The Customer Imperative · • Provide an online enrollment platform for a subscription fee •...
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PwC The Customer Imperative Digitizing the Back Office in the Benefits Market www.pwc.com/jp /advisory November 2015 Jim Quick and Michael Mariani Insurance Advisory PwC
Transcript of The Customer Imperative · • Provide an online enrollment platform for a subscription fee •...
PwC
The Customer Imperative
Digitizing the Back Office in the Benefits Market
www.pwc.com/jp /advisory
November 2015Jim Quick and Michael Mariani
Insurance AdvisoryPwC
PwC
Introductions
2
Michael MarianiPwC Insurance Advisory
Jim QuickPwC Insurance Advisory
PwC
Market Trends and Disruption
Slide 3
PwC
“The future isn’t what it used to be”
4
The environment in which insurance executives have spent most, if not all, of their careers is changing
PwC
The insurance industry is undergoing more upheaval than any other industry
5
59%believe there
are more opportunities
now than 3 years ago
61% Of Insurance
CEOs see more threats
Insurance executives are anticipating greater disruption and preparing to navigate a market filled with nearly an equal amount of opportunities and threats
37%
52%
57%
53%
50%
59%
50%
42%
64%
59%
54%
69%
63%
59%
57%
57%
59%
68%
67%
62%
63%
56%
57%
71%
51%
57%
57%
63%
55%
57%
54%
56%
66%
64%
66%
64%
71%
56%
60%
59%
69%
50%
69%
89%
56%
82%
87%
88%
Healthcare
Automotive
Consumer
Hospitality and leisure
Asset management
Retail
Communications
Power and utilities
Entertainment and media
Pharma and life sciences
Banking and capital markets
Insurance
Q: How disruptive do you think the following trends will be for your industry in the next 5 years?
Changes in distribution channel
Changes in customer
behaviors
Increase in the number of significant direct and
indirect competitors – traditional and new
Changes in industry
regulation
Source: PwC18th Annual Global CEO Survey
PwC
The Insurance Carrier of today needs to think differently in the future
6
The Shifting Landscape
The Opportunity
The Transformation Imperative
Change is accelerating in the Group market- Exchanges & Changes in Distribution
- Consumerism
- Payer Consolidation & Group M&A Activity
- Emerging Benefits Market
Carriers have the opportunity to capitalize on the change by innovating across the value chain to improve the customer experience
- Distribution
- Product Bundling
- Enrollment / Service Experience
The opportunity requires modernization of core platforms to digitize the back office and integrate the service experience
PwC 7
Further, changes in distribution are impacting the Group Benefits
Market
Retiring brokers are not being replaced at a sustainable rate
New talent is often not attracted to the insurance industry
Core product commissions are shrinking & the move to individual products challenges Group distribution models
Small producers lack capital to invest to cross sell/upsell Group product, in particular as the products become more voluntary
Aging and Consolidating
Producers
Dearth of New Talent
Declining Commissions
Capital Constraints
PwC
Additionally, ACA has lead to the introduction of private exchange models (4 listed) which are shifting the distribution landscape
8
Source: PwC Analysis, Carrier and Exchange Interviews
• Target Market = Large
• Offer a wide-range suite of services to their customers in addition to benefits administration and position this value add as part of their “full-service” value proposition
• Examples include Aon, Towers Watson and Mercer
National Brokers
• Some insurance carriers have developed their own exchanges to meet the needs of existing employers and defend against emergence of multi-carrier exchanges
• View exchanges as a way to offer more sales opportunities of both health and group products
• Examples include health insurers like Aetna and Cigna
Single Carriers
• Smaller brokers have created their own exchanges to provide a defined contribution model
• Many use exchanges as a technology solution to complement their primary brokerage or consulting business
• Examples include Bloom, Highmark and First Niagara
Independent Brokers/Consultants
• Provide an online enrollment platform for a subscription fee
• Some players, such as bswift and BenefitFocus, have also begun developing their own independently run exchanges for their current employers
• Examples include Liazon, bswift and BenefitsCONNECT
Technology Platforms
PwC
The trend toward Consumerism and increasing customer expectations are driving carriers to better address the employee experience
9
Scaling up or down the focus on each of these trends can have an effect on offer rate, participation, basket size, and persistency – and the capabilities needed will be impacted in turn
Robust ServiceSelf-service capabilities with multiple support channels
Simplified Enrollment Easy to use system with efficient process and/or decision-support tools
Extensive EducationBreadth of topics readily available in multiple formats
Innovative Product DesignCost savings through digital alternatives
Source: PwC Analysis
PwC
The impact of these trends is heightened by the recent waves of deals activity in the Health Payer and Group Space
10
Source: PwC Analysis
+
+
• Creates high competitive concentration at state level
• Limits organic growth requiring payers to look at adjacencies for profits
• May drive broker consolidation
Healthcare Payer Consolidation
+
• Increases scale for both creating a Top 10 Group Benefits carrier
• Broader product and segment mix
Group Carrier Mergers
• Largely “buy & hold” transactions
• Provides Japanese Insurers access to US market
• May provide access to additional capital to fund growth objectives
Foreign Investment in Group Carriers
PwC
The payer mergers have the potential to create significant pressure in the Group benefits market
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June 2011
Low Concentration
Moderate Concentration
High Concentration
Post-Deal Market Concentration Implications
Fewer distributors available to distribute product
Broker Consolidation
Brokers will need to cross sell non medical product to offset declining medical revenues
Increase in Broker
Efficiency
Dominant position to access to employers will better position medical providers to cross sell other lines
Increase in Product
Competition
MT
WY
ID
WA
OR
NV
UT
CA
AZ
ND
SD
NE
CO
NM
TX
OK
KS
AR
LA
MO
IA
MN
WI
IL IN
KY
TN
MS AL GA
FL
SC
NC
VAWV
OH
MI
NY
PA
MD
DE
NJCT
RI
MA
ME
VTNH
MI
National HHI558 Points (Indicates a low
concentrated market)
PwC
As a result, there is increased demand for convergent solutions across health and wealth
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The Health-Wealth Advice Need-Gap
Income Solutions and Asset Protection
Life and Health Risk Solutions
Integrated solutions and advice
Converging Customer Health-
Wealth Needs
Available Industry Solutions
Gap
The gap that exists between the need for convergent solutions across health and wealth, versus their availability creates significant opportunity
ILLUSTRATIVE
Source: PwC Analysis
Insurance company’s frame of reference therefore need to be constructed from the outside-in: Is the focus of the aperture an asset view, life risk, or advice that addresses all of customers’ health
and wealth concerns?
PwC
How Should Carriers Respond?
Slide 13
PwC
To succeed in this landscape, carriers need to accelerate and innovate across the value chain
14
Distribution Innovation
Product Innovation
Customer Experience Innovation
Insurance Carrier
Source: PwC Analysis
PwC
Carriers need to explore fundamentally different distribution strategies
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• The model with a significant sales footprint is the traditional Voluntary Worksite model
Traditional Brokers / Worksite
• A shift to individual products could provide an opening through independent financial advisors, especially ancillary products
Financial Advisors
• Small Market employers without back-office support can be targeted through affiliated sales through payroll and accounting applications
Vendor Partnerships
• Utilizing exchanges to target employers of all sizes
Exchanges
Inc
re
as
ing
ly D
isr
up
tiv
e
Source: PwC Analysis
• Utilizing a number of alternative channels, such as direct online solutions targeting holistic benefits
Alternative Channels
PwC
Carriers also need to consider product strategies that target changing customer needs
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• Customize services in addition to products based on segment needs• Ex: Provide an insurance educational website geared toward millennials such as Sureify• Ex: Provide online personal finance platform focused on women such as LearnVest
Product + Service Strategy
• Bundled solutions across health and wealth customized based on segment needs• Leveraging technology advancements to provide innovative products• Ex: Discovery underwriting based on vitality age
Holistic Product Solutions
Source: PwC Analysis
PwC
In addition, providing the right customer experience is key to success
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Delegated Assisted
• Information proliferation• Greater consumer savvy • Technology integration
Delegated giving way to Assisted (personal advice with the support of technology infrastructure); which is evolving towards a co-existence model with Self-Directed advice
With the marginal cost of integration coming down radically, we are witnessing a wholesale transformation in how ‘advice’ is disseminated - there is no such thing as fully delegated advice anymore
Self-Directed
Enrollment
Social
Advice
Grab
Mindshare
Direct
Distribution Advisor
Relation-
ships
Holistic
Advice
Education
Assisted
Advice
Distribution
Partnership
s
Source: PwC Analysis
Carriers must meet consumer needs through any channel of preference, at any time and provide consistent, personalized service
PwC
New sources of data and new analytic techniques are helping insurers drive changes in decision making…
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UnderwritingAutomation
Automation of core processes
Simulation and Scenario Development
Leveraging business modeling to develop scenarios to anticipate future strategic actions
Predictive Modeling
Moving from traditional underwriting to predictive modeling
Harnessing Big Data
Leveraging large and diverse data sets through advanced algorithms
and analytics
Enhanced Analytics
Insight from real-time unstructured data analytics supported by simulation and
scenario capabilities
Regulatory Evolution
Influencing the regulatory environment to fully leverage
growing data sets
Electronic Health Records
Accessing health records via a standardized cloud that captures a person's medical history
Sensors and Devices
Individualized and localized information gathering technologies
providing real-time data
Complexity Science
Analytically considering complexity and generating
insights to better manage risk
Agent Based Modeling
Sophisticated computationally intensive modeling technique that
models behaviors
Source: PwC Analysis
PwC
…and impacting all parts of the value chain
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Strategy & Growth
Customer & Marketing
Sales & Distribution
Products, Pricing & UW
Process & Operations
In-force Mgmt
Capital, Risk & Finance
Growth Analytics
Competitive Analytics
Customer & Distribution Segmentation
Pricing Analytics
Acquisition & Recruitment Analytics
Retention Analytics
Marketing Spend/Mix Analytics
Distribution Value Management
Product Design Analytics
Underwriting Analytics
Policy Flow Analytics
Policyholder Behavior Analytics
ALM Analytics
Fraud Analytics
Solvency & Risk Analytics
Profitability Analytics
Multi-channel Analytics
Portfolio Optimization
Source: PwC Analysis
PwC
There are six key benefits to moving forward on a transformation initiative as soon as organizationally feasible
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01 Improved customer experience
02Improved data agility
03 Rapid product introduction
04Enhanced regulatory compliance
05 Improved brand recognition
06Improved operational efficiency
Source: PwC Analysis
PwC
To compete effectively, carriers need to modernize/digitize the operating platforms
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Guiding Principles for Transformation
Guiding Principles
Drive innovative products
Build a customer-centric platform
Increase market responsiveness
Improve operating leverage
Design systems for data agility and scalability
Source: PwC Analysis
PwC
We developed an approach for transformation that starts with aligning the business strategy with transformation goals
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In our experience, core transformations is far more likely to succeed when carriers invest time to understand the core business drivers upfront and then develop a business case that fully aligns the operating strategy with the transformation
Source: PwC Analysis
Strategy and business case scenario planning
Vendor Selection
Mobilization Execution!
• Understand business design and operating environment
• Prioritize key business goals for transformation
• Align transformation scenarios
− Assess high level costs, benefits, and risks of each scenario
− Evaluate scenarios against business and technical drivers
• Conduct vendor search
• Execute an RFI/RFP
• Conduct vendor workshops
• Select a vendor
• Decompose selected scenarios into an achievable roadmap
• Create execution plan
• Mobilize resources
• Establish program management office
• Perform system development
• Complete quality assurance testing
• Deploy system
• Roll out raining and communications
@ # $
PwC
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
For Additional Information Contact:
Michael MarianiEmail: [email protected]
James QuickEmail: [email protected]
