Digital Disruption in Insurance: The Contradictions of Threat and Opportunities Joseph Tegbe Partner & Head, technology Advisory & Markets, KPMG in Nigeria September 2019 Insurance Professional Forum 2019 kpmg
Digital Disruption in Insurance:The Contradictions of Threat and Opportunities
Joseph TegbePartner & Head, technology Advisory & Markets,KPMG in Nigeria
September 2019
Insurance Professional Forum 2019
kpmg
2
Outline
1. Digital Disruption “A Global Context”
2. Digital Trends in Insurance Business
3. Repositioning for the Digital Era
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 9
01Digital Disruption “A Global Context”
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Digital is the enabler of the changing industry landscapeDigital Disruption “A Global Context”
Disrupting Norms & Creating Value
Connecting People
Connecting Things
Transforming Processes
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
80% of the world’s most valuable businesses are digital businesses compared to 10% in 2010Digital Disruption “A Global Context”
Source: Wikipedia and Bloomberg – Sunday Sept 22nd 2019
9th
8th
7th
6th
5th
4th
3rd
2nd
1st
10th
329
316
256
246
213
210
209
200
194
192
1,065
984
852
887
541
408
511
475
347
305
Quoted values are in Billions of USD2010
20192010
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Digital technology: here and nowDigital Disruption “A Global Context”
Fukoku Mutual Life Insurance
60,000
Packagesprocessedevery hour200k
Using robotic unloading systems, barcode scanning, automated vans and even drone deliveries
300KHours of legal word reviewing financial deals
after
Contract Intelligence AI system
1
500 Previously
employedwhere
Workers replaced
500k FTE’s to be replaced by 1 Million robots
30%Increased productivity
Jobs of 34 humans were replaced by IBM Watson Artificial Intelligence system
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Source: Uber & Amazon valuation based on Bloomberg data as at 22 September 2019. Airbnb valuation based on vox.com 19/03/2019
Digital disruption across industriesDigital Disruption “A Global Context”
Founded: 1994
$887 billion
>95 million prime members
$55 billion
>91 million active users
Founded: 2009
$38 billion
>150 million users
Founded: 2008
Valued at: $43 billion
Founded: 1927
Founded: 1897
Valued at: $16.6 billion
Founded: 1962
Valued at: $336 billion
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
What do Global CEOs think about disruption ?Digital Disruption “A Global Context”
Source: KPMG’s CEO Outlook Survey 2019
67%
44%
54%
believe that acting with agility is the new currency of business
say they are upskilling at least half of the workforce in new digital capabilities over the next 3 years
of CEO’s say they are either modernizing the workforce or reimagining internal function as services in order to ensure their organization is future-ready
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Digitalization forces executives across industries to answer essential questions from strategy to transformation
Digital Disruption “A Global Context”
How do I make better and faster
business decisions?
How can I enhance my business model to be more competitive?
How do I improve my spending and reduce
costs?
How can I best utilize technology to be proactive
and predict potential business issues?
How do I differentiate the business and connect
to my customers in a digital world?
How can I create value for my
shareholders?
How can I ensure collaboration across all
aspects of my business?
How can data help me look at my business in
new and innovative ways?
How do I optimize my distribution?
How do I improve user and
customer experience?
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 9
02Digital Trends in Insurance Business
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Digital Technology is transforming the insurance value chainDigital Trends in Insurance Business
Product Design/ Development
Pricing/ Underwriting
Marketing DistributionPolicy Claims/ Management
• Robotics/ Telematics/ Internet-of-Things (IoT)/ wearables offer usage-based insurance opportunities
• Emerging risks such as cyber
• Social network insurance groups
• Use of Big Data/ analytics to identify new claim drivers
• Predictive/ Prescriptive underwriting techniques
• Artificial intelligence to hone risk assessment
• Position insurance as more customer-centric
• Increase frequency of interaction
• Use Big Data/ analytics for market segmentation & personalization
• Customers prefer multi-touch omni-channel interaction
• Less face-to-face engagement
• Scope for gains in efficiency in offline channels
• AI-driven Robo-advisors
• Use of Big Data to reduce fraud and improve claims processes
• Self-service apps to improve customer post sales experience
• Blockchain applications for smart contracts and claims administration
Dig
itis
atio
n
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Some global players are already differentiating using digital technologiesDigital Trends in Insurance Business
Product Design & Development
Pricing / Underwriting Marketing Distribution Policy/ Claims Management
Glo
bal
Fizzy• Automated parametric insurance platform for delayed
flights using smart contract • Connects to global air traffic databases to monitor flight
status.• Policy pricing depends directly on the risk of delay and
cancellation, calculated independently for each flight by a custom pricing algorithm
Aviva Drive App• Aviva Dash Cam captures the road ahead• Smart collision detection for automatic detection of
collision• Discounts on insurance cover earned based on safety
score assigned from tracking the customer’s driving
Measure how you drive using the GPS
Receive driving score between 0-10
Get discounts on driving scores >3.1
Impact: Increased customer base
Impact:
Improved customer experience
1
1
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Some global players are already differentiating using digital technologiesDigital Trends in Insurance Business
Political
• Real-time risk analysis solution, to enhanceunderwriting processes for life insurances.
• Leverages Artificial Intelligence to analyse largeamounts of unstructured data (client photos) andassesses the risk associated to a client’ssubscription by predicting life events (mortality,morbidity, etc.) in real time
Product Design & Development
Pricing / Underwriting Marketing Distribution Policy/ Claims Management
• Uses Big data for customer segmentation and calculation of customer lifetime value
• Allstate is continuing to develop machine learning and natural language processing capabilities which use this data to deliver an enhanced customer experience
Impact:
Trend analysisOn blocks of insured population
10 minutesto buy life insurance
1
2
4/5 star ratingcustomer satisfaction
Precise predictionof customers’ needs
1
2
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Some global players are already differentiating using digital technologiesDigital Trends in Insurance Business
Glo
bal
• An online assistant for self service queries on policy issuance, cancellation and renewals
• Offers a web interface that allows clients to customize their own insurance policies from modules offered by the companys
• Uses mobile technology to provide insurance services in developing and emerging markets. This the technology permits with the lower entry costs
• Premium payment is collected via automatic deduction of prepaid airtime credit.
Glo
bal
• Fukoku’s Watson system can analyze and interpret claim data including unstructured text, images, audio and video
• Checks customers’ cases against their insurance contracts to find any special coverage clauses – a measure expected to prevent payment oversights
Product Design & Development
Pricing / Underwriting Marketing Distribution Policy/ Claims Management
30%Increased
productivity
1
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Only few digital players have surfaced in the Local Insurance SectorDigital Trends in Insurance Business
Product Design & Development
Pricing / Underwriting Marketing Distribution Policy/ Claims Management
Runs a comparison website which allows users get quotes for healthcare, life, travel and fire insurance.
Insurance cover to subscribers who recharge their phones with a minimum of 1000 Naira every month.
Casava leverages Artificial Intelligence to provide digital-only micro-insurance services
Allows users to compare and buy insurance policy online.
Allows user to buy auto insurance online currently work with traditional insurance companies.
Ctrl is an independent car and household insurance advice app. They have partnerships and offer end-to-end digital experiences
Incumbent Insurance organisations have begun to look into digitization of their business processes and channels. However, some players are exploring a complete rethink of their business models.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 9
03Repositioning for the Digital Era
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
While Nigeria’s key digital indicators have continued to show a steady increase in digital penetrationRepositioning for the Digital Era
The number is expected to rise to 143millionpeople by 2025
49%of mobile connections
are broadband (3G & 4G)
92 millionNigerians now use the internetat least monthly; estimated to rise to 188 million by2023
~16 MBPSAverage internet speed via mobile connections
Smartphone owners/users
~36m
>105 million Nigerians are estimated to have access to mobile phone and use it at least once a month.
0.3%Nigeria
2.8%Kenya
16.9%South Africa
3.7% India
Insurance penetration in Nigeria compared to other countries
1.5 millionNigerians hold an insurance policy
Based on these same digital indicators, the banking industry in Nigeria has been able to achieve 39.7% banked adult population as at 2018
2019 Nigeria Insurance Industry Report
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Nigeria’s Insurance penetration has remained historically low compared to other sub-Saharan African Countries
Repositioning for the Digital Era
Source: Ready and Willing African insurance industry poised for growth
16.99
6.69
4.764.18 4.09
2.83 2.441.98
0.30 0.29 0.29 0.210.
2.
4.
6.
8.
10.
12.
14.
16.
18.
SouthAfrica
Namibia Lesotho Mauritius Zimbabwe Kenya Swaziland Togo Nigeria CentralAfrican
Republic
DemocraticRepublic of
Congo
EquatorialGuinea
% Insurance penetration in Sub-Saharan Africa in 2017
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
A significantly large young population is shaping experience expectationsRepositioning for the Digital Era
Gen Z1996 - 2003
I am the change!
The generation reaching adulthood in the early 21st century. They are also hailed as “the first tribeof true digital natives” or “screenagers”.
Millennials1980 - 1995
I will inspirechange
Also know as Generation Y, they have been shaped by the technology revolution that saw computers, tablets and the web become centralto workand life.
Gen X1965 - 1979
The voice of many will inspirechange
Gen X are now becoming the “helicopter parents” ofGen Z.
Baby Boomers1946 - 1964
Work hard for the changes you want to see
Born in the years before and just after independence. Baby Boomers enjoyed free student grants, low house prices and they now hold the reins of power and have the most economic clout.
Traditionalists1920s - 1945
Work hard today for a better tomorrow
Significant influences from the colonial era
9.5m21m39.5m38.5m
107mAdults
191mTotal
~2mWell-served
~65mFinancially
Underserved
~40mFinancially Unserved 0
10 000
20 000
30 000
0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+
Age Range
2017 2030Population by Age (2018 and 2030)
2.7m
Sources: NBS, Euromonitor, EFInA, KPMG Analysis
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
A tale of two ‘countries’ - The Nigerian storyRepositioning for the Digital Era
Less educated with limited education of technology
High mobile penetration
Low income
Largely unbanked/ underbanked
Cash-reliant; low digital banking adoption
Mostly resident in rural or suburban communities
Educated and tech savvy
High mobile penetration
Middle-high income
Largely banked
High digital banking adoption
Mostly resident in urban areas
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Digital has shifted from a focus on the front to the whole value chain and executionRepositioning for the Digital Era
Digital BusinessStrategy
Enterprise Digital
Transformation
Customer Connected (End-to-End) Enterprise
Digital Customer
Engagement
Digital Marketing
Mobile
Digital Supply Chain
Disruptive Business Models
1st Transformation Wave: Digital First 2nd Transformation Wave: Digital Operations Next Wave: Efficient Execution
Brands will build holistic customer experiences that
transcend touch points.
Digital enterprises will accelerate work to break down their silos between
customers’ digital and offline engagement.
They will also break down the silos between functions and created a Connected
Customer Enterprise
Activity was centered on front office and
customer experience via digital channels (internet
and mobile)
A digital focus on just thefront office will not provide
sustainable competitive advantage
Organisations focus on restructuring operations beyond
customer-facing functions to enable enterprise-wide digital
transformation
Organisations spend more on digitizing operations in the middle
and back office
Moving from experience to operations, emphasising the need to connect front to back offices
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
The insurer of the digital era must offer what the “customer” expectsRepositioning for the Digital Era
Effortless Experiences
High Trust Standards
Value
Simplicity even with the most complex products
Personalized Services
Telcos and the Media continue to struggle with disrupted business models as they look for ways to improve customer experience
Consumer Goods businesses are trying to understand new direct to consumer business models while Retailers continue to wrestle against online e-commerce
Banks face huge challenges with regulations and regaining customer trust; this is impacting their ability to provide suitable needs-based products and services
Insurance companies are considering how to use big data to personalize customer solutions; and wrestle with the increasing power of brokers and intermediaries
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Challenges on the Journey to Digital Repositioning for the Digital Era
65 percent of insurers agree skills shortage prevents their organisation from keeping with the pace of change, with 70 percent looking at acquiring small companies to bring in the right expertise and
capabilities. “”
Harnessing the power of
data
Addressing disruption from the market
and customer
Empowering Legacy
Technology
1
2
3
Organisation, people and
culture
5
Staying in Business
4
Responding to industry consolidation and accelerating growth with customer demands increasingly moving to an omni-channel model capable of anticipating customer needs and delivering frictionless experiences
Insurance organisations are data rich. But harnessing the potential power of that data is incredibly challenging.
Years of legacy technology hinders majority of global insurers digital transformation. Insurers are increasingly looking to replace or empower their legacy technology by considering cloud, APIs etc.
Managing the inherent complexity and increasing fallibility of the legacy technology, whilst also meeting demands for change, along with regulatory and statutory requirements
Need to consider fundamental change to the way technology is incorporated into thebusiness model. Many insurers have to deal with issues of skills, capabilities and ways of working required to support thejourney to digital
2018 KPMG Global CIO Survey
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
To stay competitive, incumbents’ strategic focus should shift from digitizing the existing business model to disrupting it as digital technology takes hold
Repositioning for the Digital Era
Basic Innovation
Using digital means to replace or simplify existing processes
1
Transformative Innovation
Shifting from product-centric to customer-centric approach to
insurance
2
Disruptive Innovation
Creating a vision for a new insurance business
model, supported by technology
3
AI, big data and analytics are used to
understand customers and
provide data to allow decision makers to
act quickly
Process automation, chatbots, cloud
computing, and AI triaging high volume
low-value claims
Insurer being at the front end of a
customer’s daily transactions, such as
new purchases, travel or trips to the
doctor
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
Digital for insurance will impact every area of the insurance businessRepositioning for the Digital Era
01 Your Customers01
Your People04
Your Underwriters05
Your Products02
Your Actuaries06
Your Operation03
— Buy what they need, when they need it, on the go 24/7— Buy one product that will suit all their needs and evolve with their lives— Access insurance products and claims via simple, easy-to-use channels (mobile, USSD, etc.)
— More distinctive and created through behavioural analytics from new sources of data — Will reach more customers as part of a distribution eco-system such as lifestyle apps, ecommerce partnerships,
etc.— Get to market faster with a fast flexible insurance platform that has AI and machine learning at its core
— Improved customer servicing and response times through the use of self-serve options and automated back-office processing
— Reduced cost to serve (10-40%), as standard tasks are handled by new automation and AI capabilities
— Will focus on highly specialised cases or products as automation will provide pricing for more standard cases— Use instant, real time data from IoT, Telematics and social media to provide fast, tailored pricing for customers— Will focus more on business development as automation reduces the need to complete time consuming
administrative and servicing tasks
— Will focus more on product development as models are automated and continuously updated— Work closely with data scientists to take advantage of a vast new sources of data from IoT, Telematics and
social media to create new products
— Will work in small, agile, cross functional and multi-disciplinary teams that include data scientists, customer demand experts, service operations experts and developers as well as actuaries and underwriters.
— Will be mobile, flexible and can work from any location
© 2019 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative. ("KPMG International"), a Swiss entity. All rights reserved.
How can insurance businesses adequately capture the potential opportunities in Nigeria?Repositioning for the Digital Era
Invest in digitization
Allocate funds for investment in modern technologies
Skill up
Develop in house tech talent or employ skilled tech labour to provide digital solutions
Collaborate with digital solutions providers
Establish Digital Partnership
Be Data driven
Proactive approach in generating value from existing data i.e. data analytics
Interaction with tech natives either through online platforms or tech communities.
Engage with the tech savvy demography
1
2
5
3 4
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