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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
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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?
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Setting the Agenda for Today Before Jumping In…
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• 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…”
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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
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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
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…And China Insurance Market is One of the Largest and Fastest Growing Markets In the World
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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%
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However, Historic Heights of 30-40% Overall Market Growth Is Unlikely to Repeat in the Future…
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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
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Market Itself Becomes Biggest Challenge For Us in terms of Macroeconomic Uncertainties
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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
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Concentration in China Market is Likely to Continue, But Market Development and Competition Can Change This…
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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%
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Under Fast Changing Market Environment, It’s Time to Take Holistic Strategy and Build Structural Competencies
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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
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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?
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Major Strategic Options for Insurance Business Growth
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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?”
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A: Higher Market Penetration: What Are the Major Value Metrics?
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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
Selling more premiums to existing customers
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
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A: Higher Market Penetration: Pricing Optimization and Productivity Improvement
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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
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B: Higher Profitability from Improved ROE - What Are The Major Value Metrics?
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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
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B: Higher Profitability from Improved ROE – Improving Claim Ratio by Optimizing Claims Recoveries in P&C
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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
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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?
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Holistic Technology Mapping Needs to Be Done for Top Business Agenda
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Sustainable GWP and Profit Growth
Higher Market Penetration
Higher Profitability
Securing Business Insights
Improving Return on Equity (ROE)
Reaching to new, un-insured customers
Selling more premiums to existing 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
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How Talent Management Technology Helped AXA Make HR More Strategic and Centralized
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• Worldwide number of employees 157,000 in 56 countries
• Multiple HR systems across the globe, including PeopleSoft and SAP and needed Cloud
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How Cloud Technology Helped Delaware Life Achieve Real-Time Data in One Location
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Insurance Customers Have Achieved So Much Strategic Benefits…
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Insurance Customers Have Achieved So Much Strategic Benefits…
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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?
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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…
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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
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Oracle Insight: Oracle’s Strategic Program for Strategic Customers A Consultative Method That Recommends Solutions for Client’s Business Challenges
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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
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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
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…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
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Oracle Insight Program is a Strategic Problem Solving Exercise for Our Strategic Customers How Our Engagement helps Customer’s business and IT alignment
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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
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IP/ Assets Developed by Digital Practice
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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
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Big Data-relevant industry dynamics and use cases developed and collected by Big Data / IOT Practice
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Banking
Rail & Logistics
Telecom
Automotive
...more available in bullet list format, and as industry studies e.g., Retail, Oil & Gas
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Sample Engagement Deck on Digital Transformation
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Sample Engagement Deck on Digital Transformation
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