What You Need to Know

Top 10 Trends in Property & Casualty Insurance 2018

Contents

Introduction 3

Trend 01: Connected Devices Help Insurers to Proactively Mitigate Risk and Provide Value-Added Services 5

Trend 02: New Business Models are Explored 7

Trend 03: Increase in Automation of Processes leveraging RPA and AI 9

Trend 04: Drones Take on an Important Role for Insurance Firms 12

Trend 05: Autonomous Vehicles are Poised to Disrupt Auto Insurance Business Model 14

Trend 06: Blockchain has the Potential to be a Game Changer 16

Trend 07: Traditional P&C Insurers Realize APIs’ Importance 18

Trend 08: More P&C Insurers Embrace Advanced Analytics 20

Trend 09: Collaboration with InsurTech Firms Heats Up 22

Trend 10: P&C Insurers Adopt a Cloud-Native Approach 24

References 26

About the Authors 27

1 Inthecontextofthisreport,‘InsurTech’referstothetechnology-basedcapabilitiesthathavespecificapplicationininsurance,whereas‘InsurTechfirms’referstonewfirmswithofferingsbasedonInsurTechcapabilities,thatarelessthanfiveyearsoldandhavearelativelysmallbutgrowingcustomerbase.

Introduction

Technologyisevolvingrapidlyanddisruptingthewaybusinessprocessesarehandled.Emergingtechnologiesaretransformingeveryaspectoftheinsurancebusiness and property and casualty insurers are adjusting by adapting InsurTech capabilities.1Asconsumersarebecomingincreasinglytechsavvy,theydemandseamlessaccesstopersonalizedofferingsviaachoiceofchannels.Moreover,insurersarefacingpressuretooptimizecostsandimproveoperationalefficiency.

Enhancedcustomerexperienceistoponmindforinsuranceexecutives.So,itisnotsurprisingthatpropertyandcasualtyinsurersareembracingacustomer-centricapproachandtransitioningtobusinessmodelsthatalloweasyaccesstoservices,similartothatofutilities.Additionally,insurersareusingconnecteddevicestocapturemoredataaboutcustomersandinsuredproperties,whichenablesthemtomitigateriskandprovidevalue-addedservices.

FirmsarealsoaddingdigitalproficienciesastheystrivetoautomateprocessesacrossthevaluechainusingArtificialIntelligence(AI)andRoboticProcessAutomation(RPA),andblockchain(distributedledger)technology.

Forinstance,dronescanenablefaster,moreefficientpropertyassessment,ApplicationProgrammingInterfaces(APIs)offerseamlessintegrationwithotherstakeholders,andblockchaintechnologyhasthepotentialtoeliminateerrorsanddetectfraudulentactivity.

Thesedigitalcapabilitieswillenableinsurancefirmstoeffectivelyreduceoperationalcostsandhumanerrors,improvespeedandaccuracy,andhelpprovideabettercustomerexperience.

Moreover,insurersareimplementingadvancedanalyticstoprovidepersonalizedofferingsandimproveunderwritingoperationswithbetterrisk-assessmentmodels.

Whilesometraditionalpropertyandcasualtyinsurersaredevelopingin-housesolutions,mostofthemarepreferringtocollaboratewithInsurTechfirmsforinculcatingdigitalandadvancedanalyticscapabilities.Also,forquickdeploymentandefficientmaintenanceofthenewsystems,theyarefocusingonacloud-nativeapproach.

Byadoptingemergingtechnologies,insurancefirmscanrealizebusinessbenefitssuchasincreasedrevenue,reducedrisk,improvedoperationalcosts,betterunderwritingmarginsthroughtighterpricingaccuracy,andtrimmedclaimsleakage(especiallyduringtimesofacatastrophe).Clearly,thesetechnologiesofferearlyadoptersacompetitiveadvantage.

3

The10technologicaltrendsidentifiedinthisreportaffectavarietyofP&Cbusinessgoals,asoutlinedinTable1.

Revenue Growth

Cost Optimization

Enhancing Customer Engagement

Risk Reduction

Improving Pricing Accuracy

Reducing Claims Leakage

Connected Devices for Mitigating Risk and Providing Value-Added Services

Low Medium High High Medium High

Insurers are Exploring New Business Models

High Low High High High High

Increase in Automation of Processes using RPA and AI

Medium High High Medium High High

Increasing usage of Drones for PropertyAssessment

Low High High Low High High

AutonomousVehiclesarepoisedto disrupt auto insurance business models

Low High Low High High High

InsurersareExperimentingwithBlockchainTechnology

Low High Low Medium Low High

DevelopingNewApplicationsLeveragingAPIs

Medium High High Low Medium Low

Leveraging Advanced Analytics forPricingAccuracyandEmergingRiskIdentification

High Medium High High High High

CollaborationwithInsurTechstoInculcateInsurTechCapabilities

Medium High High Low Medium Medium

Cloud-NativeApproachtoImplementNewTechnologies

Medium High Medium Low Low Low

Becausetheseemergingtechnologiesareinterconnected,implementationandeffectiveperformanceofonetechnologyoftenrequiressupportfromanotherrelatedtechnology.Forexample,connecteddevicesrequireadvancedanalyticstoprocessdatainreal-timeandAPIscanhelpwithseamlessintegration.Future-focusedinsurancefirmsareimplementingsynergisticInsurTechcapabilitiesto offercustomersconvenience,agility,andpersonalizationwhileensuringprofitablefirmgrowth.

Source:CapgeminiFinancialServicesAnalysis,2017

Table1: Business Impact of the Top-10 Technology Trends in P&C Insurance

4 Top 10 Trends in Property & Casualty Insurance 20184

Background

• ConnecteddevicesofferbusinessvaluethatgoesbeyondoperationalcostsavingsandprovidesanopportunityforP&Cinsurerstodevelopinnovativesolutionsthatexplorereal-timedata

• Thus,thesedevicesaregainingpopularityamongP&Cinsurerstoleveragerelevantreal-timedataforimprovingcustomerengagement,mitigatingriskproactively, and providing value-added services

Key Drivers

• Multipleforecastspredictthattheconnecteddevicesmarketwillgrowheavilyinthenext4-5yearstobecomeamulti-billion-dollarindustry:

– Statistapredictsthatthetotalconnecteddevices(IoT)installedbasegloballywillincreasefrom20.4billiondevicesin2017to75.4billiondevicesin2025ataCAGRof17.8%duringthisperiod2

– According the World Insurance Report (WIR) 2016fromCapgeminiandEfma,morethanone-third(34.2%)ofcustomersthinktheywilladoptsmartecosystems,and32.4%oftheinsurerssurveyedsaytheywilladoptsmartecosystemsinthenextfiveyears3

• Insurersarelookingforwaystodifferentiatetheirofferingsfromthecompetition,avoidcommoditization,andbemorecustomer-centricintheirapproach:

– ConnecteddevicesenableP&Cinsurerstosupportquick,convenient,andpersonalizedinteractions,mitigaterisk,andprovidevalue-addedservicestocustomers

Trend Overview

• P&Cinsurersareseekingtobemorecustomer-centricandlookingforwaystoimprovecustomerengagementandexperiencebyleveragingconnecteddevices

• Throughconnectedtechnologiessuchashomesensorsandtelematicsdevices,P&Cinsurerscangetreal-timedataoncustomer’slossexposureandrespondwithtimelyinterventionsatanysignofdangerinadvancesothatpropertydamagecanbepreventedorminimized

• EarlyadoptersofconnecteddevicesintheP&Cinsuranceindustryhaveacompellingvaluepropositiontodemonstratethatdatafromconnecteddevicescanbeleveragedtogrownewbusiness,improveriskassessment,andproactivelyengagewithcustomersinlossmitigation:

– E.g.,AllianzhaspartneredwithPanasonictoprovidebetterservicetocustomers.Incaseofdangerinthecustomer’shome,Panasonicsensorssendalertstotheuser’smobiledevice,aswellastoAllianz.Allianzthendispatchesrepairteamstoquicklyaddresstheissueandmitigatedamage4

P&C insurers are leveraging connected devices for proactive risk mitigation and for providing value-added services to customers

Trend 01: Connected Devices Help Insurers to Proactively Mitigate Risk and Provide Value-Added Services

2 “InternetofThings(IoT)connecteddevicesinstalledbaseworldwidefrom2015to2025(inbillions)”,Statista,accessedOctober2017at https://www.statista.com/statistics/471264/iot-number-of-connected-devices-worldwide/

3 World Insurance Report 2016,Capgemini,2016,accessedOctober2017athttps://www.worldinsurancereport.com

4 Allianzwebsite,accessedOctober2017athttps://www.allianz.com

5

• Byleveragingconnecteddevices,P&Cinsurersincreaseriskassessmentprecisionandprovidevalue-addedservicestocustomers:

– E.g.,SecurityFirstInsurance’sSecurityFirstMobileapphelpscustomersplantheirroutineincaseofadverseweatherconditions.Theinteractivehurricanetrackingfeaturehelpscustomersplottheirpropertyaddressonthemapandcheckanactivestorm’sprojectedpath.ItalsosharesinformationonRedCrossshelters and evacuation routes5

• AnotherexampleofproactiveriskmitigationandincreasedcustomerengagementisthatofEsurance,whichlauncheditsDriveSafeteendriverprogramtohelpparentsmonitortheirteens’drivingbehaviorthroughatelematicsdevice.ThiscanbedonebysettingpreferencesontheirpersonalizedEsuranceDriveSafesitewheretheycanoptforcustomizedalertsforunsafedrivingbehaviorandreviewtripdetails6

Implications

• Withreal-timedatafromconnectedtechnologiesoncustomerriskexposure,P&Cinsurerscanrespondwithtimelyinterventionsatanysignofhazardorperilforriskreduction

• Withthehelpofsmarthomeecosystemsandtelematics,P&Cinsurersareprovidingvalue-addedservicesinmultipleareassuchashomemonitoringandassistance, driving assistance, and so on

• P&Cinsurerscarrysignificantbenefitsofprovidingvalue-addedservicestocustomerssuchascompetitivedifferentiation,increasedcustomerretention,additionalrevenuestreams,andlowerclaimcosts:

– Value-addedservicesbenefitP&Cinsurersasameansforcompetitivedifferentiation.Providinginnovativeandusefulservicescanhelpinsurersstandoutamongtheircompetitorsandrealizeincreaseincustomermindshare

– Asvalue-addedservicesenhancecustomerexperiencethroughrelevantandmeaningfulengagement,customerretentioncouldbeimprovedfortheinsurers

– Asmanyofthevalue-addedservicesaredirectedtowardproactiveriskmitigation,theycanalsohelplowertheoverallcostofclaimsforP&Cinsurersbyhelpingcustomersavoidrisksintheirdailylives

5 SecurityFirstwebsite,accessedOctober2017athttp://www.securityfirstflorida.com/resources-and-advice/security-first-mobile

6 Esurancewebsite,accessedOctober2017athttp://blog.esurance.com/introducing-esurance-drivesafe

Exhibit 1: Connected Devices in P&C Insurance

Source: Capgemini Financial Services Analysis, 2017

Connected Devices Customers

Smart Home Sensors(Ex: Leak Detectors,

Smoke Detectors)

Proactive Risk Mitigation

Value-added Services

Real-Time Customer Data

DataAnalytics

Customized Offerings

Sensors at Offices, Factories, and Worksites

Telematics Devices(Automobiles)

6 Top 10 Trends in Property & Casualty Insurance 2018

Trend 02: New Business Models are Explored

Background

• Technologicaladvancementisenablingtheintroductionandviabilityofnewinsurancebusinessmodels–suchasusage-based,on-demand,andpeer-to-peerinsurance–whicharetransformingthewaypeopleconsumeinsuranceofferings

• Thenewbusinessmodelsarefocusedonevolvingcustomerneeds,bridgingthegapsininsuranceofferings,andcateringtounexplored/underservedmarkets

• TraditionalP&Cinsurersseektointroducenewofferingsbasedonnewbusinessmodels,mostlybycollaboratingwithInsurTechfirms

Key Drivers

• Theadventofdynamicriskmodelingtechniques,drivenbyreal-timeaccesstocustomerdataviasocialmediaandIoT,andadvancementinanalyticscapabilitiesareenablingthenewbusinessmodels

• InsurTechfirmsthatprovideinnovativeofferingsbasedonthenewbusinessmodelsaredrivingtraditionalinsurancefirmstoexploresimilarproductsandservices leveraging digital technologies

• Customerdemandformoreflexibilityandeasieraccesswhileresearchingorbuyinginsurancecoverageisalsoencouragingthegrowthofnewbusinessmodels

Trend Overview

• The World Insurance Report(WIR)2017fromCapgeminiandEfmafoundthatusage-basedinsurance,on-demandinsurance,andall-in-oneriskpoliciesaremorerelevanttoP&Cinsurers(accordingtomorethan75.0%ofexecutivesinterviewed),followedbyflexiblecoverageoptions,microinsurance,andpeer-to-peerinsurance7

P&C firms are adopting new, more flexible business models with the potential to transform the way clients consume insurance offerings

Exhibit 2: New Business Models Relevant to P&C Insurers

Source: Capgemini Financial Services Analysis, 2017

New Business Models

7World Insurance Report 2017,Capgemini,2017,accessedOctober2017athttps://www.worldinsurancereport.com/

7

• Usage-Basedinsurancecanincentivizelessriskybehaviorandmitigatemoralhazardproblems.Insurancefirmscanalsoleveragetheinfrastructureforprovidingvalue-addedservicestoreduceclaimsincidents:

– Forexample,Nationwideisrunningapay-as-you-driveinsuranceprogramnamedSmartRide,whereuserscangetupto40%reductiononpremiumsforsafedrivingbehaviorandgetpersonalizedinputsformakingsaferdriving decisions8

• On-Demandinsuranceofferscustomerstheflexibilitytoactivateaninsurancecoverageas-and-whentheyrequire.Astheon-boardingandclaimsprocessingisquickandhassle-free,thisbusinessmodelisexpectedtobringmorepeopleunderinsurancecoverage:

– Forexample,TokioMarineallowscustomerstobuyshort-terminsurancepoliciesthatcovertravelandsportingactivities.Customerscaninstantlypurchasepolicesbycompletinganapplicationformandpayingthroughamobileapp9

• Insteadofhavingvariouspoliciestocovermultiplerisks,oneall-riskpolicycancoveralltherisksofacustomerinonepolicy:

– Thiswillmakeiteasierforcustomerstomanagetheirpolicydetails – Insurerstoocanbenefitthroughlowermarketingandadministrativecosts

• Byprovidinginsurancepolicieswithlowerpremiums,microinsurancepoliciesaimtobringeconomicallyweakersectionsunderinsurancecoverage:

– Forexample,AllianzAfricaoffersstandardandsimplemicroinsurancepoliciesandithasinsuredmorethan600,000peopleinAfrica10

• Peer-to-peerinsuranceenablesagroupofpeopletoinsurethemselvesbypoolingpremiums,andthegroupmemberscanreceiveaportionofthepremiumbackifthetotalvalueofclaimsislesserthanthepremiumsreceived.Membersofthegrouparealsoinvolvedincriticaldecisionsincludingclaimsadjudication:

– Forexample,InsurTechfirmbesureprovidesaplatformwherepeoplewithsimilarinsuranceneedsaregroupedinapool.Membersofthepooltakecareofclaimssettlementprocess11

Implications

• Asgapsininsuranceofferingsareaddressed,newbusinessmodelswillgeneratenewrevenuestreamsfortheinsurers

• Insurerscanenhancecustomerexperienceasinsuranceofferingscanbeaccessedseamlessly,likeautilityservice

• Businessmodelssuchasusage-basedinsurancewillhelpinsurerstoperformbetterriskassessmentandpricetheproductsmoreaccurately

• Sinceclaimsarereviewedbyaclosedgroupofpeersinpeer-to-peerinsurancemodel,thelossescanbepredictedaccurately,thusreducingclaimsleakage

• Newbusinessmodelswillhavecostimplicationsthatcanbemitigatedbyemergingtechnologiessuchasblockchainandautomationtools

8 “NationwidePromotesSafeDrivingThroughUsage-BasedInsuranceProgram”,BodyShopBusiness,accessedOctober2017at http://www.bodyshopbusiness.com/nationwide-promoting-safe-driving-usage-based-insurance-program/

9 “TokioMarinepartnerswithNTTDoCoMotoofferOneTimeInsurance”,TheDigitalInsurer,accessedOctober2017at https://www.the-digital-insurer.com/dia/tokio-marine-partners-with-ntt-docomo-to-offer-one-time-insurance/

10Allianzwebsite,accessedOctober2017at http://www.allianz-africa.com/africa/index.php?option=com_content&view=article&id=7%3Amicro-assurance&catid=3%3Aproduits&lang=en

11besurewebsite,accessedOctober2017athttps://besure.com/

8 Top 10 Trends in Property & Casualty Insurance 2018

Trend 03: Increase in Automation of Processes leveraging RPA and AI

Background

• IntheP&Cinsuranceindustry,thescaleandimpactofautomationhaveincreaseddrasticallyinrecentyearswiththeadventofRoboticProcessAutomation(RPA)andArtificialIntelligence(AI).TheefficiencyofunderwritingandclaimsprocessingcanbeimprovedbyimplementingRPAandAI

• According to the World Insurance Report(WIR)2017,RPAandAIareconsideredimportantby63.2%and69.0%ofthesurveyedinsurersrespectively,andmorethan80.0%oftheexecutivessurveyedindicatedthatinsurersareeitheralreadyinvestingorplanningtoinvestduringthenextthreeyearsinRPAandAI12

Key Drivers

• Newchannelsforcollectingcustomerdata,advanceddataprocessingcapabilities,andimprovementsinartificialintelligencealgorithmsarepoweringtheautomationagenda

• Costoptimizationandimprovedoperationalefficiencyarekeystrategicprioritiesbeingusedmoreandmoretojustifythecaseforautomation

• Quick,error-free,andpersonalizedcustomerserviceisexpectedtoremaincompetitiveandcanbeachievedviaautomation

Trend Overview

• InP&Cinsurance,RPAandAIarefindingapplicationsacrossthevaluechaintosignificantlyexpediteprocessesandalsoexplorenewmodelsofengagement

• P&Cinsurersareusingbotstoautomateprocessessuchaspolicyservicingandclaimsmanagementandthusprovidingmuchfasterandmorepersonalizedservicetocustomers:

– Inthefrontoffice,chatbotscanbeusedtointeractwithcustomerstogainabetterunderstandingoftheirneedssothatthecustomercanbeprovidedpersonalizedquotes:

� Forexample,SPIXIIisanautomatedinsuranceagentthatcustomerscaninteractwith,throughanativemobileapporothermessengerplatforms,tobuytherightcoveragefortheirrequirements13

– Inpolicyholderservicing,chatbotscanbeusedtomanagesimplerqueriesmorecost-effectivelyandspeedily:

� Forexample,Geico’svirtualassistantKateanswerscustomerqueriesabouttheirpoliciesandpayments14

P&C insurers are increasingly automating processes across the value chain by leveraging technologies such as RPA and AI

12World Insurance Report2017,Capgemini,2017accessedOctober2017athttps://www.worldinsurancereport.com/

13 “SPIXII:Makinginsurancesimple,accessibleandpersonalforeveryone”,RogerPeverelli,ReggydeFeniks,DigitalInsuranceAgenda,May4,2017,accessed October2017athttp://www.digitalinsuranceagenda.com/102/spixii-making-insurance-simple-accessible-and-personal-for-everyone/

14 “MoveOverAdjustersandUnderwriters,theBotsAreComing”,DeniseJohnson,ClaimsJournal,June6,2017,accessedOctober2017at https://www.claimsjournal.com/news/international/2017/06/06/278804.htm

9

– Inclaimsmanagement,botscanbeusedtoassessandpayoutsmallerclaims,whichiscostefficientandcanalsoconsiderablyenhancecustomerexperienceatavitaltouchpoint:

� E.g.,Lemonade’sinsuranceclaimsbot,A.I.Jim,setarecordbyassessingandpayingoutapropertyclaiminonly3seconds15

• RPAandAIcanalsoactasthesupportingtoolsforinsurerstoexplorenewofferings: – AutomationwillbeacrucialcomponentintheshiftofP&Cinsurerstowardrisk-mitigationmodelsthatmonitorreal-timedataviaconnecteddevicesandnotifycustomersofimpendingdanger

– Useofintelligentautomationandconnecteddevicescanalsoenableinsurerstoexploreparametricformsofinsuranceinmoreproductlines

• P&Cinsurerscanhavesignificantcostsavingsandachieveoperationalefficiencybyimplementingautomation:

– Insurerscanimprovetheirprocessqualityandregulatorycompliancebyautomatingtheprocess

– Automationsolutionsarehighlyscalable,andtheycanbeimplementedinphaseswithoutdisruptingnormaloperations

– RPAcanbeimplementedforprocesseshandlingstructureddata.Itcanbedeployedinashorterperiodandprovidehigherreturnoninvestments:

� Forexample,aleadinginsurerautomatedthepolicyrenewalprocessusingRPAandrealized30%-40%increaseinefficiencyandaround50%reductionofFTEs.Thefirmwasalsoabletoincreasethecustomersatisfactionwithfasterresponsetimes16

– However,forprocesseshandlingunstructureddata,AIsolutionsareimplemented: � Forexample,InsurTechfirmTycheleveragesAIforimprovingitsclaimlikelihoodmodelbyaccessingdatafromvarioussources.Thiswillenableinsurerstoimproverisk-assessmentaccuracyduringunderwriting,whichcanpositivelyaffectprofitability17

Exhibit 3: Key Benefits of Automation

Source: Capgemini Financial Services Analysis, 2017

Benefits ofAutomation

New Business Models

15 “LemonadeReportsInsuranceClaimPaidin3SecondswithNoPaperwork”,AnthonyR.O’Donnell,InsuranceInnovationReporter,January5,2017,accessed October2017athttp://iireporter.com/lemonade-reports-insurance-claim-paid-in-3-seconds-with-no-paperwork/

16 “RoboticProcessAutomationinInsurance”,Capgemini,April2017,accessedOctober2017at https://www.capgemini.com/wp-content/uploads/2017/07/robotic-process-automation-in-insurance-whitepaper.pdf

17 “TheImpactofArtificialIntelligenceontheInsuranceValueChain”,MaxKraus,Logiq3,May29,2017,accessedOctober2017at http://www.logiq3.com/blog/artificial-intelligence-insurance-value-chain-part-1

10 Top 10 Trends in Property & Casualty Insurance 2018

Implications

• Personalizedunderwritingandinstantclaims-processing(achievedviaRPAandAI)canenhancecustomerexperience

• Thereductionofhumanlaborandfasterprocessingtimescanoptimizecostandoperationalefficiencies

• Operationalefficiencyandtheabilitytoprovidepersonalizedserviceswillbolsterfirms’marketcompetitiveness

• Byautomatingback-endsystems,insurerscanimplementnewbusinessmodelssuchason-demandinsurance

• Automationmakesitpossibleandaffordabletobringpreviously-outsourcedprocessesbackin-house

11

Trend 04: Drones Take on an Important Role for Insurance Firms

Background

• Manualinspectionofroofsisrisky,andduringcatastrophicevents,roofinspectionsbecomeanevenmoresignificantchallenge

• Droneswithsophisticatedcamerascancapturehigh-resolutionimagesoftheproperty,andthesephotoscanfacilitateremotepropertyassessment.Hence,theuseofdronesisgraduallyrisingforpropertyassessmentbyP&Cinsurers

Key Drivers

• Customersexpectaquickerresolutionofclaims(especiallyafterCATevents)• Manualclaimsinspectiontakeslotoftimeandinvolveshighcostasitcanbe

handled only by experts• Droneandimagingtechnologyadvancementshelpinsurerstoobtainhigh-definitionimagesthatfacilitateremoteandaccuratepropertyestimations

Trend Overview

• TheFederalAviationAdministrationoftheU.S.estimatesthatthesalesofcommercialdroneswillincreasedrasticallytoreach2.7millionin202018 and insuranceindustryisoneoftheearliestadoptersofdronesforcommercialusage

• Globally,traditionalinsurancefirmsarealsoincreasinglyexploringanddeployingdronesforpropertyassessment:

– Forexample,intheUnitedStates,toassessthedamagesduetohurricaneHarvey,leadinginsurancefirmsincludingAllstate,Farmers,andStateFarmdeployed drones19

– ToevaluateearthquakedamagesinEcuador,QBEleverageddronesandsettled90%oflarge-lossclaimswithin90days20

– InAustralia,IAGuseddronestodeterminedamagescausedtohomesbybushfires21

• ThereareseveralInsurTechfirmswhoarespecializinginoperatingdronesandanalyzingtheimages.Traditionalfirmsarecollaboratingwiththemforscalinguptheirpropertyassessmentcapabilities:

Drones are increasingly used by P&C insurers to improve the accuracy and speed of underwriting and claims processing

18“FAAReleases2016to2036AerospaceForecast”,FederalAviationAdministration,March24,2016,accessedOctober2017at https://www.faa.gov/news/updates/?newsId=85227&cid=TW414

19“Harveyofferspreviewofhowdronescouldbeusedtospeeduprebuilding”,MelissaRepko,DallasNews,September&,2017,accessedOctober2017at https://www.dallasnews.com/business/technology/2017/09/07/harvey-offers-preview-drones-used-speed-rebuilding

20“QBEdeploysdronestoassessinsuranceclaims”,AllieCoyne,itnews,February27,2017,accessedOctober2017at https://www.itnews.com.au/news/qbe-deploys-drones-to-assess-insurance-claims-452739

21“HowDrones&UAVsAreChangingTheInsuranceIndustry”,ChristineThelander,Canstar,April26,2017,accessedOctober2017at https://www.canstar.com.au/home-insurance/home-and-contents-insurance/the-future-of-insurance-claims-is-drones/

12 Top 10 Trends in Property & Casualty Insurance 2018

– Forexample,InsurTechfirmBetterviewofferssolutionsforanalyzingtheroof,estimatingclaimsofroofdamages,thermalscansfordeterminingriskstopropertyduetotrappedmoistureoroverheatingelectricalwiring,andpredictingwildfirerisks22

• Somefirmsalsoprovideon-demanddroneservicestoclaimsadjusters: – E.g.,DropInInc.hasanUber-likenetworkofdroneoperators,andinsuranceadjusterscanaccesstheirservicesforcapturingtheimagesorvideoofthesite under investigation23

• However,droneoperatorsmustcomplywithregulations,whichvariesacrossgeographies:

– TheUSAhasrelaxedtherules,exemptingdroneoperatorsfrommedicalexaminationsandliabilityinsuranceanddronescanflyupto400feetabovegroundlevel(AGL)24

– IntheUK,droneoperatorsshouldhaveliabilityinsuranceanddronesarenotallowedtoflywithin50metersnearbuildings,andforcongestedspaces,itis150meters25

– InGermany,droneoperatorscanflydroneslessthantake-offmassof5KGbelow100metersAGL26

Implications

• Dronescanimprovepropertyassessmentaccuracy,whichwillhelpinsurersadjustpricingaccuracyandreduceclaimsleakage

• Usingdrones,insurancecompaniescanresolveclaimsquickly,whichwillenhancethecustomerexperience

• Theinspectioninfrastructurecanbescaledupinashorterspanoftimetohandlemoresignificantnumberofpropertiesandcostincurredforpropertyassessmentwillbelesserthanmanualinspection

• Combinedwithadvancedimageanddataprocessingcapabilities,dronescanalsofacilitateautomationofpropertyassessmentforclaims,minimizingtheneedforamanualadjuster

• Regulatoryconstraints,privacyconcerns,andlimitedavailabilityoftrainedstaffaresomekeychallengesinwidespreadadoptionofdrones

Exhibit 4: Key Benefits of Using Drones

Source: Capgemini Financial Services Analysis, 2017

Benefits of Drones

Scalability

Automationof PropertyAssessment

EnsuresSafety

CostOptimization

Enhanced Customer

Experience

ImprovedSpeed and Accuracy

22Betterviewcompanywebsite,accessedOctober2017athttps://www.betterview.net/what-we-offer/

23“Uber-LikeVideoServiceDropInLetsAdjustersAssessDamagefromTheirDesks”,AndrewG.Simpson,InsuranceJournal,September2,2016, accessedOctober2017athttp://www.insurancejournal.com/news/national/2016/09/02/425370.htm

24GlobalDroneRegulationsDatabase,accessedOctober2017athttps://www.droneregulations.info

25Ibid

26 Ibid

13

Trend 05: Autonomous Vehicles are Poised to Disrupt Auto Insurance Business Model

Background

• Around94%ofvehiclecrashescanbeattributedtohumanerrors27, and self-drivingsoftwarewilldecreasetheriskofaccidentsbyeliminatingaccidentscausedbyrule-breaking,lapsesinhumanjudgment,orfatigue

• Apartfromincreasedroadsafety,autonomousvehiclesalsoofferhigherfuelefficiencyandcanreduceroadcongestionbyabout25%28

• Theadventofautonomousvehicleshasnumerousimplicationsforautoinsurers,withthepotentialtoredefinetheautoinsurancebusiness

Key Drivers

• Auto tech funding is on an increasing trajectory,29andexpertsestimatethatby2020therewillbe10millionself-drivingvehiclesontheroad30

• Increasingcapabilitiesofdevices,technologies,algorithms,andprocessingspeedareaidingdevelopmentofautonomousvehicles

Trend Overview

• Moreavailabledatafromconnecteddevicesinautonomousvehicleswillincreasetransparencyandreduceriskinautoinsuranceprocessessuchasproductdevelopment,underwriting,andclaimsprocessing

• Theshifttoanecosystemofself-drivingvehicleswillchangethenatureandownershipofrisk:

– Withincreasingadoptionofautonomousvehicles,thecauseofaccidentswillgraduallyshiftfromhumanerrortofailureofmechanicalpart,device,orcontrolsystems

– Thereductionofriskarisingduetohumanerrorswillshiftriskfromvehicleownerstovehiclemanufacturers

• Thechangingnatureofrisk,itstransparency,andownership,willchangethebusinessmodelofautoinsurancefirms:

– Theoverallreductioninriskexposureofthecustomerwillgraduallyreducethemarketfortraditionalpersonalautoinsuranceproductsastheriskwillchangeintocommercialproductliability31

Autonomous vehicles are poised to shake up the business model of auto insurance industry by reducing the probability of accidents to a greater extent

27“4BenefitsofAutonomousVehiclesYouMayNotHaveConsidered”,JessieRobinson,Fleetio,April25,2017,accessedOctober2017at https://www.fleetio.com/blog/4-benefits-of-autonomous-vehicles

28Ibid

29“AutoTechStartupFinancingTops$1BillionIn2016”,CBInsights,January12,2017,accessedOctober2017at https://www.cbinsights.com/research/auto-tech-startups-2016-recap/

30“10millionself-drivingcarswillbeontheroadby2020”,BIIntelligence,June15,2016,accessedOctober2017at http://www.businessinsider.com/report-10-million-self-driving-cars-will-be-on-the-road-by-2020-2015-5-6?IR=T

31“World Insurance Report 2016,Capgemini,2016,accessedOctober2017athttps://www.worldinsurancereport.com/

14 Top 10 Trends in Property & Casualty Insurance 2018

– Autoinsurerswillalsolikelyfaceissuesindeterminingtheliabilityofanaccidentbetweenthepossiblecausessuchasthevehiclemanufacturer,thesensormanufacturer,ortheautonomoussystem

� Datafromconnecteddevicesandsensorswillbecriticalinsuchacaseforfindingthecauseofaccident

– Theroleofregulatorswillalsodefinedevelopmentsinthisspace.Forinstance,TheDepartmentforTransport,UKiscomingupwithnewtwo-in-oneinsuranceproductplansforautonomouscars,coveringthedriverwhentheyaredrivingandthecarwhenitisinautonomousmode32

Implications

• Real-timedatafromconnecteddevicesinself-drivingvehicleswilldelivercriticalinsightstoimproveunderwritingprofitabilityandreduceclaimsleakage

• ThechangingnatureofriskmayaltertraditionalP&Cbusinessmodelsandregulatorswillbecriticalindefiningthepathforward

• Autoinsurerswillneedcomprehensivestrategiestoprepareforthedisruptionscausedbyautonomousvehicles

Exhibit 5: Autonomous Vehicles Can Disrupt Auto Insurance Business Model

Source: Capgemini Financial Services Analysis, 2017

Increase in Risk Transparency Transfer Risk Ownership

Change in Nature of Risk

Disruption of Auto Insurance Business Model

Enhanced Data

Availability

Reduction in Variables

Affecting Risk

Real-Time Risk

Assessment

Reduction in Risk Exposureof Customer

Shifting of Risk Liability to

Manufacturer

32“Driverlesscarownerswillneed‘two-in-one’insurancepoliciesundernewGovernmentplans”,KatieMorley,TheTelegraph,February9,2017,accessed October2017athttp://www.telegraph.co.uk/news/2017/02/09/driverless-car-owners-will-need-two-in-one-insurance-policies/

15

Trend 06: Blockchain has the Potential to be a Game Changer

Background

• P&Cinsurersarehandlingmultiplepoliciesforcustomers,andthevolumeofdatageneratedbycustomersisincreasingexponentially.Forsharingandcombiningdataobtainedfromvarioussourcesandtohaveaneasyandcontrolledaccesstothedata,insurershavealreadystartedexperimentingwithblockchaintechnology

• According to the World Insurance Report(WIR)2017,blockchainmaygraduallygaintraction,with59.1%oftheexecutivessurveyedagreeingthatinsurersarealreadyexperimentingandwillbeinvestinginnextthreeyearsinthistechnology33

Key Drivers

• Withhugevolumesofdatageneratedforeachcustomerandthedatahavingtobeprocessedinreal-time/nearreal-timebymultipledepartments,thereisabusinessneedforeasyandsecuretransferofdataacrosstheorganizationandwithmultiplestakeholders

• Thereisaneedforauto-initiationofinsuranceclaimsandquickerclaimsprocessingforbettercustomerexperience

• Newbusinessmodels,especiallythosethathandlehighvolumesandlowmargins,needaninfrastructurethatoptimizesoperationalcosts

Trend Overview

• SeveralP&CinsurersareexperimentingwithblockchaintechnologyorcollaboratingwithInsurTechfirmstocreateprototypesrelatedtoinsuranceofferings:

– SompoJapanNipponkoaHoldingsiscollaboratingwithInsurTechfirmSoramitsutodevelopaprototypeofacatastropheinsuranceplatform34

– TheindustrywideBlockchainInsuranceIndustryInitiative(B3i)explorespotentialblockchainapplicationsininsuranceandasofOctober2017,itissupportedby38insurance/reinsurancecompaniesincludingAIG,Allianz,Chubb,LibertyMutual,SwissRe,TokyoMarine,andZurich:

� B3ilaunchedabetaversionofblockchain-basedsolutionforthere/insuranceindustrythatisexpectedtobedeployedin201835

– Ruschlikon,anindustrywideinitiativeleveragingblockchainforinsuranceclaims,isfocusingonincreasingthespeedofclaimsprocessingby30%,leveragingblockchaintechnology36

Blockchain technology has the potential to be a key game changer in the insurance industry

33 World Insurance Report2017,Capgemini,2017,accessedOctober2017athttps://www.worldinsurancereport.com/

34“P&CInsurerTrialsBlockchainforCatastropheCoverage”,StanHiggins,coindesk,September26,2016,accessedOctober2017at https://www.coindesk.com/pc-insurer-trials-blockchain-catastrophe-coverage/

35“B3iexpandswithnewmembersjoiningitsprototypeMarketTestingphase”,B3i,October2,2017accessedonOctober2017at http://b3i.tech/single-news-reader/press-release-3.html

36“Ruschlikon–Blockchainconsortiumaimstospeedclaimsprocessingby30%”,TheDigitalInsurer,accessedOctober2017at https://www.the-digital-insurer.com/dia/ruschlikon-an-industry-wide-effort-to-implement-acord-global-reinsurance-and-large-commercial-grlc-messaging-standards/

16 Top 10 Trends in Property & Casualty Insurance 2018

• Blockchaincanbeupdatedbymultiplepartiesatthesametimewithoutalteringtheexistingdata.Therefore,customerdatacapturedfromvarioussourcescanseamlesslyandsecurelybeaccessedbyseveralparticipants:

– Customeridentitiescanbesharedamongorganizationsforbetteridentitymanagement

– Capturedcustomerdatacanbeusedinmultipleapplicationsincludingcoreprocessessuchasunderwritingandclaimsprocessing

– Claimsprocessingdetailscanbestoredinblockchainandsharedwithintheorganization/acrossorganizationstoreducefraudassociatedwithmultipleclaimsforasingleincident

• Forprofitableandsustainableoperations,on-demandbusinessmodelsrequirequickaccesstodata,andmicroinsurancerequirescostoptimization.Blockchaincanensuredataavailabilitywhilereducingoperationalcoststoalargeextent

• Moreover,DecentralizedAutonomousOrganizations(DAOs)canaideffectivepolicymanagementwhileSmartContractscansupportautomaticpolicy execution

Exhibit 6: Key Benefits of Blockchain Technology

Source: Capgemini Financial Services Analysis, 2017

01

02

03

05

04

Identity Management

Seamless Access of Data

Fraud Management

New Products and Services

Secured Transactions

Key BenefitsBlockchain

Implications

• Customerdetailsrequiredfor“KnowYourCustomer”(KYC)processcanbesharedeasilyamongfirms,whichenablesquickcustomeronboardingandinstantpolicyissuancetoenhancecustomerexperience

• Duringclaimsincidentssuchasfireincidentsandvehicleaccidents,blockchainbasedsmartcontractscanexecuteautomaticallywithinputsreceivedfromconnecteddevices.Thiscanleadtoadrasticreductioninoperationalcosts

• BlockchaininP&Cinsurancecanpotentiallyensuretransparencyintransactions

17

Trend 07: Traditional P&C Insurers Realize APIs’ Importance

Background

• ApplicationProgrammingInterface(API)enablessharingofdatabetweensystemsinadefinedmanner,therebysimplifyingandstreamliningthedevelopmentandintegrationofsystems

• APIsfuelspartnerships,fast-tracksinnovationsandhelpsitsprovidersachievebroaderaudiencebyallowingeasyandefficientsharingofinformation

Key Drivers

• P&Cinsurersneedtointegratedatafromvarioussourcesandthirdparties,includingconnecteddevices,forgeneratingmorecompellinginsights

• APIscanenablefasterpaceofinnovationfortraditionalinsurers,helpingthemtocapitalizeonthedigitaladvances

Trend Overview

• TheadvancementintechnologiesandtherecentsurgeinusageofconnecteddeviceshasopenedupnewavenuesforP&Cinsurers

• InsurersareusingAPIstointegratedatafrommultiplesourcesforderivingvaluableinsightsandcreatingcompellingofferingsforcustomers:

– Forexample,Allstatehascreatedits‘GoodHome’toolbyutilizingproprietaryclaimsdata,GoogleMapsAPIs,weatherAPI,andpublicdata37:

� Userscanlookattheirhouse,visualizesignificantrisksintheirarea,andreceivetechniquestomitigatesuchrisksthroughthistool

� GoodHomeenabledAllstatetoimprovecustomerengagementsandbuildbettercustomerrelationships,andtheinsurerfoundthatauserofthistoolismorelikelytorequestforaninsurancequotethananon-userbyover350%38

• APIsarealsoenablinginsurerstointegrateintotheconnecteddevicesecosystemandprovidevalue-addedservicestothecustomers:

– Forexample,Nationwide’susage-basedautoinsuranceprogram,SmartRide,usesIMS’sconnectedcarplatform39:� APIsareusedtoretrievevehicleinformationandthedriver’sbehavioraldatafromtheonboarddiagnosticsdevice

� TheinsurerhasaSmartRidewebportalaswellasamobileappwheretheenrolleduserscanviewtheirdrivingtrends,receivepersonalizedfeedback,andviewtheirtripsonmaps40 41

APIs enable traditional insurers to develop new applications at a faster pace and facilitate seamless integration with other stakeholders

37AllstateGoodHomewebsite,accessedOctober2017athttps://goodlife.allstate.com/goodhome/

38“AllstatehelpspeopleuncoverriskstotheirhomesusingGoogleMaps”,ElizabethSchreier,GoogleCloudBlog,March10,2015,accessedOctober2017at https://cloud.googleblog.com/2015/03/Allstate-helps-people-uncover-risks-to-their-homes-using-Google-Maps.html

39“CustomerCaseStudy:Nationwide”,IMS,accessedOctober2017athttps://www.intellimec.com/telematics-insurance-case-study

40NationwideSmartRideWebsite,accessedOctober2017athttps://www.nationwide.com/smartride.jsp

41NationwideSmartRideAppon–Android’sGooglePlayStoreandApple’sAppStore,accessedOctober2017

18 Top 10 Trends in Property & Casualty Insurance 2018

• InsurersareopeningAPIdeveloperportalsfordatascientistsandappdeveloperstorevupthepaceofexperimentationandinnovation:

– Forexample,anewopenAPIdeveloperportalbyLibertyMutualInsurance’sSolariaLabscombinesproprietaryinsuranceknowledgewithpublicdata,suchasautotheftandparkingcitations,tohelpscientistsanddeveloperscreate user safety apps42

– AnotherexampleincludesInsurHack,aninsurancesoftwaredevelopmentchallengeorganizedbyZurichInsuranceGroup,whereparticipatingteamscanaccesssimulatedcustomerdataviaAPIstoworkontheirideaandcreateaworkingprototype43

Implications

• APIswillhelpinsurersprovidecustomerswithinnovativepersonalizedofferingstoimprovetheiroverallexperience

• Third-Partycollaborationswillhelpstreamlineservicesandexpandoverallcustomerreach,openinguppossibilitiesfortop-linerevenuegrowth

• Fast-PaceinnovationwillallowP&Cinsurerstoalignwithcustomerdemandsforadvanced technologies

Exhibit 7: Usage of APIs in P&C Insurance

Source: Capgemini Financial Services Analysis, 2017

Connected Devices – Telematics and Smart Homes

Developing Innovative Applications

Collaborating with Third Parties

APIs in P&C Insurance

42“LibertyMutualInsurance’sSolariaLabsUnveilsNewDeveloperPortal”,LibertyMutual,January4,2017,accessedOctober2017at https://www.libertymutualgroup.com/about-lm/news/news-release-archive/articles/solaria-labs-unveils-new-developer-portal

43 ZurichInsurHackWebsite,accessedOctober2017athttps://www.zurich.de/de-de/insurhack

19

Trend 08: More P&C Insurers Embrace Advanced Analytics

Background

• AdvancedanalyticstoolsenableP&Cinsurerstoeffectivelyleverageinternalandexternaldatatocarve-outgranularinsightsthatallowthemtotailorservicesbasedonacustomer’ssituation,behavior,preferences,andriskprofile

• AdvancedanalyticsofferthepromiseofcreatingnewtoolsdesignedtogenerateinsightandforesightbyallowingP&Cinsurerstotestalternativescenariosandtoextendaccomplishedthinkingonplausibleevents

• Thus,P&Cinsurerscanidentifynewrisksandaccuratelydevelopunderwritingstrategies,pavingthepathfornewlinesofbusinessandrevenuesources

Key Drivers

• Advancesincomputingtechnology(e.g.,processingstructuredandunstructureddatatogether)andaninfluxofdatafromvarioussourcesaredrivingP&Cinsurerstoadoptadvancedanalyticstools

• Novelbusinessactivities,emergingtechnologies,andthesharingeconomyareincitingnewriskssuchascybercrimeanddigitalidentitytheft

• CustomersareexpectingAmazon-likeexperiencefromP&Cinsurancewhenitcomestospeed,convenience,personalization,andprice

Trend Overview

• Withdatamoreavailablethaneverbeforeandwithadvancementsinanalyticalcapabilities,P&Cinsurerscannowdriveprofitablegrowthbyaccuratelypricingriskandbyidentifyingnewriskfactors:

– Withintegrated,up-to-date,andorganizeddata,analyticswillhelpP&Cinsurersassessrisksacrossthefirmandthemarket:

� Forexample,WillisTowersWatsonemployspredictiveanalyticssoftwaretomodelcomplexcustomerbehaviourwhichenablesthefirmtoenhanceitspricingaccuracy.Thesoftwarealsoreducesthedecisioncycletimessignificantly44

– AdvancedanalyticsallowP&Cinsurerstoprotectthefirmfromevolvingriskexposures,optimizebusinessstrategies,andidentifynewgrowthopportunities

– Withanalytics,autoinsurerscanadjustpolicypricesdynamically,monitorpricesforspecialsegmentsonprice-comparisonwebsitesandadjustfeeseachnightuntiltheyreachtheirtargetedsaturationforthesegment

P&C insurers are increasingly leveraging advanced analytics to price risks accurately and identify emerging risks for more fine-tuned underwriting

44WillisTowersWatsonenhancesitspredictivemodellingsoftware”,PaoloTaruc,InsuranceBusinessAsia,October25,2017,accessedOctober2017at http://www.insurancebusinessmag.com/asia/news/breaking-news/willis-towers-watson-enhances-its-predictive-modelling-software-82884.aspx

20 Top 10 Trends in Property & Casualty Insurance 2018

– E.g.,MetLifeAuto&Homelaunchedanonlineplatformthroughwhichpoliciesmaybepurchasedinminutesbecausedataandanalyticsareleveragedtoassesspricingandriskinrealtime:45

� Theentireprocess,frompolicypurchasetopremiumpaymenttoclaims,ispaperlessandthewebsiteisdesignedwithsimplifieddigitalprocessestoimprovethecustomerexperience

• OneofthebiggestchallengesforP&Cinsurersincludesemergingriskssuchascyber-security.Today,thenewdatasourcescombinedwithadvancedanalyticaltools,suchaspredictiveanalytics,areofferingnewsolutionstonotonlyidentifytheemergingrisksbutalsotocreatenewserviceofferingsaroundthem: – ForExample,AllianzGlobalCorporate&Specialty(AGCS)haspartneredwithZeguro,asoftwarecompanyhavingexpertiseincyber-security,tostreamlinecyber-securityandriskmanagementforsmalltomedium-sizedbusinesses(SMBs):46

� ZegurowillserveasavirtualChiefInformationSecurityOfficer(CISO)forAllianz’scyberinsurancecustomersandmanagesthefirm’scyberexposureanddecreasestheoverallriskoffinanciallossfollowingacyberattack

Exhibit 8: Benefits of Analytics in P&C Insurance Industry

Source: Capgemini Financial Services Analysis, 2017

Benefits of Analytics in

P&C Insurance Industry

AdvancedAnalytical

Technologies

New DataSources

AccurateRisk

Assessment

IdentifyingEmerging

Risks

PersonalizedCustomerOfferings

AddressingIntensifyingCompetition

Implications

• AnalyticsandriskmodelingofferP&Cinsurersaquickwaytoconsistentlyandaccuratelypriceandreducerisks

• Byleveraginganalytics,P&Cinsurerscanofferhighlypersonalizedproductsandcustomizedservicestoenhancecustomerexperience

• Withadvancedanalytics,insurerscandevelopalistofemergingrisks,anddevelopaswellasimplementunderwritingstrategiesaccordinglytoenhancefirmcompetitiveness

45“MetLifeAuto&Home®Introduces100%DigitalProductsonGuidewirePlatform”,October04,2017,accessedOctober2017at http://www.businesswire.com/news/home/20171004006344/en/MetLife-Auto-Home%C2%AE-Introduces-100-Digital-Products

46“Who’susingwhatinP&Cinsurance”,PropertyCasualty360,October09,2017,accessedOctober2017at http://www.propertycasualty360.com/2017/10/09/whos-using-what-in-pc-insurance-oct-9-2017?t=agency-technology?ref=channel-news

21

Trend 09: Collaboration with InsurTech Firms Heats Up

Background

• IncreasingnumberofInsurTechfirmsareprovidinginnovativeofferingsinP&Cspace,includingauto,homeowners,andcyberinsurance,withglobalinvestmentsinP&CInsurTechspacehavingcrossed$2billionasof201647

• ThegrowthofInsurTechfirmsandtheinnovativeofferingsisstimulatingtraditionalP&CinsurancefirmstoacquireInsurTechcapabilities.SeveralP&CinsurersarealreadycollaboratingwithInsurTechfirmsviapartnerships,accelerators/incubators,VCfunds,orbyacquiringsomeofthesestart-ups

Key Drivers

• Thereisanincreasingdemandforinnovativeproductsandservicesfromcustomers,particularlyGen-Yormillennials

• Thecostofestablishingandmaintaininganin-houseR&Dcenterishigh,anditusuallytakessometimetoestablishatechcultureinthefirm.CollaboratingwithInsurTechfirmscanprovidemuchfasterresultstotraditionalinsurers

• Ontheotherhand,InsurTechfirmsalsoneedtocollaboratewithtraditionalinsurancefirmsforcustomerbase,funding,andbusinessknow-how

Trend Overview

• Toimplementinnovations,traditionalinsurerspreferassociatingwithInsurTechfirmsratherthandevelopingin-housecapabilities:

– According to the World Insurance Report(WIR)2017,52.9%ofinterviewedinsuranceexecutiveswantedtopartnerwithInsurTechfirmstoleveragedigitaltechnologies,comparedwith35.6%executivesfavoringin-housedevelopment48

• InsurTechcompaniesoperateacrosstheP&Cinsurancevaluechainincludingfront-endservicessuchaspolicycomparison,policyapplication,orrenewalsandback-endservicessuchasunderwritingandclaimsprocessing:

– Addedtothat,theyprovideuniqueservicesthathelptraditionalinsurancefirmstoenhancetheircustomerexperienceanddataprocessingcapabilities

• PartneringwithInsurTechfirmswillenabletraditionalinsurancefirmstoacquireInsurTechcapabilitiesmorequickly,asitrequiresminimalchangesininfrastructuretointroducenewofferings:

– Forexample,AllianzhaspartneredwiththeInsurTechfirmVisicoverforprovidingaircraftinsurance.ThepartnershipwillenableAllianztoservecustomersviadigitaldistributionchannels49

More and more, traditional P&C insurers are collaborating with InsurTech firms and investing in emerging technologies

47“BrokerSoftware,DigitalDistribution,AndMore:ActivityBoomsInProperty&CasualtyInsurtech”,CBInsights,December13,2016,accessedOctober2017at https://www.cbinsights.com/research/property-casualty-insurance-tech/

48World Insurance Report2017,Capgemini,2017,accessedOctober2017athttps://www.worldinsurancereport.com/

49“AllianzGlobalCorporate&SpecialtyAnnouncesOnlineAircraftInsurancePartnershipwithVisicover”,Allianz,July18,2017,accessedOctober2017at http://www.agcs.allianz.com/global-offices/united-kingdom/news-press-uk/allianz-global-corporate-specialty-announces-online-aircraft-insurance- partnership-with-visicover/

22 Top 10 Trends in Property & Casualty Insurance 2018

• Bytakingpartinaccelerators/incubatorsforInsurTechfirms,traditionalinsurerscanstayclosetolatesttrendsininnovationbycloselyworkingwithstart-ups,andthisapproachalsoallowstheinsurerstoidentifypotentialpartners:

– Forexample,leadingP&CinsurersincludingZurich,Farmers,andUSAAarepartneringwithPlugandPlayaccelerator,whichoperatesin22globallocations50

• SometraditionalinsurancecompaniesinvestinInsurTechfirmsviainvestmentarmsthatprovidereturnsoninvestmentalongwithinsightsonlatesttrendsininnovation:

– Forexample,XLInnovate,investmentarmofXLCatlin,hasinvestedinseveralInsurTechfirmsincludingLemonadeandSliceLabs51

• TraditionalP&CinsurerscanalsoacquireInsurTechfirmstobolstertheircompetitivemarketadvantage

• Establishedfirmsalsofollowamixofapproachesdependingontheirinnovationobjectivesandbusinessgoals.The World Insurance Report2017foundthat37.9%ofsurveyedinsurersvotedinfavorofamixofthevariousapproaches.52

Implications

• Customerexperiencecanbeenhancedwithvalue-addedservicesandofferingsbasedonnewbusinessmodels

• Innovativeproductsandservicescanensureprofitabilitybygeneratingnewrevenuestreamsandreducingoperationalcosts

• BycollaboratingwithInsurTechfirms,traditionalfinancialservicesfirmscaninculcateinnovationintheirofferingsinamoreflexibleandcost-effectivemannerascomparedtoin-houseinnovation.Collaborationisawin-winsituationforbothInsurTechfirmsandtraditionalinsurers,asbothhavecomplementarystrengths

Source: Capgemini Financial Services Analysis, 2017

Exhibit 9: Traditional Insurance Firms and InsurTechs – Various Collaboration Approaches

VCInvestment

Mix of Approaches

Partnerships

Accelerators/ Incubators

Acquisition

50PlugandPlaywebsite,accessedOctober2017athttp://plugandplaytechcenter.com/

51 “BrokerSoftware,DigitalDistribution,AndMore:ActivityBoomsInProperty&CasualtyInsurtech”,CBInsights,December13,2016,accessedOctober2017at https://www.cbinsights.com/research/property-casualty-insurance-tech/

52World Insurance Report2017,Capgemini,2017,accessedOctober2017athttps://www.worldinsurancereport.com/

23

Trend 10: P&C Insurers Adopt a Cloud-Native Approach

Background

• Cloud-nativeapplications,designedspecificallyforcloud,arebuiltandrunusingPlatform-as-a-Service(PaaS)model

• Insurersarealreadycreating16%oftheirnewapplicationsusingacloud-native approach53

Key Drivers

• Insurersneedtoachievefastertime-to-marketandadjustquicklytoshiftingmarketconditionssuchascustomerdemand,technologicaldevelopments,regulatoryreforms,andacompetitiveenvironment

• ReducingITcostsisthemostimportantpriorityofbusinessmanagers,54 and theflexibilityofferedbythecloudcanhelpinsurersreduceITcostsrelatedtoapplicationdevelopmentanddeployment

Trend Overview

• Microservicesarchitectureinacloud-nativeapplicationallowsdesign,testing,deploying,orreplacingselectiveservicesinanapplicationwithoutimpactingotherservices,thussupportingcontinuousdevelopmentanddelivery:

– P&Cinsurerscanutilizecloud-nativemethodstoimprovetheirresponsetomarketrequirements

P&C insurers take to the cloud in efforts to adopt new technologies and deploy customer-centric innovations

Exhibit 10: Benefits of Cloud Native Applications for P&C Insurers

Source: Capgemini Financial Services Analysis, 2017

Better Agility

Lower ApplicationDevelopment Cost

Improved Scalability

Increased Flexibility

Benefits

53“CloudNativeComesofAge”,Capgemini,accessedOctober2017athttps://www.capgemini.com/service/cloud-native/

54 Ibid

24 Top 10 Trends in Property & Casualty Insurance 2018

– E.g.,LibertyMutualisusingcloud-nativeandagilemethodstoquicklydeliverinnovativeproducts:

� TheP&Cinsurerdevelopedanddeployedacloud-nativeportalwithinsixmonthsforunderwritersintheaccidentandhealthinsurancespaceinAustralia55

� Theinsurertookonly28daystolaunchaMinimumViableProduct(MVP),allowinguserstobuymotorcycleinsuranceviaanapp56

• Cloud-Nativeapplicationsenablesmoothhorizontalscalingaccordingtothedemand:

– Applicationscanmovefromtestingphasetomarketdeploymentinminimaltime,extendingbetterflexibilitytotheinsurers:

� Forexample,Allstate’sCompoZedLabs,usingPivotalCloudFoundryforcreatingcloud-nativeapplications,empowersthedeveloperstocreateanMVP,testitquickly,andifsuccessful,scaleitupinaveryshorterperiodoftime57

– InternetofThings(IoT)projectscanalsoleveragecloud-nativemethodstoachieve better scalability, reliability, and business agility58

� InthecontextofP&Cinsurance,thismeansthatcloud-nativeapproachcanempowerinsurerstobettermanagetheconnecteddevicessuchastelematicsorsmarthomesystems

Implications

• Cloud-Nativeapproachwillreducecostandtimeduringdevelopmentanddeploymentofnewapplications

• Fasterdevelopmentcycleswillallowinsurerstorespondquicklyandmorefrequentlytomarketrequirements,whichwillenhancetheircompetitiveposition

• Cloud-Nativeapplications,withtheirabilitytorunonanycloudwithoutmodification,willprovidegreaterflexibilitytoinsurers

55“LibertyMutualDeliversanInsuranceAppin6MonthswithCloudFoundry”,AlesiaBulanok,Altoros,July6,2017,accessedOctober2017at https://www.altoros.com/blog/liberty-mutual-delivers-an-insurance-app-in-6-months-with-cloud-foundry/

56Ibid

57“HowInsuranceGiantAllstateIsUsingCloudTechtoBuildNewBusinesses”,BarbDarrow,Fortune,June19,2017,accessedOctober2017at http://fortune.com/2017/06/19/allstate-insurance-cloud/

58“Cloud-NativeArchitectureandtheInternetofThings”,OpenConnectivityFoundation,June8,2017,accessedOctober2017at https://openconnectivity.org/wp-content/uploads/2016/03/OCF_Cloud-Native-IoT-White-Paper.pdf

25

1. World Insurance Report 2017,Capgemini,2017,accessedOctober2017at https://www.worldinsurancereport.com/

2. World Insurance Report 2016,Capgemini,2016,accessedOctober2017at https://www.worldinsurancereport.com/

3. World FinTech Report2017,Capgemini,2016,accessedOctober2017at https://www.capgemini.com/service/introducing-the-world-fintech-report-2017/

4. “BrokerSoftware,DigitalDistribution,AndMore:ActivityBoomsInProperty&CasualtyInsurtech,”CBInsights,December13,2016,accessedOctober2017athttps://www.cbinsights.com/research/property-casualty-insurance-tech/

5. “TheInsuranceIndustry’sGameOfDrones,”CraigCasazza,Forbes,April24,2017,accessedOctober2017at https://www.forbes.com/sites/ccasazza/2017/04/24/the-insurance-industrys- game-of-drones/#66b5e71c7225

6. “Blockchainininsurance:promiseforthefuture,”MarkBreading,PropertyandCasualty3600,December2,2016,accessedOctober2017at http://www.propertycasualty360.com/2016/12/02/blockchain-in-insurance- promise-for-the-future?slreturn=1509006971

7. “10MillionSelf-DrivingCarsWillHitTheRoadBy2020--Here’sHowToProfit”,OlivierGarret,Forbes,March3,2017,accessedOctober2017at https://www.forbes.com/sites/oliviergarret/2017/03/03/10-million-self-driving-cars-will-hit-the-road-by-2020-heres-how-to-profit/

References

26 Top 10 Trends in Property & Casualty Insurance 2018

Kumaresan AisaseniorconsultantwiththeMarketIntelligenceTeaminCapgeminiFinancialServicesSBUwithmorethanfiveyearsoftechnologyconsultingandstrategicanalysisexperienceintheITandinsurancesectors.

Saurav SwarajisaseniorconsultantwiththeMarketIntelligenceTeaminCapgeminiFinancialServicesSBUwithmorethanthreeyearsofconsultingandstrategicanalysisexperienceacrossmultiplesectorsincludinginsurance.

Raghunandan KothamasuisaseniorconsultantwiththeMarketIntelligenceTeaminCapgeminiFinancialServicesSBUwithmorethanfouryearsofconsultingandstrategicanalysisexperienceintheinsuranceindustry.

TheauthorswouldliketothankIan Campos, Gunnar Tacke, James Kruger, Karin Schweigko ler, Nathan Root, Ramesh Darbha, Satish Weber, Seth Rachlin, Silvia Milian Bon, William Sullivan, Vikash Singh, Krithika Venkataraman and Tamara Berry fromCapgeminifortheircontributionstothispaper.

About the Authors

27

About Capgemini

A global leader in consulting, technology services and digital transformation, Capgemini is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital and platforms.

Building on its strong 50-year heritage and deep industry-specific expertise, Capgemini enables organizations to realize their business ambitions through an array of services from strategy to operations. Capgemini is driven by the conviction that the business value of technology comes from and through people. It is a multicultural company of 200,000 team members in over 40 countries. The Group reported 2016 global revenues of EUR 12.5 billion.

Visit us at

www.capgemini.com

Learn more about us at:

The information contained in this document is proprietary. ©2017 Capgemini. All rights reserved. Rightshore® is a trademark belonging to Capgemini.

www.capgemini.com/insurance oremail:insurance@capgemini.com