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1 – 5 Oct 2017 | Orlando, FL

Insurance Scenario 2030 —


Leading Through Innovation
Kimberly Harris-Ferrante

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The Speed of Insurance Innovation

30 70 150

"The insurance sector is at a turning "Lemonade, the insurance


point with new trends and company powered by artificial
opportunities which AXA has started intelligence and behavioral
to capture …, will allow us to further economics, today announced it
leverage our existing capabilities and has set a world record for the
develop new business models and speed and ease of paying
services in order to accelerate the a claim: 3 seconds and
pace of change for our customers." zero paperwork."
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Key Issues

1. What is the best insurance industry practice for creating a scenario


as the foundation for digital business strategic planning?
2. How will the insurance industry be remade by digital business
by 2030?
3. How can insurance industry CIOs build a winning strategy to digital
business investments and business model changes?

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Key Issues

1. What is the best insurance industry practice for creating a scenario


as the foundation for digital business strategic planning?
2. How will the insurance industry be remade by digital business
by 2030?
3. How can insurance industry CIOs build a winning strategy to digital
business investments and business model changes?

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Industry Change Requires a Strategic Planning Approach

Changes in
Economic Abundance of Evolving risks and Evolving
consumer
conditions new technology insured items ecosystems
behavior

New value Political Demographic New


Regulations
proposition stability shifts competitors

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Scenario Planning: What Are Scenarios? Why Are
They Important?
 Give context for the present Single-Point
Forecast
and future
 Understand how to succeed
in those scenarios Trends
Range
of
 Move away from "one size Uncertainties

fits all" thinking

Timing?
Adapted From: P. Schwartz. "The Art of the Long View: Planning for the Future in an Uncertain World." Crown Business. 2012.

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Strategizing for Insurance 2030: Scenario Planning

The Focal Issue Evaluation Criteria

How can the insurance


industry develop and deliver Low Market Volatility High
a value proposition and
value chain to address a
radically changing ecosystem
and competitive environment?
Traditionalist Corporate Culture Futurist

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How Will the Market Environment for Insurers Look Like?

High Volatility Low Volatility

Regulatory Regulations in Flux Stable Policy and Regulations

Financial Low Interest Rates Moderate/High Interest Rates

Robust Economics; Few Hostilities;


Political Environment Civil Wars, Weak Economies, Nationalization
Investor-Friendly

Market Environment Stagnation/Shrinking, Consolidation Moderate Premium Growth, Few M&A

Market Accessibility New Entrants, Global High Barriers to Entry, Domestic

Competition New Players, High Industry Fluidity Traditional Players, Low Industry Fluidity

Customer Behavior Volatile Demand, High Churn Stable Demand, Moderate Churn

Underwriting Soft Market, Tight Margins Hard Market, Moderate/High Margins

Risks Unpredictable, Black Swans Predictable, Conventional

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What Will Be the Corporate Culture Patterns in Insurance?

Futurist Traditionalist
Innovation Strategy Outside-In Inside-Out

Outcomes Learn and Fail Fast Succeed First Time

Management Focus on Transformation Prove ROI

Level of Autonomy Decentralized Decisions Centralized Decisions

Technology Adoption Early Adopter Laggard or Late Follower

IT Modality Bimodal/Mode 2 Mode 1

Business Model Business Platform/Ecosystem Traditional Value Chain (Pipes)

Business Focus Proactive, Front Office, Customer Value Reactive, Back Office, Efficiency

IT Governance Incubate, Collaborate Structured Project Life Cycle

Sourcing/Partnership Creative Partnerships Traditional Providers

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Key Issues

1. What is the best insurance industry practice for creating a scenario


as the foundation for digital business strategic planning?
2. How will the insurance industry be remade by digital business
by 2030?
3. How can insurance industry CIOs build a winning strategy to digital
business investments and business model changes?

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Four Plausible Scenarios

Futurist

PIONEER DISRUPTOR

Corporate Culture
Low Market Volatility High

ADMINISTRATOR ADAPTER

Traditionalist
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Scenario A: Disruptors Shake Things Up

Business Environment: High Market Volatility


 High competition and market dynamics with
nontraditional market entrants
 Quickly changing/unstable market
 Fast-paced regulatory changes
 Changing definition of "insurance" with
new value propositions

Business Culture: Futurist


An Insurtech Takes a Place on
the Top 10 Insurer List
 Aggressive and disruptive
 Agile and entrepreneurial
The First Robot Gets
 Creative, no-limit mindset Insurance License
 Experimental, fail-fast attitude Life Insurance Underwriting Goes
 Challenging status-quo From Weeks to 3 Minutes

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Scenario B: Pioneers Focus on Selective Transformation

Business Environment: Low Market Volatility


 Rising but controlled interest rates
 Stable growth
 Changing customer expectations
 Incremental regulation
 Political stability

Top P&C Company Launches


Business Culture: Futurist Autonomous Car Product
 Visionary Top Life Insurer Enhances Web
 Incrementally innovative Presence, Sells 50% Business Online
 Opportunistic
 Open-minded
Top Insurer Reports That 50%
of Inbound Communications
Go to Chatbot

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Scenario C: Administrators Stick to Traditions

Business Environment: Low Market Volatility


 Rising interest rates
 Predictable growth
 Price stability
 Traditional competition
 Growing middle class
 Stable regulatory environment

Business Culture: Traditionalist


Rise of Closed-Block BPO
in Life Insurer Doubles
 Reliable and sustainable
 Risk-averse
Investment in Call Centers
 Cost-conscious and Agents on the Rise
 Relationship-driven Failure of Insurtechs Results in
 Contemplative and skeptical Innovation Slow Down

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Scenario D: Adapters Respond to Threats

Business Environment: High Market Volatility


 Dynamic and rapid change
 Threatening and evolving competition
 Unstable interest rates/markets
 High cost of capital
 Changing customer expectations

Business Culture: Traditionalist Top Insurer Reduces Staff by


 Pragmatic 50% Through Use of Robots
 Customer-focused Core System
 Late follower Replacements Accelerate
 Calculated risk-taker
 Market-aware Regional Insurer Announced IoT Pilot

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How Will You Respond to This Future?

Futurist

PIONEER DISRUPTOR

Corporate Culture
Low Market Volatility High

ADMINISTRATOR ADAPTER

Traditionalist
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Key Issues

1. What is the best insurance industry practice for creating a scenario


as the foundation for digital business strategic planning?
2. How will the insurance industry be remade by digital business
by 2030?
3. How can insurance industry CIOs build a winning strategy to digital
business investments and business model changes?

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How to Win in the Disruptor Scenario

IT Focus
 Agility and bimodal IT Disruptor

Futurist
 Technology innovation —
inside and through investments
 Position IT as an innovation leader
 Business ecosystem orchestration and integration
High Market Volatility

CIO Role and Recommendations


 Review IT environment to ensure agility, fast change and flexibility
 Build IT platform for ecosystem integration and process efficiency
 Be an advisor for insurtech innovation
 Apply "fail fast" to IT innovation

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How to Win in the Pioneer Scenario

IT Focus
 Agility and adaptability Pioneer

Futurist
 Use technology to drive down costs
 Invest to modernize IT assets
 Seek strategic partnerships and technologies
 Position IT as strategic enabler
Low Market volatility

CIO Role and Recommendations


 Instigate a development culture in your organization incorporating
hackathons, crowd sourcing and innovation workshops
 Develop a measurable set of KPIs for your digital initiatives to be
able to quantify success
 Continuously evaluate, document and engage with insurtechs that
offer complementary solutions that enhance your business offering

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How to Win in the Administrator Scenario
Low Market Volatility
IT Focus
 IT efficiency and reliability

Traditionalist
 Strong process management maturity Administrator
 Practical solutions with bimodal capabilities
 Strategic sourcing for value
 Optimize costs

CIO Role and Recommendations


 Maintain a balanced cost-value ratio
 Instill a technical service partner culture
 Establish strong business relationships
 Focus on business process optimization and automation

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How to Win in the Adapter Scenario
High Market Volatility
IT Focus
 Balance assets in bimodal attitude

Traditionalist
 Standardize and consolidate operations Adapter
 Align with business objectives
 Spotty innovation — selective new opportunities
 Position IT as a utility

CIO Role and Recommendations


 Focus on pragmatic innovation opportunities in a controlled manner
without sacrificing the stability of existing IT systems
 Develop partner and acquisition management capabilities
 Treat legacy systems as a continuous improvement cycle
 Improve the cost, quality and scalability of IT

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Recommendations

CIO and IT Leaders: IT Architects and Strategists:


 Develop a scenario plan for your IT  Consolidate and organize leadership vision
department. Include diverse mix of thought based on scenario analysis.
leaders outside IT.  Focus on strategic platforms that are
 Engage business leaders to refine directly linked with scenario attributes.
scenarios and set appropriate business  Adjust timing and investment in
and IT priorities. platform roadmaps to match
 Communicate scenario analysis and scenario-derived priorities.
priorities within IT. Adjust the timing of
activities across IT to match scenarios.
 Be aware that in large organizations,
different scenarios may play out in different
geographies and lines of business.
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"The best way to predict
the future is to create it."
— Peter Drucker

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Recommended Gartner Research

 Insurance 2030 Scenarios: How CIOs Can Survive and Thrive in


an Era of Industry Transformation
Juergen Weiss (G00324622)
 Insurance 2030 Scenario: Disruptors Succeed in a Changing
World by Challenging Traditional Thinking
Kimberly Harris-Ferrante (G00324219)
 Insurance 2030 Scenario: Pioneers Focus Innovation on
Competitive Differentiation
Laurie Shotton (G00324124)

For more information, stop by Gartner Zone.


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Recommended Reading

 The Art of the Long View: Planning for the Future in an


Uncertain World
Peter Schwartz (2012)

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gartner.com/reviews

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