1.
Platforms for Growth: Technology Innovations in the Insurance Industry
State Street 2014 Insurance Survey 21 October 2014
Richard Fogarty, Head of Insurance, Asia Pacific, State Street

2.
State Street 2014 Insurance Survey
About 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.
Respondents by Type of Insurance Company
Respondents by
Area of the Business
72%
6%
13%
4%
2%
3%
Diversified
Health
Life
Property &
Casualty
Reinsurance
18%
39%
42%
Asset management unit
Non-asset management
unit
My role spans both asset
management and non-
asset management

3.
Although Innovation is Mostly Seen as “Moderate,” There are Pockets of Excellence
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:
31%
46%
7%
16%
Rapid
Moderate
Sluggish
Don’t Know
55% of Asia Pacific respondents considered the pace ‘Rapid’
Examples:
•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
But data is the next battlefield
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

4.
Platforms for Growth: Key Points
Insurers’ foremost strategic priority is identifying and penetrating new customer segments
This 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 challenge
Investment priorities include social media, technology to capture new customer insights, CRM & risk management tools
Technology strategy is not always aligned with the business objectives
28% of global sample say there is full alignment; 41% of asset management respondents say the same
Legacy IT issues and data silos are big impediments to transformation
86% of global sample is affected by legacy IT Issues
Technology-savvy market entrants will inevitably disrupt the industry – insurers cannot postpone digital transformation
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

5.
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?
10%
10%
20%
11%
33%
8%
10%
13%
14%
39%
Optimising investment portfolio returns
Entering new geographic markets
Strengthening distribution model
Enhancing product offerings
Target new customer segments in existing markets
Global Respondents
APAC Respondents
% expecting these factors will be a major driver of technology investment
GLOBAL
APAC
Changing customer demands
78%
84%
Growth in business volume
75%
81%
Actions of competitors
64%
63%
New regulation
64%
65%
Unlocking new customer segments will require fresh insights from data – and significant investments in technology
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

6.
New Technologies Enable Deeper Understanding of New Customer Segments and Innovative Product Development
% who are prioritising for investment in next 3 years
52%
42%
41%
43%
45%
21%
20%
59%
57%
50%
38%
27%
21%
21%
Improved customer relationship management systems
Social media tools to build stronger engagement with
customers
Technology to capture new customer insights (e.g., from
telematics)
Tools to strengthen risk management
Digital distribution and customer servicing channels,
including mobile platforms
Tools to improve investment decision making
Technology to improve pricing and underwriting decisions
Global
APAC
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

7.
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit
Asset Managers’ Data Priority is Real-time Access to a Cross-portfolio View
New investment strategies and increasingly complex portfolios will require better data and advanced risk and performance analytics
% Planning to Expand Existing Investment
GLOBAL
APAC
Emerging Markets
53%
28%
Alternatives
21%
20%
ETFs
21%
14%
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.

8.
Legacy Systems are a Major Impediment to Digital Transformation
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 modernisation.
Please indicate the extent to which you agree or disagree: “We spend little or no time addressing legacy IT issues”
3%
11%
26%
18%
41%
Strongly agree
Somewhat agree
Neutral
Global respondents
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

9.
Data Silos – a By-product of Disparate Legacy Platforms
Overall, how effective is your business today at turning multiple data sources into actionable insight?
37%
53%
6%
4%
Asia Pacific Respondents
Very effective
Somewhat
effective
Not effective
Don’t know
Total
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

10.
Legacy Systems and Silos Need Not Paralyse Insurers
Some options advanced by practitioners for overcoming, or circumnavigating, these bottlenecks:
Legacy Systems
Data Silos
•Modernise 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
•Prioritise interoperability over integration; only integrate where absolutely necessary
•Leverage external data (e.g. from social media and governments) to reduce dependence on internal data
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

11.
Technology and Business Managers Do Not Always See Eye-to-Eye
How Non-Tech Roles View
Technology Managers:
How Technology Managers View
Non-Tech Roles:
Not Flexible Only 36 percent of non-tech respondents strongly agree that technology managers are flexible in the face of changing business needs
Not Innovative Only 22 percent of non-tech respondents strongly agree that technology managers are proactive in proposing new, innovative solutions
Not Capitalising On Technology Only 26 percent of tech respondents strongly agree that business managers readily take advantage of new technologies
No Senior Buy-In Only 18 percent of tech respondents strongly agree that senior leaders in their company give technical initiatives the priority they deserve
Source: State Street 2014 Insurance Survey, conducted by the Economist Intelligence Unit

12.
Technology Strategy is Not Always Aligned With the Business Objectives
But alignment is better on the asset management side of the business …
Thinking about the top business priority you selected, how aligned do you believe your firm’s current technology strategy is to support that objective?
Only 36% of Asia Pacific respondents believe there is complete alignment between their technology strategy and the top strategic priority of their business
41%
24%
28%
Asset management
unit
Non-asset
management unit
All respondents
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

13.
“Technology Leaders” Stand Out When It Comes to Innovation and Alignment
APAC RESPONDENTS
Technology Leaders*
Total Sample
85%
55%
80%
43%
70%
23%
65%
31%
65%
26%
50%
29%
•Characterise 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

14.
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 analysing insurance data and generating insight
Prioritising data visualisation (because, when it comes to analytics, visualisation is almost as important as the analysis itself)
Striving for interoperability rather than integration of systems in order to ease legacy modernisation 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.

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