Presented to High Performance Insurance: How Technology ... · Expense ratio Claims ratio...

Copyright © 2015, Oracle and/or its affiliates. All rights reserved. |

High Performance Insurance: How Technology Can Bring Competitive Advantage? Oracle Insight Point of View on General Insurance

Paul Kim Senior Director Oracle Insight & Customer Strategy APAC May 19th, 2015

Oracle and PingAn Confidential

Presented to


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Today’s Agenda

1

2

3

4

What’s Driving High Performance in Insurance Business?

What Could Be PingAn’s Next Top Business Agenda?

How Technology Can Help Insurance Industry (and PingAn) with Sustainable Growth?

How Oracle Can Better Help PingAn with Future Challenges?



Setting the Agenda for Today Before Jumping In…


• WHY: What do we want to achieve from technology?

• WHAT: What are the key business innovation drivers that technology can enable?

• HOW: How new technologies we look at today are mapped to your business innovation drivers?

• MEASURE: How do we know that specific technology really helped us in the end?

“A Tale of Two Cities…”


Emerging Asia Is the Main Contributor to Global Insurance Market Growth…

14 16 20 32

111 102

47 31 38

55

86 84 80 68

-11 -2

53 69 62

45

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E

Mature Market

Emerging Market


Source Notes: McKinsey Global Insurance Pools

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Absolute growth share of total insurance premiums (Percentage)

80% 20%

-8% 108%

57% 43% Period Average

Financial Crisis


…And China Insurance Market is One of the Largest and Fastest Growing Markets In the World


GWP: Gross Written Premium Source Notes: CIRC, Bloomberg

-20%

-10%

0%

10%

20%

30%

40%

50%

2005 2006 2007 2008 2009 2010 2011 2012 2013

GDP Growth

Life GWP Growth

Non-Life GWP Growth

Total GWP Growth Faster than

Economy growth

Slower than Economy growth

On par with economy growth

China insurance industry growth Gross Written Premium (GWP) vs. GDP growth

CAGR (2008 – 2013)

7.4%

21.2%


However, Historic Heights of 30-40% Overall Market Growth Is Unlikely to Repeat in the Future…


Source: Swiss Re Sigma 3 2013

2.96%

6%

12%

China Developed(Low) Developed(High)

Low Insurance Penetration (2012) Penetration Ratio = GWP/GDP

Life = 1.7%

Non-Life = 1.3%

3 - 9% lower than Developed

1

$179

$2,000

$7,000

China Developed(Low) Developed(High)

Low Insurance Density (2012) Density Ratio = GWP/Capita

Life = $102.9

Non-Life = $76

91 - 97% lower than Developed

2

Unit: USD

• Key factors that drove China’s insurance market in the past:

• Fast economic development • Growth-oriented government

policy • Large population

• As China market is moving toward

more maturity, market growth is projected to follow GDP growth rate and eventually slow down

• But penetration and density still have large room to grow, implying that market is still under-developed

Implications


Market Itself Becomes Biggest Challenge For Us in terms of Macroeconomic Uncertainties


Note: An incentive program launched after the global financial crisis distorted sales between 2009 and 2012. 2015 is an estimate Source: Wall Street Journal, China Association of Automobile Manufacturers

0%

10%

20%

30%

40%

50%

60%

2006 07 08 09 10 11 12 13 14 15

Slower Ride Sales growth for China’s passenger car market is decelerating

Year-over-year sales growth • Motor insurance accounts for 70% of

total non-life premium, indicating highly imbalanced among different lines of business

• 2nd and 3rd largest business lines are property and agriculture, accounting for about 7% and 4% only

• This type of auto sales growth slowdown can have massive impact on motor insurance and non-life market growth

Implications

Launch of incentive program

Economic deceleration Restriction to tackle down pollution and traffic problem


Concentration in China Market is Likely to Continue, But Market Development and Competition Can Change This…


4.0% 4.8% 5.6%

40.3% 40.1% 40.8%

55.7% 55.2% 53.7%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2011 2012 2013

Companies with Foreign Ownership

Other Domestic Players

Top 3 Domestic Players

Note: Life business growth slacked in 2011 and 2012 due to changes in GAAP excluding most premiums from Variable Universal Life and investment-linked products and new banc-assurance regulation imposed by CBRC Source: CIRC

China’s Life Insurance Market Share Highly concentrated among top 3 companies…

China’s Non-Life Insurance Market Share Even more concentrated among top companies…

1.1% 1.1% 1.2% 1.3%

31.5% 32.3% 33.4% 33.9%

66.4% 66.6% 65.3% 64.8%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2010 2011 2012 2013

Companies with Foreign Ownership

Other Domestic Players

Top 3 Domestic Players

PICC 34.4%

PingAn 17.8%

China Pacific 12.3%

China Life 30.4%

PingAn 13.6%

New China Life 9.6%


Under Fast Changing Market Environment, It’s Time to Take Holistic Strategy and Build Structural Competencies


Regulation & Policy Initially structured to protect domestic

players, but gradually opening the market to encourage competition and customer

protection (M&A, SFTZ)

Channel Efficiency Flexible, creative and innovative approach to

expand distribution channels and provide new products, while keeping tight cost

control and efficiency

Social and Economic Development

People’s adoption of new technology (smart phone and apps), growth of middle income class, decelerating auto sales growth and

aging population for higher financial security

Access to Quality Data Ability to access sufficient and reliable data that help to generate through underwriting,

accurate pricing and risk modeling

Major Forces on China’s Insurance Market

1 2

3 4

Different way to address these major market forces is likely to create very different results for China’s insurance companies

Source: Oracle Insight analysis


Today’s Agenda

1

2

3

4







Major Strategic Options for Insurance Business Growth


Sustainable GWP and Profit Growth

Higher Market Penetration

Higher Profitability

Securing Business Insights

Improving Return on Equity (ROE)

Product Reaching to new, un-insured customers

Selling more premiums to existing customers

Channel

Pricing

Customer Service

A

B

Advanced corporate performance analysis

Actions on Operation Cost

Marketing

Top Business Agenda

Key Management Levers

Source: Oracle Insight analysis

Key Initiatives Selected Topics to Address

“How do we develop market leading products, faster?”

“How do we reach to remote, un-insured customers in cost effective, but engaging way?”

“How do we manage customer’s life cycle more holistically?”

“How do we laser in our target audiences and interact more intelligently?”

“How do we systematically improve claims expense?”


A: Higher Market Penetration: What Are the Major Value Metrics?


Key Initiatives Target Capabilities Potential Activities

Reaching to New, un-insured customers

Mobile Sales Channel for new market development

Building mobile business & technology platform for remote sales (e.g. mobile sales & marketing agents for rural areas, “PingAn Bus”)

Integrating with self-service & Social friendly channel for new tech-savvy target (e.g. young, middle income segments)

Pricing competitiveness from accurate, fast and flexible premium pricing

Initiating evaluation of pricing data quality management capability and calculation productivity improvement


Customer intimacy & Customer Life Cycle Management

Building modern marketing practice with targeted product offerings and customer services at different stage of customer life cycle and taking predictive & prescriptive measures

Flexible product configuration and optimization

Evaluating product configuration efficiency and traction of new products with target segment

EXAMPLE

1

2


A: Higher Market Penetration: Pricing Optimization and Productivity Improvement


EXAMPLE

CASE: Rate becomes core element with competitive advantage for product attractiveness and revenue maximization

INSURER’s CHALLENGES FUTURE CAPABILITIES

Difficult to modify and maintain rates

Dependent on IT support

Multiple policy admin systems to integrate with

1

2

3

Higher market development

Increased market share

GWP Growth

Speed: Easy-to-modify business logic by business users, rating changes in hours or days

Creativity: Allowing multi-tiered rating and unique discounts to differentiate in the marketplace

Consistency: Making sure rating operation is consistent across entire org


B: Higher Profitability from Improved ROE - What Are The Major Value Metrics?


32.9%

33.2%

62.1% 65.8%

6.9%

4.2%

79.8%

175.9%

Expense ratio

Claims ratio

Investment income/Reserves

Reserves/Premiums

5.0%

1.0%

5.5% 7.5%

1 – Combined Ratio

Investment income/Premiums

7.4% 8.1%

2.0% 1.2%

Return on Premium

Premiums/Equity

14.7%

9.6%

ROE

+

X

X

X

Mature market

Emerging market

PingAn Combined ratio 95.3% (2014)

Global Property & Casualty Market Profit Drivers 2002 – 2012 Average

Note: Discrepancy explained by calculation of Expense ratio (expense/net premiums written). All other ratios are a function of net premium earned Source: McKinsey Global Profit Pools, PingAn 2014 Annual result IR presentation


B: Higher Profitability from Improved ROE – Improving Claim Ratio by Optimizing Claims Recoveries in P&C


Source: Oracle Insight analysis, InformationWeek Insurance & Technology

EXAMPLE

CASE: For an insurance company with $200M subrogation opportunity, 5% of recovery thru proper subrogation = $10M

INSURER’s CHALLENGES FUTURE CAPABILITIES

Massive volumes of claims data

Unstructured nature of claims data (75 -80%)

Management of staffs and process complexity

Manual process

1

2

3

4

Claims Ratio

Combined Ratio

Return on Premium

Data integration for claims and subrogation data sources

Unstructured data mining capability

Detecting cases for subrogation early in the process

Predictive analysis for claims


Today’s Agenda

1

2

3

4







Holistic Technology Mapping Needs to Be Done for Top Business Agenda


Sustainable GWP and Profit Growth

Higher Market Penetration

Higher Profitability

Securing Business Insights

Improving Return on Equity (ROE)

Reaching to new, un-insured customers


A

B

Top Business Agenda Key Initiatives

Customer Experience

Document Automation and Customer Communication

Business Transaction Processing

Compliance, Risk & Finance

Enterprise IT

Enterprise Business Intelligence

Major Technology Areas

1

2

3

4

5

Sales & Marketing Cloud

Profitability and Performance Management

Risk and Compliance

Core Applications (Policy Admin, Rating Calculation, Revenue & Billing)

Back-office Application

Core Tech (DB, MW, Portal, SOA)

IT Infra (ES, OS, Server & Storage, Virtualization)

Business Analytics

Data Mining and BI

Data hub, Policy Automation Source: Oracle Insight analysis, Oracle public data

Mobility Platform


How Talent Management Technology Helped AXA Make HR More Strategic and Centralized


• Worldwide number of employees 157,000 in 56 countries

• Multiple HR systems across the globe, including PeopleSoft and SAP and needed Cloud

AXA Uses HCM Cloud to Transform HR - YouTube.mp4


How Cloud Technology Helped Delaware Life Achieve Real-Time Data in One Location


Customer Success ERP and EPM Cloud at Delaware Life - YouTube.mp4


Insurance Customers Have Achieved So Much Strategic Benefits…



Today’s Agenda

1

2

3

4







1,491

1,872 2,195

2,741 2,767

3,254

4,519 4,523

4,498

4,766

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Oracle is the Only Company Who Will Continue To Bring Innovation on Business & Technology…


Source Notes: Company data, Statista.com

COMPLETE STACK CONTINUED R&D CONTINUED REVENUE GROWTH

• CAGR 14% high growth in R&D spending since 2005

Million USD

CAGR = 14%

12 14

18

22 23

27

36 37 37

38

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

• CAGR 14% high growth with market leadership and transition to fast growing “Cloud” company

Billion USD

CAGR = 14%

• With continued acquisition and development, Oracle is now offering complete stacks of technologies and Cloud

• Oracle has also integrated all these technologies for customers, reducing time-to-value, cost and risk


Oracle Insight: Oracle’s Strategic Program for Strategic Customers A Consultative Method That Recommends Solutions for Client’s Business Challenges


An Insight Process leverages a wide array of resources, makes all experts within Oracle

accessible and creates actionable recommendations supporting the decision process.

Business strategy

Business goals

IT Imperatives

IT Architecture

IT Strategy

IT Infrastructure

Customer

Industry Experience

Technology Expertise

Solution Knowledge

Value Analysis

Copyright © 2015, Oracle and/or its affiliates. All rights reserved. | • .

While Our Team Brings Rich Professional Experiences from Global Power House in Business & Technology…

Experience From Leading Global Companies Experiences from Leading Consultancies

MBAs and Ph. Ds From Global Top School

University of Chicago London Business School

A Team With Rich Experience in Business Technology

23 Insight Directors in APAC

Average Work Experience of 18 Years

Spread across Asia Pacific ex-Japan

Done > 128 Customer Engagements (FY15 YTD)

To serve our strategic customers

New York University Peking University

Columbia University

Indian Institute of Management

Australian Institute of Management



…But The Real Power Comes From Oracle’s Comprehensive Knowledge and Virtual team to Solve Strategic Issues

Roles Responsibilities Customer Oracle

• Confirm scope of the engagement

• Secure an appropriate level of involvement and priority

• Address and resolve project roadblocks

• Attend final presentation

Executive Sponsor: CxO

• Commitment includes 1hour interview during the discovery, ensuring commitment from team, participating in final presentation, and providing formal feedback

Exec. Sponsor: Oracle Executive Sponsor

• Commitment includes agreement on scope & resources commitment

• Approving final deliverable

• Coordinate the preliminary data request list and interview schedule

• Validate interim findings, recommendations and benefits analysis

• Manage day-to-day operational aspects of the engagement

Project Owner: TBD

• Helps define scope, resources, timing & logistics, coordinates data collection

• Answer a brief online survey providing feedback on Insight; Short phone call with Insight global management

Project Owner: Oracle Insight Lead

• Commitment includes putting the team together to deliver set expectations in time and quality

• Manage end-to-end engagement

• Identify preliminary data requests based on subject matter expertise and conduct interviews to fill in the gaps

• Own and support in-scope work streams based on areas of expertise

Business Process Owners

• Commitment includes ~1-2 hour to articulate business processes, issues, needs, and metrics during discovery

Oracle Project Team (xLOB Solution Consulting, EA, Partner, etc.)

• Resources assigned with the right expertise (industry, business & technology solution expertise)

• Contribute to engagement

Project Owner

Project Sponsorship

Project Fulfilment



Oracle Insight Program is a Strategic Problem Solving Exercise for Our Strategic Customers How Our Engagement helps Customer’s business and IT alignment


Customer’s common decision making process Areas for Insight Engagements

Research & Evaluation IT Strategy & Planning Operational Strategy

• How do we innovate our business model by monetizing our own data from the operation?

Business Strategy

• Identifying business models for data as-a service

• Understanding sources of data and value prop for potential customers

• Understanding current IT and business capability maturity

• Understand capability gaps for major operational areas

• Prioritization of key IT initiatives

• Develop future state IT architecture

• Develop IT roadmap with major milestone and metric for measurement

• Investment ROI

• Understanding specific technology features and functionality with product demo or POC

• Technology performance benchmarking

• Commercial evaluation

Oracle Pre-Sales Consulting, EA and Sales

Capability Assessment & Issue Analysis 1

Prioritization and high-level IT roadmap/Architecture 2

Investment ROI Estimation 3

EXAMPLE


IP/ Assets Developed by Digital Practice


Key Frameworks

Approach & Benchmarking

Key Trends Financial Services in Mobility Airlines/ Insurance POV on Mobile & Social Mobile Strategy - Positioning Mobile Assessment - Level 3 Framework

Approach to Mobile Assessment & Digital Transformation Mobile Maturity Assessment

Insight Point of View

Benefits Digital Maturity Assessment Framework*

* Joint working as Digital Practice


Big Data-relevant industry dynamics and use cases developed and collected by Big Data / IOT Practice


Banking

Rail & Logistics

Telecom

Automotive

...more available in bullet list format, and as industry studies e.g., Retail, Oil & Gas


Sample Engagement Deck on Digital Transformation


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