WIR 2014 key findings_australia

Australia — Key Findings Deck

February, 2014

All materials under non-disclosure till February 26, 2014

The information contained in this presentation is proprietary. Copyright ©2014 Capgemini. All rights reserved. 2

World Insurance Report 2014 (WIR14) Introduction

WIR 2014 High Level Key Messages

WIR 2014 Key Findings Overview

Agenda


Each Year, Capgemini Publishes Insights on the Insurance Sector Through its World Insurance Report

World Insurance Report Featured Topics

Policy Administration Transformation

Claims Transformation

Multi-Distribution Model

Customer and Distribution Analysis

Optimizing the Insurer, Distributor and Customer relationship

Featured Topics

Customer Experience Index (CEI) and Evolving Distribution Strategies

Note: WIR was not published in 2010

Customer Experience Index (CEI) and Digital Capabilities of Insurers

2012 2011 2009 2008 200720132014


WIR 2014 Addresses Operational Efficiency and Assesses Digital Capabilities of Insurers while Continuing the CEI from Last Year

Customer Experience Index (CEI)

15,500 customers 30 markets

Exploring three dimensions: • products• networks/channels• customer lifecycle

Efficiency Ratio Model14 countries

Five ratios analyzed:• Claims Ratio• Acquisition Ratio• Operational Ratio• Investment Ratio• Underwriting Ratio

Spotlight Digital Capabilities

of Insurers• Current state of insurer

digital capabilities • Need for insurers to go

digital given the growth ofinternet and mobile channels

• Digital transformationto achieve top andbottom-line growth

World Insurance Report2014


The Report’s Findings Draw on Data from 30 Markets and are based on Extensive Executive Interviews

Argentina

Australia

Austria

Belgium

Brazil

Canada

China

Denmark

France

Germany

Hong Kong

India

Ireland

Italy

Japan

Mexico

Norway

Poland

Portugal

Russia

Singapore

South Africa

South Korea

Spain

Sweden

Switzerland

Taiwan

The Netherlands

UK

US

Countries Covered


AG Insurance Ageas UK Limited Allianz Italia Allianz Polska AMF Asistencia Sanitaria Collegial S.A. AXA Polska AXA Seguros Generales Espana Belfius Insurance Cardif Caser Seguros CNA Compensa TU SA Vienna

Insurance Group Delta Lloyd (Belgium) Direct Line Group DNB Skadeforsikring AS Ergo Insurance N.V. (Belgium)

Ethias NV / SA Folksam Gruppo Generali Espana Helvetia Italy Insurance Australia Group Jupiter MGA Kemper Property & Casualty Länsförsäkringar AB Llyods Banking Group Mapfre Mutua Madrileña NFU Mutual Insurance Society Ltd Nordea Liv & Pension Porto Seguro Seguros PZU SA Quixa Royal London Group RSA – Sun Insurance Office

Santalucía Insurance Company

SA Seguros Catalana Occidente Skandia Old Mutual Wealth Sparebank1 Forsikring AS SulAmerica Seguros Previdencia e Investimentos TAL Towarzystwo Ubezpieczeń

Europa Warta SA Wesfarmers Insurance Willis Zurich Financial Services

Australia Ltd Zurich Seguros

Interviews were Conducted with More Than 100 Leading Insurance Companies Across The Globe …

Executive Interviews

The following insurers agreed to be named in the report





Agenda


Insurers had generally higher profits in 2012 mainly due to lower catastrophe related claims and increased use of newer technologies and channels to improve operating and acquisition ratios

There is a clear link between positive customer experiences and firm profitability and with close to 70% of customers who do not have positive experience with their insurers, insurers have significant scope and opportunity to enhance customer experience and improve their profit margins, leveraging digital channels

Insurers report that within 5 years they expect nearly one-third of their business to occur over digital channels – Digital transformation is an effective approach to meet the increasing demands of customers, create positive experiences, and secure customer loyalty. This along with operational excellence is the way forward for insurers aiming to boost their bottom line growth

2014 World Insurance Report, Key Messages





Agenda


Absence of major catastrophic events helped insurers post improved claims ratios in 2012:• Claims expenses that touched record levels of $126 billion in 2011 fell to $77 billion in 2012 due to lower number of

catastrophe related claims.

• In Australia, compared to the $4.4 billion in claims paid out in 2011, non-life insurers paid only about $1.0 billion in 2012.

• Insurers also benefited from better aligning premiums to payouts in response to the record claim volume of 2011.

Insurer efforts in utilizing direct channels and newer technologies to acquire and serve customers helped achieve operational efficiencies:• Reduction in head count and increased use of direct channels such as internet and mobile were some of the steps

taken by insurers to reduce costs.

• Insurers who have begun making these investments might witness increased cost ratios in the short term as these efforts would take time to fructify.

Customers are gradually shifting to new alternative channels such as internet and mobile, creating opportunities for insures to improve their top and bottom-lines.• While internet-PC is already an important channel across all age groups in Australia, the importance of the mobile

channel is fast rising, especially among the younger age customers in the country.

2012 turned out to be a good year for insurers, as profit margins of most insurers improved steadily:• Aided by favorable weather conditions, increased premium volumes, better management of operating and acquisition

expenses, and stable macro-economic environment, insurers in most regions were able to post higher profit margins.

Efficiency Model — Key Findings


2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

2009

2010

2011

2012

0

20

40

60

80

100

120

140

77.4

70.5

97.6

82.8

63.0

61.0

71.4

62.5

74.0

73.8

68.9

64.0

62.5

65.0

60.3

56.6

67.1

70.5

71.7

68.5

67.7

69.1

74.2

69.6

73.0

70.4

63.2

63.7

86.4

87.0

89.6

89.2

68.3

65.7

63.4

58.5

79.0

74.7

72.8

72.8

69.5

69.0

68.4

70.8

77.6

77.0

67.5

76.0

65.5

64.5

58.9

60.6

86.8

95.3

89.7

NA

10.6

11.3

10.6

9.0

19.4

18.5

17.6

16.7

10.6

10.9

10.9

11.6

9.0 9.

714

.314

.2

13.3 13

.2 15.4

15.8

19.7

18.9 19

.020

.9 18.9

15.5

15.7

13.7

9.4

6.1 6.0

5.5

8.2

8.2

8.8

12.5

8.6

8.4

8.2

8.5

9.7

9.4

9.7 10

.2 8.2

7.2

7.7

6.7

12.5

13.1

14.4 16

.9

30.3

31.8

26.2

14.0

13.1

13.0

12.6

16.6

16.7

16.4

16.4 16

.717

.318

.118

.1

15.7 15

.1 20.4

20.4 11

.5 12.2 11

.210

.3 18.2

17.9 17

.316

.3 18.6

18.8

18.8

18.2

6.2

6.1 5.8

6.1

14.0

15.0

15.2

16.1

16.1

16.1

15.9

15.5

16.6

16.3

16.3 16

.0 15.1

15.9

16.4 15

.4

14.0

16.6

14.2

20.4

6.3

5.7

6.3

102.

094

.912

1.2

104.

4

99.1

96.2

105.

495

.6 101.

310

2.0

97.9

93.7

87.2 89

.8 95.0

91.2

91.9 95

.9 98.3

94.6

105.

610

5.8

110.

510

6.8

110.

510

4.7

97.7

95.6 10

2.0

99.2 101.

410

0.8

90.5

88.9

87.4

87.1

103.

799

.296

.996

.8

95.9

94.7

94.4 97

.0 100.

910

0.1

91.6 98

.1

91.9 94.3

87.5

97.9

123.

3 132.

912

2.2

Claims ratio Operational Ratio Acquisition ratio

Un

der

wri

tin

g R

atio

(%

)

Australia witnessed the biggest improvement in underwriting ratio aided by lower claims costs due to absence of any major disasters

Note: The ratios are valid only for non-life insurance; The ratios reflect non-life data as reported by the countries themselves, and hence include health insurance for Belgium, India, Italy, Spain, Switzerland, and the Netherlands; At the time of analysis, 2012 data was not available for India, where the financial year ends March 31st; The previous year ratios may have changed based on the refresh of results for some of the companies; PP refers to percentage points.

Source: Capgemini Analysis, 2013

Despite substantial reduction in claims paid out in 2012 compared to 2011, higher reinsurance costs, as well as lower interest rates, had an adverse effect on profit margins in Australia

Non-Life Insurance Expenses as a Percentage of GWP (%), 2009–2012PP Change2011-12

Australia Japan Canada Belgium Germany US UK Netherlands Italy Switzerland France Brazil IndiaSpain

2009-11

(16.8) (9.8) (4.2) (3.8) (3.7) (3.7) (2.1) (0.6) (0.3) (0.1) 2.6 6.5 10.4 NA

19.2 6.3 (3.4) 7.8 6.4 4.8 (12.8) (0.6) (3.1) (6.8) (1.5) (9.3) (4.4) (1.1)


While Australia witnessed a significant improvement in claims ratio, the acquisition and operating ratios remained stable

A significant improvement in claims ratio in Spain was offset by deterioration of operational and acquisition ratios leading to a very minor improvement in underwriting ratio

Improvement in Australia’s acquisition ratio was likely due to the rise in 2012 premium rates, given the spate of disasters to befall the country in 2011, as well as the possibility of lower commissions

Underwriting ratio of non-life insurers in France was badly impacted by the increase in claims ratio which was driven by many low and medium-intensity damages caused by the cold wave in 2012

Countries / PP Change in Ratios, (2011-12) Australia Japan Canada Belgium Germany U.S. U.K. Netherland Spain Italy Switzerland France Brazil India

Claims Ratio -14.8 -8.9 -4.9 -3.7 -3.2 -4.6 0.5 -0.4 -4.9 0.0 2.4 8.5 1.7 NA

Operational Ratio

-1.6 -0.9 0.7 -0.1 0.4 1.9 -2.0 -0.5 3.7 0.3 0.5 -1.0 2.5 NA

AcquisitionRatio

-0.5 0.0 0.0 0.0 -0.9 -1.0 -0.6 0.3 0.9 -0.4 -0.3 -1.0 6.2 NA

Underwriting Ratio

-16.8 -9.8 -4.2 -3.8 -3.7 -3.7 -2.1 -0.6 -0.3 -0.1 2.6 6.5 10.4 NA

Note: PP refers to percentage points; Refers to change; 2012 Data for India is unavailable.Source: Capgemini Analysis, 2013; Company Annual Reports, 2009-12; Industry Reports from Insurance Associations and Regulators

High DeteriorationMedium DeteriorationLow ChangeNo changeMedium ImprovementHigh Improvement

The large improvement in underwriting ratios across Australia, Japan, and Canada was primarily driven by improvements in their claims ratios


Several insurance markets witnessed marginal improvements in their CEI scores, however the overall percentage of customers having positive insurance experiences remains low:• Except US, where 51% customers reported positive experiences, all other markets had more than half of their

customers with either neutral or negative experiences, presenting a potential flight risk challenge.

• Australia witnessed a significant deterioration of positive experience levels causing it to slip four places from second last year to sixth this year.

There is a strong link between the level of positive experiences and factors that drive profitability:• Customers with positive experiences are nearly twice as likely to refer their friends or buy additional products from their

insurers.

• This behavior gets predominant in emerging markets such as Latin America and Developing APAC, clearly indicating a huge opportunity for insurers trying to tap into these markets that have huge growth potential.

Agent is still the dominant channel, however convenience and ease of use is driving customers, especially the younger ones towards digital channels:• Excluding the agency channel, new age digital channels such as internet has overtaken other traditional channels such

as the bank and broker to emerge the next most popular one.

• In emerging markets such as Latin America and Developing APAC, internet and mobile were cited as highly important by younger customers

• Even in Australia, the importance of the mobile channels among the younger customers is increasing, making it imperative for insurers to focus on enhancing their mobile capabilities.

CEI — Key Findings


World Insurance Report Voice of the Customer (VoC) Survey Covers 30 Countries Across Five Regions

Countries Covered in WIR 2014 for the VoC Survey

Canada US

North America

Argentina Brazil Mexico

Latin America

Belgium France Germany Denmark Ireland Italy Netherlands Portugal Spain Norway Sweden Switzerland UK Austria Poland Russia

Western Europe

China India

Developed Asia-Pacific

Australia Hong Kong Japan Singapore South Korea Taiwan South Africa

Developed Asia-Pacific


The 2014 WIR Customer Experience Index (CEI) Measures Customer Experience Across Three Dimensions

Source: Capgemini Analysis, 2013

The 2014 WIR Voice of the Customer (VoC) will provide insights into customer satisfaction levels with personal-line insurance products and distribution channels.

Dimensions of Capgemini’s Insurance Customer Experience Index (CEI)

Channels / Networks

Prod

ucts

Custom

er

Lifecycle

CEI

Research and Getting a Quote Policy Acquisition Policy Servicing Claims Servicing

Insurance Agents Insurance Brokers Bank Branches

Life and Savings Pensions and Annuities Automobile Insurance Property Insurance

Phone / Call Centre Internet Mobile


76%77%

69%73%72%71%71%

66%62%62%

63%62%

64%59%

63%64%

59%60%60%

57%52%

54%56%54%54%55%54%52%52%

46%

9%7%

13%8%8%8%7%

8%10%11%7%8%5%

10%5%4%

9%8%6%

6%9%

7%5%6%6%4%3%5%4%

3%

15%16%18%20%20%21%22%

26%27%28%30%30%31%31%31%32%32%32%34%

37%39%39%40%40%41%41%43%44%44%

51%

Australia witnessed a significant deterioration in the percentage of customers with positive experience levels

Source: 2013 Insurance Voice of the Customer Survey, Capgemini, 2013

As a result of this deterioration, Australia slipped four positions to 6 th in 2013 from 2nd in 2012

Insurance Customers with a Positive/Negative Experience by Country (%), 2013

Positive ExperienceNeutral ExperienceNegative Experience

USNetherlands

AustriaSouth Africa

CanadaAustraliaBelgiumGermanyArgentina

SwitzerlandFranceIrelandIndia

MexicoUK

PortugalBrazilSpainItaly

PolandDenmarkNorway SwedenJapan TaiwanRussia

SingaporeHong Kong

ChinaSouth Korea

% Point Change for Positive Experience

2012–13

4.5% 18.2% 0.0% 1.0%

(3.4%) (4.7%)

1.0% (0.5%)

1.2% 5.6% 3.2% 6.5%

(7.1%) (8.4%)

(11.2%) 12.3% (0.9%)

2.9% 7.0% 4.1% 1.8% 4.7% 9.0% 8.8% 2.2%

(0.3%) (3.5%) (1.0%) (2.9%) 1.7%


0%

20%

40%

60%

80%

100%

71%

58%

46%

37% 36%

18%

41%

34%28%

19% 19% 21%

Australian non-life insurance customers with positive experience are nearly twice as likely to refer a friend to their insurer

Life

Percentage of Customers with Positive and Neutral or Negative Experiences Likely to Refer a Friend to their Insurer, (%)

For life insurance, it is likely that, in addition to positive experience, several other factors such as brand, quality of advice, and financial performance play a major role in obtaining customer

referrals

33% 67% 26% 74% 40% 60% 25% 75% 30% 70% Overall % of customers with positive and neutral or negative experiences


Customers likely to refer a friend as a percentage of customers with Positive Experience

Customers likely to refer a friend as a percentage of customers with Neutral or Negative Experience Latin

Am

erica

Devel

opin

g ...

North

Am

erica

Devel

oped

...

Europ

e

Austra

lia

0%

20%

40%

60%

80%

100%

68%

54% 52%

35% 37%41%

44%

36%

25%

17% 19%24%

Non-Life

40% 60% 31% 69% 52% 48% 33% 67% 40% 60%28% 72% 48% 52%


Overtaking traditional channels, internet-PC has emerged more important, as perceived by customers across all age groups

45%

61%

41%

56%

44%

67%

45%

59%

37%

56%

48%

43%

52%

56%

38%

50%

38%

65%

48%

59%

38%

52%

38%

52%

55%

75%

44%

65%

57%

43%

50%

63%

40%

59%

49%

43%

Agent Phone Internet-PC Internet-Mobile

Traditional Channels Digital Channels

Channel Importance by Region (%), Younger vs Older Customers

While mobile is not quite popular among the older age groups, its importance is fast rising among the younger customers, making it imperative for insurers to focus on enhancing their mobile capabilities


(8%)

(6%)

(4%)

(12%)

(5%)

18 – 34 years35+ years

Latin America

North America

Developing APAC

Europe

Developed APAC

4%

0%

(4%)

(2%)

0%

0%

2%

0%

3%

(4%)

2%

0%

6%

19%

6%

(0%) (24%) 22%Australia

Difference Difference Difference Difference

25%

23%

22%

43%

41%

21%

31%

42%

28%

43%

43%

43%(13%)


Within the next five years, nearly one-third of insurance business is expected to be generated via digital channels:• While the contribution of internet-PC is expected to nearly double, it is the growth of mobile channel-

5-10 times its current contribution, that is creating several opportunities for insurers.

Globally, there is a significant scope for improvement in the level of digital features offered by insurers:• Majority insurers are offering higher levels of digital capabilities by assisting customers in research

and providing quotes, however when it comes to the truly important stage of claims servicing, insurer offerings often fall short of customer expectations.

• North-American insurers are digitally more advanced than insurers in other regions and similarly non-life insurers are much more digitized than their life counterparts.

Digital maturity, which is strongly related to profitability and efficiency, is relatively low for the insurance industry:• Firms with a strong digital presence and customer focus are 26% more profitable than other firms.

• Few leading insurers are using advanced and innovative digital features to service customers and enhance client-centricity.

Digital intensity in combination with investments in channel integration, multiple touch points, and predictive analytics is likely to drive bottom line growth.

Spotlight — Key Findings


Digital transformation entails a profound shift in the insurance firm and its relationship with distributors, suppliers, and end-customers

Maturity of Development

Customer ExperienceResearch and Get a

Quote

Policy Acquisition

Policy Servicing

Insurance productServices Services

INSURER BACK OFFICE

Customer Interactions

Claims Servicing

Insurer Front OfficeDistributors and

Partners

End Customers

Sales/Service Staff, Intermediaries, and

Suppliers

Insurance Company

Business Information and Data Management

Customer Interactions

Focus Area for WIR 2014

Operational and Business Model for Successful Digital Transformation

Insurers who can successfully execute the move toward digital transformation will be best positioned to capture the upcoming growth opportunities


Insurers would need to implement key functionalities for various stages across the insurance life cycle to enhance customer experience

Key Areas of Functionality Across insurance Life Cycle

Online Claims Notification

Online Claims Processing

Static/Dynamic Organizational Information

Real-Time Information Capture/Gathering

Claims ServicingPolicy ServicingResearch and Get a

Quote

Policy Details/View

Policy Changes

Seamless Multi Channel Integration

Online Application and converting quote to policy

Proactive ProspectingClaims Reports Including

Tracking

Policy Acquisition

Customizable Quote Generation

Document Management

Payment and Policy Issuance

Reminders, Billing, and confirmation

Proactive Query and Complaint Resolution

Effective Data Management and Use of Predictive Analytics

Ability to Transact through Various Touch Points

Proactive Claims Identification, Assistance and

Processing

Important area for customers


While insurers are providing advanced quote gathering features, there is a significant scope for improving policy and claims servicing features

InsuranceResearch and Get a Quote

Policy Acquisition Policy Servicing

Claims Servicing

North America

Europe

Asia-Pacific

North America

Europe

Asia-Pacific

Life

Non-Life

Intermediate Advanced Leading PracticeBasicNote: Basic: A primitive online feature providing simple information;

Intermediate: Customers can interact via online channel; Advanced: Insurers are able to respond back to customer requests and simple transactions can be

completed online; Leading Practice: The entire transaction life-cycle can be completed online without the need to be present in

person

Digital Online Capability Levels by Value Chain for Different Regions, 2013


Across different insurance life cycle stages, insurers have adopted few leading digital practices to enhance customer experience

Research and Get a Quote

Policy Servicing

Claims ServicingPolicy Acquisition

High Importance Area for Customers

Leading Digital Practices Across the Insurance Value Chain


Additionally, some other leading practices adopted by insurers globally have been truly innovative

Glow App – Fertility App

Bupa’s Apps – Encouraging Healthy Lifestyle

Allstate’s All Inclusive Mobile App for Claims

Marmalade – Targeting Young Drivers

Verti – A Complete Online Insurance Experience

Additional Leading Digital Practices Adopted by Insurers


Customer centric approach to digital is important for top-line but insurers need to streamline their operations for bottom-line growth

Customer Centric Approach

Operational Excellence

Seamlessly Integrated Multiple Channels

Ability to Transact through Various Touch

Points

Effective Data Management and Use of Predictive Analytics

Effective Digital Transformation

Top-Line Growth

Bottom-Line Growth

Way Forward for Effective Digital Transformation

Significant technology investment is essential to ensure operational excellence and effective digital transformation

The information contained in this presentation is proprietary.© 2014 Capgemini. All rights reserved.

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WIR 2014 key findings_australia

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