS • All divisions and the group use the same ECM module• Capital can be re-allocated on an ad hoc basis using ECM
output• In this example, dynamic scenario analysis detects the
“Motor business in Division II” has plateaued => 5m is subsequently re-allocated to group level• Conversely, Division IV requires more capital than
forecasted and needs to increase capital (e.g. to support additional risks)• Group can then allocate 5m excess capital to Division IV
Top-down Capital Steering
Scenario-driven Capital Steering
Division IV
GroupECM
Division I
Division II
Division III
Motor Property Marine
25m 25m 25m 25m
15m 5m 5m
ECM
5m5m
5m
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Exemplary dimensions drive a comprehensive enterprise-wide customer-centric strategy supported by Risk ManagementOverview of Risk Management adoption on selected client-centric initiatives
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Improved availability of data per client (not only per product) based on Risk Management insight
Improved understanding of the customer risk profile and new demands
Increase effectiveness of channels through improved risk-based segmentation of customer groups
New products/self-service offerings based on new customer risk demands and/or profiles
Disruptive technologies allow insurers to place customers at the center of
the right activities, thus improving customer experience and satisfaction
Unique Customer View
Customer Analytics
Campaign Management
Customer-oriented Products and Services
Agenda
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Technology drivers that require new thinking around efficiency and
innovation for Chief Risk Officers and Actuaries
Risk management to be applied beyond current corporate areas to help
improve Economic Capital Management (ECM) and increase
client centricity
Conclusion: Technology Vision 2016 – Emerging trends for
Insurers
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The Accenture Technology Vision 2016 outlines key trends that also drive future Finance and Risk ArchitecturesSelected Trends – Accenture Technology Vision 2016
Do things differently, do different things and create new jobs, products and servicesMachines will be the newest recruits
IT barriers have been eliminatedLooking to digital ecosystems for the next waves of change
PEOPLE FIRST: The Primacy of People in a Digital Age
Predictable Disruption
Platforms are trending, and for great reasons. New business models are adaptable, scalable and interconnected
Platform Economy
Intelligent Automation
New technologies require new talents. Liquidity takes on new meaning in the work-force: become adaptable and change-ready
LiquidWorkforce
Source: Accenture Technology Vision 2016: https://www.accenture.com/us-en/insight-technology-trends-2016.aspx
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Insurers are in the midst of a digital revolution that is impacting most, if not all, aspects of their businessTo position themselves for success, insurers are encouraged to seize the opportunities created by emerging trends
Business model innovation
Platform Economy
Upgrade business processes
Intelligent Automation
Enhance organizational efficiency
Liquid Workforce
Long-term R&D strategy
Predictable Disruption
Pre-emptive risk mitigation
DigitalTrust
of surveyed insurers see the “Internet of Things” bringing about complete transformation or significant change in the industry
of surveyed insurers believe trust is the cornerstone of every business in the digital economy
of surveyed insurers expect platform-based business models to become part of their growth strategy in three years
of surveyed insurers agree that a more fluid workforce will improve innovation
of surveyed insurers are investing more in embedded artificial intelligence solutions
78% 83%82% 83% 85%
PEOPLE FIRST
Source: Accenture Technology Vision 2016: https://www.accenture.com/pt-en/insight-insurance-technology-vision-2016
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Efficiency and Innovation: From Regulatory-driven Risk Operating Models to Improved ECM and Client Centricity
DisclaimerThis presentation is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals.
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