insurance industry

propanestudio.comsan francisco

newbusiness@propanestudio.com415.550.8692

private & confidentialaugust 10th 2013

agenda

• life Insurance

• health insurance

• auto insurance

lifeinsurance

statistics

overview

91 M adults in the U.S. do not

have any life insurance1

61% of men have some kind of life

insurance2

93% of Americans agree life insurance is something most

people need6

57% of women have some kind of life insurance3

50% of Americans admit they do not have

adequate life insurance4

40% of American households

would be unable to meet

expenses if their spouse died5

1-4."Life Insurance Facts & Figures." Whole Term Life Insurance Quotes. N.p., 26 Apr. 2012. Web. <http://www.infographicpost.com/term-and-whole-life-insurance-facts-figures/2012/04/26>.5-6. "What You Need to Know About Life Insurance." LIFE A Nonprofit Organization. N.p., n.d. Web. <http://www.lifehappens.org/pdf/printable-consumer-guide/life-insurance-pcg.pdf>.

market share 2012

overview

21%

14%

13%12%

10%

7%

7%

6%5% 5%

MetLifeAflacPrudentialNorthwestern MutualNew York LifeLincoln NationalJohn HancockMassMutualAegonState Farm

Figure 1.Hersch, Warren. "NAIC Names Top 25 Life Carriers by Market Share." Life Health Pro. N.p., 13 Mar. 2013. Web.

fundamental changes

overview

Customer • real time decision support• customization and

personalization of product and services

Technology• full integration of old channels

with a new digital core• harnessing the power of

predictive tools and techniquesCompetition• threat from other industries or

new startups entering the market7

7.Jackson, Graham, Jeremy Lefebure, and Vicki Symmerhayes. "Life Insurance The Digital Insurer: Change Now to Get Ahead." Accenture. Accenture, 2012. Web.

trend 1: {demographic shi!}

boomers vs. millennials

trend 1

• two fundamentally different groups, insurers need to decide who they will target, will it be the 55+ or the under 35 age group

• each segment will require a complete restructure of current distribution models to satisfy customer needs

• first movers will have an advantage

• companies that fail to act will become providers of commoditized insurance in a market looking for personalization8

8. French, Doug, and James O'Neill. "The Future of Life Insurance." Ernst & Young. N.p., Sept.-Oct. 2012. Web.

challenges

trend 1

• two segments have almost opposite needs and buying preferences

• customers may turn to buying direct from online channels (much like what has happened to bookstores, travel agencies and stock broker firms)

• as customers better understand life insurance needs through independent online research, self service will become more popular

• failing to adapt, insurers lose an opportunity to strengthen existing relationships or develop new ones with young buyers9

9. French, Doug, and James O'Neill. "The Future of Life Insurance." Ernst & Young. N.p., Sept.-Oct. 2012. Web.

55 & over

trend 1

• these customers have turned to advisors for a personalized service approach

• they have a complex set of financial needs, and need advice on financial planning and retirement income advice

• insurers will need to acquire knowledge to act more like financial planners and investment advisers

• major investments will need to be made to meet customer needs

• changes will occur across technology infrastructure and toolsets, product development processes, data management, agency incentives and training

• insurers will face new competition from wealth management companies as they are better equipped in technology and have a stronger suite of

products to meet customer needs10

10. French, Doug, and James O'Neill. "The Future of Life Insurance." Ernst & Young. N.p., Sept.-Oct. 2012. Web.

under 35

trend 1

• younger generation is looking for fairly basic protection and savings as they enter the market for the first time

• they prefer to conduct as much as possible online

• insurers who plan to serve this segment will need a technologically savvy and connected agency force

• agents will have to play new roles and capture data about individual consumers and feed it back to the home office in order to effectively measure customer engagement

• there is no optimal data source to track these trends, an agency force with the listening capabilities and agility to play this role will succeed11

11. French, Doug, and James O'Neill. "The Future of Life Insurance." Ernst & Young. N.p., Sept.-Oct. 2012. Web.

defining future success

trend 1

• 10 - 15 years the number of people in different life stages will be a significant driver for life insurers choosing which primary market to serve

• who they will serve should be determined by a self assessment of carriers current operational strengths, as well as where they are most strategically positioned to succeed

• depending on the segment life insurance carriers must understand how and what customers want to buy more precisely than they do today

• this will require a retooling of their distribution channels to address the unique needs and opportunities associated with each of the major segments12

12. French, Doug, and James O'Neill. "The Future of Life Insurance." Ernst & Young. N.p., Sept.-Oct. 2012. Web.

trend 2: {the digital insurer}

the digital insurer

trend 2

Successful life insurers will demonstrate 3 characteristics.

1. Connected - reinvent the customer experience and place customers at the heart of their business

2. Analytic - exhibit richer insights and smarter decisions to enable better outcomes

3. Agile - constantly stay one step ahead13

13. Jackson, Graham, Jeremy Lefebure, and Vicki Symmerhayes. "Life Insurance The Digital Insurer: Change Now to Get Ahead." Accenture. Accenture, 2012. Web.

the digital insurer

trend 2

connected

• physically and emotionally connected with consumers, and stay in tun with changing customer sentiments, behaviors and expectations

• multi-channel sales and service as a standard offering, fully integrating old channels with a new digital core

• embracing and actively engaging through relevant social media, such as social and mobile platforms

• harnessing deeper collaboration and connection with a broader group of stakeholders including customers, employees, partners, distributors and suppliers14

14.Jackson, Graham, Jeremy Lefebure, and Vicki Symmerhayes. "Life Insurance The Digital Insurer: Change Now to Get Ahead." Accenture. Accenture, 2012. Web.

the digital insurer

trend 2

analytic

• richer insights and smarter decisions to enable better outcomes

• tap into and exploit value from the explosion of data

• harness the power of next generation predictive tools and techniques

• wire analytics into core processes and decision making

• integrate real-time decision support, drive more value from each customer interaction

• customize and personalize products and services15

15. Jackson, Graham, Jeremy Lefebure, and Vicki Symmerhayes. "Life Insurance The Digital Insurer: Change Now to Get Ahead." Accenture. Accenture, 2012. Web.

the digital insurer

trend 2

agile

• execute operational excellence built around lean core business processes and strong process management disciplines

• use an intelligent sourcing approach, making cost effective and flexible use of supplier capabilities

• develop early warning and rapid response mechanisms to constantly scan, assess and initiate changes based on market movements and opportunities

• deliver greater, faster and cheaper change through agile methods

• foster a culture of innovation and entrepreneurship16

16.Jackson, Graham, Jeremy Lefebure, and Vicki Symmerhayes. "Life Insurance The Digital Insurer: Change Now to Get Ahead." Accenture. Accenture, 2012. Web.

newentrantcompetition

IEnetwork

competition

Mobile life insurance app to find the best quotes quickly and easily.

• easily estimate quotes across 100+ carriers

• no annual/monthly fees

• up-to-date quotes

• includes policy fees17

17. "IEnetwork." Manage, Market & Recruit. N.p., n.d. Web. <https://www.ienetwork.com/>.

cakehealth

competition

The best free way to manage health care plans online.

• track health spending by entering insurance credentials

• visibility into medical payments, and peace of mind that you are on top of your bills

• helps you find a plan that’s optimized specifically for your needs

• keep up with routine check-ups and doctor’s appointments18

18. "The Best Free Way to Manage Healthcare." CakeHealth. N.p., n.d. Web. <https://cakehealth.com/>.

summary

life insurance industry

Life insurers will need to provide customers with a innovative and personalized experience. Insurers will need to embrace digital technologies that are preferred by their target segment. On the retail side, insurers will need to focus on acquiring and training high performing agents and providing with them with the proper tools to effectively serve their customer base. Ultimately, insurers who accomplish this will gain a significant advantage in the marketplace, while those that don’t will be replaced by new entrants.

opportunities for the future

life Insurance Industry

• develop integrated tools to give customers access to information and educate themselves on different types of life insurance

• create mobile and online tools to provide agents with the ability to collect, monitor, manage and quantify data

• design mobile tools to assist insurers with segmented targeting and selling strategies

health insurance

statistics

overview

Individuals’ contribution to health care is rising 10% a

year19

18% of Americans are

uninsured20

Women pay approximately 30% more for

health insurance24

875,000 Americans were medical tourists

in 201021

41% of working Americans have

medical bill problems or are

paying off medical debt22

Medical bills are a major cause of

60% of bankruptcies in

the US23

19. Komisar, Harrient. "The Effects of Rising Health Care Costs on Middle Class Economic Security." AARP Public Policy Institute. N.p., n.d. Web.20-24. "Health Insurance Facts." EnhanceInsurance.com. Enhance Insurance, n.d. Web. <http://www.enhanceinsurance.com/images/health-insurance-facts-infographic.jpg>.

health insurance companies

overview

fundamental changes

overview

• customers are more likely to purchase insurance from non-traditional sources

• private insurers and employers are likely to pursue contracts with accountable care organizations

• increase in private health insurance exchanges

• new legislation, starting the 1st of the new year, health insurers won’t be able to turn people away because of health problems25

25."Health Reform: Seven Things You Need to Know Now." Consumer Reports. Consumerreports.org, n.d. Web.

trend 1:{health insurance exchanges}

overview

trend 1

• PwC estimates by 2019 28 million Americans will purchase health insurance through this new online channel

• 52% of health insurance executives plan to compete and participate in the exchanges

• exchanges will create an array of new choices for customers in the individual and small group markets

• top concerns for insurers are adverse selection and technology integration (payment & enrollment transactions)26

26.Barnes, Kelly, Michael Galper, and Jeffery Gitlin. "Change the Channel Health Insurance Exchanges Expand Choice and Competition." PwC. PwC, July 2011. Web.

2014 changes

trend 1

Health insurers will not be permitted to...

• deny coverage or charge different premiums based on a person’s health or claim history

• charge premiums that are more than 3x higher than the lowest premium, based on age, for the same product and geography

• spend less than 80% of premium dollars on medical expenses for the individual and small group markets27

27. Barnes, Kelly, Michael Galper, and Jeffery Gitlin. "Change the Channel Health Insurance Exchanges Expand Choice and Competition." PwC. PwC, July 2011. Web.

2014 changes

trend 1

What insurers can do...

• charge different rates based on geography, number of persons covered (ie. single, family), age and tobacco use

• there are limitations on the premium variation for age and tobacco use

• charge a smoker 1.5x the premium of a non-smoker28

28. Barnes, Kelly, Michael Galper, and Jeffery Gitlin. "Change the Channel Health Insurance Exchanges Expand Choice and Competition." PwC. PwC, July 2011. Web.

for customers

trend 1

top things health insurers can do to make insurance purchasing more user friendly...

• 72% provide a clear view of what is covered

• 46% make it easy to talk to someone at the insurance company

• 43% provide tool to estimate costs of common procedures

• 37% offer a way to compare insurance products

• 31% make it easy to change plans

• 20% offer multiple methods of payment (ie. electronic or automatic payment)29

29. Barnes, Kelly, Michael Galper, and Jeffery Gitlin. "Change the Channel Health Insurance Exchanges Expand Choice and Competition." PwC. PwC, July 2011. Web.

newentrant competition

covered california

competition

• goal is to increase the number of Californians with health insurance

• customers can shop online, over the phone and in person choose the health plan that offers the best services and greatest value for their individual needs

• individuals and small businesses can discover if they qualify for federal financial assistance

• customers have access to financial assistance 30

30."Covered California." About Us. N.p., n.d. Web. <https://www.coveredca.com/about/index.html>.

bloom

competition

• Bloom works with employers and health plans to define and control health benefit spending

• employers pre-deposit tax defined contribution dollars on behalf of each employee into a Bloom account

• employees take an health survey that matches them with plans and services to meet their needs

• recommendation engine generates tailored insurance plan options for each employee (displayed through Virtual Shelf, online marketplace) 31

31."Bloom." Our Help Your Benefit. N.p., n.d. Web. <http://www.gobloomhealth.com/>.

oscar health

competition

• Oscar makes it simple to guide customers through the complex process of health insurance

• revolutionizing care delivery, log into your account, type your symptoms and a doctor will call you to chat within 20 minutes

• if you need to see someone, the site offers a list of nearby providers

• allows customers to check prices for procedures ahead of time and offers 3 free in person doctors visits and free generic drugs 32

32."Oscar Insurance." New York Health Insurance. N.p., n.d. Web. <https://www.hioscar.com/>.

summary

health Insurance Industry

New legislation and regulations are paving the way for change within the health insurance industry. Current health insurers are facing increased competition from new market entrants. In order to retain their market share, traditional insurance companies will need to take on health insurance exchanges. Successful insurers will be able to simplify the insurance buying process and provide customers with personalized plans.

opportunities for the future

health Insurance Industry

• destination for customers to search health conditions and compare different types of plans

• easy definable personalized access to plan pricing information

• portal to access insurers and make it easy for customers to ask questions and get immediate answers

auto insurance

statistics

overview

$1,029 is the average amount

spent on auto insurance per

year33

On average a driver will have

an accident claim every 17.9

years34

Auto premiums usually go down

substantially after a driver

turns 2537

16% of drivers are uninsured at any given time35

All 50 states require drivers

to carry insurance36

33. Copeland, Larry. "The Cost of Owning Your Car? $9,000 a Year." USA Today. Gannett, 16 Apr. 2013. Web.34. Aho, Karen. "Here's How Many Car Accidents You'll Have." CarInsurance.com. N.p., 17 June 2013. Web35.- 37 Stauffer, Eric. "Automobile Insurance Facts (Infographic)."ExpertInsuranceReviews.com. N.p., n.d. Web. <http://www.expertinsurancereviews.com/insurance-education/car-insurance-facts-infographic/>

fundamental changes

overview

customer

• shift to individual customer data collection instead of industry wide statistics

technology

• impact of car technology could completely alter auto insurers current business models

• demand for online and mobile tools to give customers the convenience and access they desire

competition

• increased competition from new entrants 38

38. Brockman, Marik, and Anand Rao. "The Insurance Industry 2013." Reshaping Auto Insurance. PwC, 2013. Web.

trend 1:{car technology}

insurance by manufacturers

trend 1

• in-car technology, such as telematics, location awareness and collision avoidance sensors will shift the risk of driver liability to manufacturers

• a new auto insurance, that comes packaged with these technologically advanced cars

• coverage would be marketed to customers directly by the auto manufacturers and/or dealers

• profound impact on insurers, changing the entire value chain from product definitions, to pricing, marketing and distribution 39

39. Brockman, Marik, and Anand Rao. "The Insurance Industry 2013." Reshaping Auto Insurance. PwC, 2013. Web.

pay per mile insurance

trend 1

• urban living and the increasing availability of car sharing suggest a future in which premiums move from 24 hour asset coverage to pay per use model

• currently 80% of the US, and 50% of the global population are considered urban dwellers and car sharing is rapidly growing

• Forbes reported in 2012 that the global car sharing market is expected to grow and could exceed 10 billion by 2020

• result would increase the number of low frequency drivers, which would reduce individual insurance premiums 40

40. Brockman, Marik, and Anand Rao. "The Insurance Industry 2013." Reshaping Auto Insurance. PwC, 2013. Web.

then there’s google...

trend 1

• success and adoption of driverless vehicles could change the entire industry

• Google’s driverless, laser equipped vehicles have logged over 300,000 miles without an accident

• 2012 study by JD Power found that 37% of US drivers were interested in this new technology

• driverless cars can reduce traffic accidents, the number of cars on the road and wasted commute time and energy by 90%, resulting in savings of 2 trillion per year for the US economy 41

41. Brockman, Marik, and Anand Rao. "The Insurance Industry 2013." Reshaping Auto Insurance. PwC, 2013. Web.

trend 2: {driver monitoring}

gps monitoring

trend 2

• gps systems in cars are being used to rate individual drivers on their driving habits, instead of relying on statistics of accidents reported in the area as a whole

• systems collect the following:

• average speed driven, occurrence of sudden stops

• average times of day driven

• number of miles driven per day

• location of parked vehicle

• systems benefit less risky drivers, who can now receive lower premiums and more discounts thanks to this technology 42

42."Auto Insurance Chnages in 2013." VehicleInsure.com. N.p., n.d. Web. <http://vehicleinsure.com/auto-insurance-changes-in-2013/>

newentrant competition

leaky

competition

Leaky helps you compare car car insurance the easy way for free.

• compare prices, plans and potential scenarios to take the mystery out of your insurance

• manage all your insurance information in one easy spot

• provide alerts when customers can save money so you get the best deal possible on insurance 43

43. "Compare Car Insurance the Easy Way." Leaky. Leaky, n.d. Web. <http://leaky.com/>.

metromile

competition

MetroMile is per mile car insurance designed for people who drive less than 10,000 miles a year.

• calculates insurance costs each month based upon actual miles you drive

• customers pay a few cents per mile and a low monthly base rate, that’s significantly less than standard insurance

• rewards customers for driving less, so when your car is parked or when you decide to take the bus or ride your bike you save money

• charges are capped at 150 miles per day, regardless of how far you drive 44

44."MetroMile - Because You Drive Less." MetroMile. MetroMile, n.d. Web. <https://www.metromile.com/>.

drivefactor

competition

Drivefactor is the trusted worldwide source for driving data and analytics

• use a sensor telematic platform to gather better driving data for superior scoring and customer rewards

• smart ways for customers to monitor and improve personal driving behaviors through a plug and drive device

• insurers can utilize drivefactor’s technology to roll out usage based insurance programs and gain a key competitive advantage in the marketplace 45

45. "The Trusted Worldwidesource for Driving Data and Analytics." Drivefactor.com. Drivefactor, n.d. Web. <http://www.drivefactor.com/>.

summary

auto Insurance Industry

Changing technology is dramatically impacting auto insurance companies. Advances like GPS monitoring, in car telematics are paving the way for a new insurance model known as usage based. Successful auto insurers will need to recognize these changes and act quickly before they are displaced by new entrants.

opportunities for the future

auto Insurance Industry

• develop apps for auto insurers that monitor individual driving behaviors

• create apps and online comparison tools for auto insurers to provide customers with access to pricing and plan information

• develop interactive quizzes or games that allow customers to estimate individual insurance needs based on personalized scenarios

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