The General Insurance Report 2015

The Future
of General
Insurance 2015
A special report
Sponsors

3 -
Forewords
The insurance community often talks about putting
customers at the centre of their thinking but this is
easy to say and much harder to do, especially against a
backdrop of increased competition, squeezed margins,
economic uncertainty, and continued regulatory and
legal change. That is just one of the reasons why
the CII is delighted to support this research into the
challenges facing the insurance community as it looks
to ensure it remains relevant to the changing needs of
a changing society.
It is clear throughout this report, that there is still
much to do, especially in response to the new digital
landscape, and I hope that the findings act as a spur
for those working in insurance to embrace change and
innovation: only then can they start to think differently
and ensure they are able to develop insurance solutions
that can meet customer expectations and for example
help support the development of new business models
emerging from the likes of the so-called sharing or
collaborative economy.
The insurance community must respond, as former US
Army chief of staff General Eric Shinseki so neatly puts
it because “if you don’t like change, you’re going to like
irrelevance even less.”
I hope the information in this report will encourage
everyone across the profession, from junior staff to
established industry leaders, to invest in understanding
the potential challenges they and their customers will
face in the future, the opportunities the data explosion
and digital development present and to identify the
additional skills and knowledge they will need to order
to meet changing customer needs.
Ant Gould
Director of Faculties
The Chartered Insurance Institute
For centuries the insurance industry has underpinned
the economic resilience of households, of trade and of
nations. Insurers put broken businesses back on their
feet, provide financial security for families and invest
heavily in national infrastructure. It is an industry of
strategic importance and its health should concern us
all.
It is for this reason that Marketforce has, for the second
year, decided to take the pulse of the industry and
asses its fitness for a future that is being shaped by
unprecedented technological and competitive threats.
Our health check finds an industry that has taken action
to address some of the weaknesses we identified last
year: it is with some relief we can report that insurance
companies have finally woken up to the need to optimise
their websites for mobile.
Yet the industry’s much-discussed conservative culture
means its reflexes are still slow when it comes to
responding to the push and shove of the digital world. Be
it changing customer behaviour, the Internet of Things
or driverless cars, the disruption is rapid, relentless and
profound. Too many insurance companies are reeling
from the digital onslaught, which comes as the industry
combats a rearguard action against ongoing regulatory
scrutiny, economic woes, spiralling claims costs and
fraud.
Our research suggests there is now a window of
opportunity for insurance companies to put in place the
leadership, systems and partnerships to not only build
immunity to the forces of digital disruption but also to
forge their own industry-defining innovations. Failure to
act could leave this strategic industry vulnerable – and
all of us the poorer for it.
Juliet Knight
Director
Marketforce

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Chapter One
Facing a perfect storm
Chapter Two
The future of motor insurance
Chapter Three
The future of data
Chapter Four
Engaging the connected customer
Chapter Five
The insurer as innovator
Chapter Six
Digital channels – taking customer experience to the
next level
Chapter Seven
Claims - tackling costs, improving experiences
Chapter Eight
The fight against fraud
5
9
12
17
20
23
27
31
34
Contents
Conclusions

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Chapter One
Facing a perfect storm
Today, the digital titans at the heart of this crucible use
their vast treasury of user data and brand know-how to
wow customers. Start-ups, capitalised by those keen
to back the next Google or Amazon, fan the flames of
innovation.
As these pioneers, large and small, apply the white
heat of innovation to new industries, those in the line
of fire must be ready to respond – and this includes the
insurance industry, with its centuries-long history of
resilience, adaptability and survival.
This global industry has been under pressure for some
time, squeezed by a weak economic climate, increasingly
stringent regulation and ever more audacious fraud.
Underwriting discipline remains a concern while
disruptive technologies have made it ever easier for
customers to switch insurers, leading to higher costs
and tighter margins. Against this backdrop of pressured
balance sheets and restless customers, insurers
are right to fear competition, both from incumbent
players and new entrants. Our research shows that
market competition has been the main pressure on the
industry over the last 12 months, cited by 43 per cent of
respondents and ahead of regulation, which was the top
pressure in 2014.
Fig 1 Relative intensity of pressures on the industry in the last
12 months
2015 2014
Market competition Regulation
Economic conditions Market competition
Regulation Economic conditions
Changing consumer
behaviour
Changing consumer
behaviour
Innovators: a clear and present threat
Competition is driving innovation as insurers, both
incumbents and new entrants, seek to win market share
through a differentiated offer. Already there are some
radically different propositions in the market place that
are winning loyal adherents from among groups of
disaffected customers: Bought by Many in the UK and
Friendsurance in Germany are applying the principles
of the social media revolution to the insurance model
while P2P models, such as 2014 start-up Guevara,
which allows groups to pool their resources and protect
each other, cut out the insurer altogether.
Fig 2 The players most likely to disrupt the insurance market
with a new product or service:
Yet our survey finds that most insurers (59 per cent)
expect disruptive innovation to come from existing major
players. This is a confident assertion from an industry
that is better known for its virtues of prudence and
resilience than its creativity and ingenuity, suggesting
insurers may still be complacent about the threat posed
by new entrants.
Google takes second spot in the ranking of most likely
disruptors, cited by 22 per cent of our respondents. In
2011 Google acquired aggregator service BeatThatQuote
for £37.7 million and subsequently launched Google
Compare in the UK. Analysts estimate it has a mere
The digital revolution ignited a firestorm of innovation. Fuelled by public appetite
for smart gadgets that entertain, connect and transact, this storm ripped through
traditional businesses, turning some to ashes, forging reinvention in others.
An existing major player
Google
Facebook
A P2P insurer
Other

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two per cent of the insurance aggregator market in the
UK despite its high visibility in ad listings1
. Undeterred,
Google has recently dipped its toe in the US market,
albeit limited to a single product in a single state.
The significance of these cautious investments should
not be under-estimated: Google is likely to learn from
its initial insurance ventures to add incremental levels
of innovation and improvement – as it did with Google
Maps, for example - until it can deal a knock-out blow.
Google’s feared competitive edge is its ability to mine
huge seams of behavioural data, which could then yield
significant gains in underwriting and pricing. Indeed,
the signal that Google believes it is data that will drive
innovation in insurance comes from that 2011 acquisition
of BeatThatQuote; while the deal has yet to yield obvious
returns, this bit player in the UK aggregator market
incentivised users through cash backs to give it more
data. Incumbent insurers may do well to take note.
Facebook, meanwhile, remains a potent yet enigmatic
threat. Although only 9 per cent believe the social
media giant has the greatest potential to disrupt the UK
insurance market, 62.5 per cent of insurers and brokers
who work in personal lines expect Facebook to enter
the market at some point, with a most likely entry date
of late 2017. The company has tentacles that stray into
insurance: the mobile-based insurance intermediary
Kroodle allows customers in the Netherlands to
automatically populate application forms with details
from Facebook while health insurer Vitality provides
perks to customers who use the health app Move, which
was purchased by Facebook in 2014. This acquisition
means the Menlo Park-based company has frontline
exposure to the fast-emerging wearable device market
that is expected to be a hotbed of innovation in the
coming years.
expect digitally-enabled
new entrants to take over
a significant share of the
personal lines insurance
market within five years
Indeed, it is clear that personal lines insurance will
be massively disrupted in the next five years as new
entrants wow customers with innovative new offers.
Ninety per cent of our respondents expect digitally-
enabled new entrants to take over a significant share
of the personal lines insurance market by 2020. This
means the clock is already ticking for incumbents keen
to retain market share.
Learning to live with the new regulatory
regime
If competition now tops the pressures weighing on
insurance companies, it is because the industry’s fears
about increasingly stringent regulation have abated
over the last 12 months. A year ago insurers feared
the dawn of a more interventionist regime under the
newly formed Prudential Regulation Authority (PRA)
and Financial Conduct Authority (FCA). Although the
threat level has eased, this year regulation was still the
top pressure for almost one-quarter (24 per cent) of our
surveyed organisations.
12%
expect the FCA’s proposed
ban on opt-out selling to
make a significant dent in
profitability
Certainly the FCA continues to scrutinise the market:
last year’s work on insurance add-ons has been followed
with a proposed ban on opt-out selling. Yet the impact on
profitability looks set to be muted: of those respondents
who use opt-out selling, 88 per cent expect to see
either no or only a slight reduction in profitability with
just 12 per cent predicting a significant reduction. The
bigger worry for the industry is the threat of continued
intervention, which almost half our respondents last
year feared could hinder the development of new and
innovative products and services, and at a time when
innovation has never been more important. To stay
compliant, insurers must make sure innovation always
puts the customer first.
90%
1. Financial Times, 8 December 2014

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of insurers expect the the
CMA ban on “Most-Favoured-
Nation” price agreements to
exert downward pressure on
premiums
The industry has also been under the scrutiny of the
Competition and Markets Authority, which has banned
Most-Favoured-Nation price agreements between
aggregators and insurers in an attempt to increase
competition in the aggregator market. Sixty-seven
per cent of insurers expect this to lead to downward
pressure on premiums for already squeezed motor
carriers.
No relief on the economic front
84%
agree that the influx of
insurance capacity from
non-traditional sources is a
phenomenon that is here to
stay
At the same time, macro-economic woes continue to sap
balance sheets. Low interest rates in the UK are eroding
margins, both by impacting investment returns and
encouraging an influx of capacity, and could give rise to
difficulties with Solvency II obligations. These pressures
are not going away: 84 per cent agree that the influx of
insurance capacity from non-traditional sources, such
as pension funds and private equity, is a phenomenon
that is here to stay. Learning to live in this softer, lower-
margin environment will require innovation to improve
underwriting profitability, reduce costs and capture
higher margins.
59%
agree that the 9.5% insurance
premium tax will cause
a significant minority of
customers to reduce their
insurance cover
The recent hike in the insurance premium tax, up from 6
per cent to 9.5 per cent, although still a lower rate than
many countries in the EU, is another economic blow.
As these costs filter through to premiums, squeezed
policy-holders could be tempted to skimp on cover: 59
per cent of our respondents expect to see a significant
minority of policyholders reduce their cover as a result
of the higher tax rate. This impact could be countered,
however, if insurers effectively communicate with
customers to highlight the personal risks of reduced
cover.
70%
of insurers agree that fiercer
competition, the insurance
premium tax, a weak global
economy and continued low
interest rates together look
set to create a perfect storm
for UK for insurers in 2016
Further tax challenges may lie ahead. As the tax affairs
of major multinational organisations come under the
scrutiny of the OECD’s BEPS tax avoidance project,
insurers could see a punitive tax rate applied to their
intra-group reinsurance strategies. This would only
compound the impact of ongoing pressures: 70 per cent
of insurers agree that fiercer competition, the insurance
premium tax, the weak global economy and low interest
rates look set to create “a perfect storm” for insurers
next year.
These stormy waters will test the industry as never
before. The concern, however, is that a preoccupation
with external forces will lead insurers to neglect the
one area – the relationship with the customer - that
could prove a safe haven amid the storm. Customer-
centric innovation could be the route to protect market
share, meet regulatory appetite for fair conduct and
yield operational and underwriting improvements to
weather fiscal and economic downturns. Yet, in both
2014 and 2015, our respondents have ranked consumer
behaviour last in the pressures facing their organisation,
suggesting too many insurers are paying twice as much
attention to their competitors as they are to their own
customers.
67%

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Chapter Two
The future of motor insurance
Recent decades have seen the steady erosion of
profitability in motor as fierce competition, aided
by disruptive technology and changing consumer
behaviours, drove down prices while surging claims
costs further hollowed out margins. And the coming
decade promises to unleash forces that will change
not only motor insurance as we know it but also the
structures of vehicle ownership, transport systems and
urban planning.
On a knife edge: price pressures,
profitability and premiums
Motor insurance premiums are predicted to
increase 2.74% in 2016 and only...
49%
expect motor insurance to be
profitable next year
Hard-pressed motor insurers clawed into profit in 2013
and 2014 but analysts predict the market could slide
back into red this year2
. Insurers have not been able
to maintain more than two consecutive years of profit
in the last three decades and the marginal profits of
2013-2014 were propped up with reserve releases, an
unsustainable model for the longer term. Earlier this
year, however, premiums rose for the first time since
2011, valu-on-year increase reported in Q1 2015, and
further sharp increases over Q23
. Further increases
would be required to deliver more sustainable premiums
from rock bottom levels yet our respondents predict
a very modest 2.74 per cent increase in 2016. This is
a sector beset by uncertainty, with our respondents
divided as to whether last year’s meagre profits can be
sustained: only 49 per cent expect motor insurance to
be profitable in 2016.
12%
foresee a significant hit to
profitability from the new
rules on add-on sales
Price competition is not the only challenge facing motor
carriers; regulatory scrutiny, from the CMA and FCA, has
also piled on the pressure in recent years. Our research
shows that the FCA ruling on add-on GAP insurance
sales, which gives customers four days to shop around,
will not have a significant impact on the industry: of
those who offer GAP insurance, 54 per cent expect little
or no impact and only 12 per cent foresee a significant
hit from the new rules. In most other lines, this muted
impact could be absorbed but with the profitability of
motor lines balancing on a knife edge, this could be
sufficient to tip insurers back into the red.
The connected car: the journey begins
The connected car is an innovation that, backed by EU
policy4
, is already en route. It’s an obvious marriage of
two beloved conveniences of modern life: the car and
the smartphone. The connected car will create a safer
and more convenient way to check the traffic, map out a
route or pick a playlist, using well-known apps such as
Google Maps and Spotify, via a handsfree interface built
for driving.
Car manufacturers have responded to the technology
challenge posed by the connected car, leading to
partnerships with mobile and digital frontrunners.
Google’s Open Automotive Alliance, which is working
towards using the Android operating system to power
the next generation of connected cars, pulls together
38 motor manufacturer partners and 20 technology
partners.
With the first cars with Android integration due to roll
off the assembly lines by the end of this year, there’s
Those insurers who doubt the power of innovation to not only disrupt but devastate
existing models need only look to motor lines to shake their complacency.
2. EY’s UK Motor Insurance Results seminar, June 2015
3. AA British Insurance Premium Index showed the Shoparound quote for comprehensive motor insurance was up 5.2 per cent in Q2 2015
4. In 2015 the European Parliament voted in favour of the eCall regulation, which will require all new cars from 2018 onwards to be fitted with technology that will automatically
call emergency services in the event of serious incident.

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an urgent need for motor insurers to understand the
market implications of the connected car. Some are
positive, with likely reductions in road traffic incidents,
personal injury claims5
and maintenance issues as
manufacturers will be able to remotely diagnose and
quickly resolve potential issues with the new vehicles.
Six out of ten think it’s likely that motor
manufacturers will move into insurance once
connected cars are on the road
Other implications could prove profound for insurers as
car manufacturers capture the kinds of data that would
enable them to manage insurance risk themselves:
three-quarters (75 per cent) think it’s likely that motor
manufacturers will offer longer warranties as they
trouble-shoot issues before they become expensive
to resolve and 63 per cent think it’s likely that motor
manufacturers will move into insurance once connected
cars are on the road.
Even if insurers still ultimately underwrite the policies,
there’s a clear risk that they will lose control of the
customer relationship and with it any opportunities to
cross-sell policies in more profitable lines. This risk is
clearly recognised by insurers:
»» Three-quarters (77 per cent) agree that partnering
with motor manufacturers will be key to retaining
market share
»» 78 per cent agree that data from telematics and the
connected car holds the key to deepening customer
relationships
68%
agree that over the next
ten years the model of car
ownership will shift towards
paying a monthly fee that
includes breakdown cover
and insurance
These findings underscore the emergence of data as the
key strategic asset. As digital technology diverts the flow
of data from insurers to manufacturers, insurers risk
being sidelined: two-thirds (68 per cent) agree that over
the next ten years the model of car ownership will shift
towards paying a monthly fee that includes breakdown
cover and insurance. This is already happening as the
keeper of the data has the opportunity to leverage this
advantage to set the terms of car ownership: Peugeot’s
Just Add Fuel offer sees customers pay a flat monthly
fee irrespective of their individual risk profile to cover
car costs, insurance, tax, warranty, servicing and
roadside assistance. The additional risk exposure to the
car-maker is managed by the data flow from telematics
devices so that repeated instances of poor driving will
terminate the contract.
It is not only manufacturers that threaten to dislodge
the role of the insurer. Car clubs are emerging, where
insurance is purchased by an organisation on behalf of
thedrivers,whileP2Pcarrentalprogrammes,replicating
the hugely successful Airbnb model, could see drivers
willing to offset the costs of car ownership by renting
out their vehicle to other individuals: with easyCar Club
members earning upwards of £1,500 a year, this is a
model that could gain real traction in the marketplace.
Insurance companies must think hard about how to stay
relevant in the sharing economy6
, either by launching
their own model or through partnership with disruptors:
in July 2015, for example, leading insurer Admiral
announced a partnership with easyCar Club to provide
comprehensive insurance on a P2P basis.
Telematics: retaining control of the
customer relationship
84%
agree that engaging
consumers by offering a
value-added service beyond
simple insurance will be
crucial for motor insurers
to avoid being pushed down
the value chain
With a key market under threat as data flows shift,
insurers will need to cement their relationship with the
insured. Data will be key to converting a once-a-year
grudge purchase into an engaged relationship built
5. The number of injury claims has been increasing at around 10 per cent per annum since 2013, according to EY’s Motor Insurance Results seminar, June 2015
6. Research by easyCar Club in July 2015 shows the growing popularity of the sharing economy, with lack of awareness the main barrier to further growth. Nearly three-quarters
of Britons who haven’t yet used the sharing economy (73 per cent) cited a lack of knowledge as the main reason, more than double the number who cited factors such as value
for money, reliability or quality. When people do use P2P, they tend to use it again: 69 per cent of P2P renters in 2015 are repeat customers, with many hiring more than once a
year (62 per cent), suggesting considerable scope for growth in this market as the concept becomes more widely understood.

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upon meaningful and personalised interactions that add
real value to the customer and cannot be easily replaced
by other providers. The industry clearly recognises the
need for this approach: 84 per cent agree that engaging
consumers by offering a value-added service beyond
simple insurance will be crucial for motor insurers to
avoid being pushed down the value chain.
29%
of insurers who offer motor
insurance have a telematics
proposition and a further 19%
plan to introduce one in the
next two years.
To achieve this level of customer engagement motor
insurers need the daily data flows from a telematics
device that enable them to truly know and understand
the customer. Our survey reveals a significant minority
of insurers are already utilising this transformative
technology: 29 per cent of those offering motor
insurance have a telematics proposition and a further
19 per cent plan to introduce one in the next two years.
Motor insurers and brokers who work only in personal
lines have been significantly more proactive than their
commercial lines counterparts: 54 per cent of personal
lines motor organisations already offer a telematics-
based policy and a further 13 per cent plan to do so
within 2 years, compared with 25 per cent and 19 per
cent respectively in commercial lines. With the value-
added services that telematics can offer commercial
fleets, this suggests a significant missed opportunity.
16%
of UK motorists could have
a telematics-based policy in
five years’ time
Slow consumer uptake may explain why the industry
is dragging its feet in accessing the data rewards of
telematics. Yet our research suggests that telematics
is gaining traction with consumers: our survey
respondents expect that on average 16 per cent of UK
motor policies will be telematics-based by 2020, up from
3.2 per cent now7
, allowing early adopters to leverage
this data rush to improve underwriting accuracy, price
competitiveness, claims management and customer
engagement. Those who fail to invest in telematics now
could find that by 2020 the data advantage has already
been lost to competitors.
The driverless future
Fig 3 The timeline for when organisations will start working on
a strategy in response to the development of driverless cars
66% of motor insurers and brokers will be
working on a driverless car strategy in the next
five years...but 17 per cent have no plans to
address this threat
The connected car is an evolutionary change; the
driverless car is a revolution that will not only overturn
traditional motor insurance – with no driver there will
be no personal liability - but transform many aspects
of modern life. Autonomous vehicles that can be
7. Uswitch poll
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11 -
summoned and dismissed at will could reduce urban
vehicle usage by as much as 90 per cent, deliver drastic
cuts in pollution and noise, ease urban crowding by
removing the need for parking, increase independence
for the elderly, disabled and children, not to mention
virtually eliminating road accidents8
.
The concept has attracted significant public debate, with
varying degrees of excitement and scepticism, and the
driverless car is certainly on the industry’s radar: 19
per cent of those working in motor have a team already
looking at the implications for driverless cars and a
further 49 per cent expect to start working on a strategy
within five years. However, 9 per cent of motor insurers
and 25 per cent of motor insurance brokers think they
will never work on a strategy for driverless cars.
This is a worrying degree of complacency concerning
a possible extinction-level threat to personal lines only
motor insurers. Driverless cars are already in action:
Google’s driverless cars have reached the milestone of
a collective one million miles on the road and are active
on the roads of Mountain View, California and Austin,
Texas. Earlier this year the British Government gave
the greenlight for testing driverless cars in four UK
towns and cities while the Swedish city of Gothenburg
has given Volvo permission to test 100 driverless cars
in 2017.
There are significant technology challenges associated
with connected and driverless cars9
but the companies
backing these technologies are proven innovators
and problem solvers. The insurance industry needs to
be ready to confront these emerging challenges and
opportunities – a failure to even consider a strategy for
these innovations is a failure to understand the nature
of the changes already afoot.
8. Sources: The Economist, Google, International Transport Forum
9. In July 2015 it was revealed that hackers can take control of some connected cars, raising a range of worries about safety and future crash for cash scams.

- 12
Chapter Three
The future of data
Yet this data advantage is now being undermined as huge
volumes of new data from a proliferation of devices11
sweep through the modern enterprise, enabling
digitally-savvy players to use high-powered analytics to
yield their own treasury of data-driven insight. As micro-
sensors turn everyday objects, from running shoes to
fridges, into connected gadgets, the Internet of Things
is set to change forever how we organise modern life12
.
The implications for insurers will be profound: retaining
their data advantage in this newly connected world will
require an appetite to innovate, both in terms of the data
they use and how they put this new data to work.
Internet of Things to spur innovation
69%
of personal lines insurers
agree the availability of data
from wearable devices and
the Internet of Things will be
the main catalyst for product
innovation in the next five
years
As the Internet of Things reshapes our world, from the
buildings where we live and work to the clothes we wear
and cars we drive, insurers will need to respond: 69 per
cent of personal lines insurers agree the availability
of data from wearable devices and the Internet of
Things will be the main catalyst for insurance product
innovation in the next five years.
TheInternetofThingsisstillembryonic-Ciscoestimates
that 99.4 per cent of physical objects that may one day be
part of what it calls the “Internet of Everything” are still
unconnected - but already organisations are confronted
with a blizzard of new data sources from which they
must find order and meaning.
Much data is going unused…
Our survey shows much data is going unused. Despite
the ubiquity of social media postings, for example,
only four out of ten insurers are using social media
data for customer-centric product development or
fraud prevention and just one in five use it to inform
underwriting and pricing. GPS-enabled location data
is also proving difficult to harness: just 17 per cent of
organisations are using insights about a customer’s
movements to personalise marketing messages and
only a quarter to inform product development. Even
when it comes to M2M data, where some motor insurers
have existing expertise due to the growing deployment
of telematics, the proportions making good use of this
data are surprisingly low: just 59 per cent use this data
for underwriting and pricing, 42 per cent for product
development or fraud prevention and 26 per cent for
personalised marketing.
70%
agree “my organisation
has access to a far greater
volume and variety of data
than our systems currently
allow us to analyse”
This low utilisation of new data sources is recognised by
insurers, with 70 per cent agreeing their organisation
has access to more data than their systems can analyse.
This systems bottleneck may explain why insurers
predict a slow uptake of new data from the increasingly
connected world.
The insurance industry has long used the power of data, today measured by the
exabyte10
, to hone pricing accuracy, risk management and product design. This
mastery of data is the foundation of a multi-trillion dollar global industry that
underpins the resilience of modern life.
10. Each day the world creates 2.5 quintillion bytes of data. IBM Institute for Business Value, Innovative analytics, 2015
11. Gartner, Inc forecasts that 4.9 billion connected things will be in use in 2015, up 30 per cent from 2014 and will reach 25 billion by 2020. Gartner press release, November 2014.
IBM predicts that machine generated data will be 42 per cent of all data by 2020, with over 12 billion M2M devices in use
12. Connected devices now outnumber the world’s population by 1.5 to 1. Cisco.
Sponsored by:

13 -
The connected home
Fig 4 The timeframe for when organisations will make
extensive use of data from the connected home to deepen
customer insight
Tapping into data streams from sensors in buildings
and household goods offers clear benefits, from
improved underwriting and pricing decisions to reduced
claims costs through early detection and resolution of
problems as well as new opportunities to engage the
customer in the better management of their living and
working space.
While just 7 per cent of household and
property insurers make extensive use
of data from sensors in buildings, this is
expected to rise to 49 per cent within five
years
Yet it seems the bulk of the industry is failing to make
good use of this new data. According to our survey,
just seven per cent of household and property insurers
make extensive use of data from sensors in buildings,
albeit this is expected to rise to 49 per cent within five
years and 70 per cent in ten years. The use of data from
sensors in household goods looks set to see slower
growth: by 2020 just under four out of ten expect to be
extensively using data from connected white goods and
other devices in the home.
These low levels of data usage stand in stark contrast
to the bold claims made by backers of smart buildings,
who expect to see significant growth from what is
already a market thought to be worth US$7 billion13
.
This will be accelerated as Millennials enter the market:
this digitally-savvy generation is twice as likely as the
total population to install a smart home product14
.
Technology heavyweights are already deploying this kit:
Nest Labs, which builds intelligent thermostats and
smoke detectors, was acquired by Google for US$3.2
billion in 2014 while Samsung is already rolling out a
range of smart home devices. Amazon has introduced
a one-button home order service for household
consumables and Apple is developing a voice-enabled
smart home platform.
Manufacturers of white goods are also banking on
consumer appetite for connected washers and dryers
by aligning their products with other connected devices,
such as Google’s Nest thermostat and smoke detector,
increasing consumer peace of mind on the safety
front while also driving down operating costs. LG and
Whirlpool appliances, for example, go into energy-
saving mode when Nest notices that no one is home.
While there are still big barriers to this technology going
mainstream - not least the issue of a common industry
standard - the cost, security and convenience of smart
home gadgets are likely to prove compelling.
Insurers that fail to appreciate the implications of these
smart gadgets will find themselves offering protection
on a basis that no longer makes sense to the connected
householder. Some insurers have taken an early lead
by partnering with manufacturers of smart home kit,
allowing them to not only lower risk exposure but also to
tap into an additional data streams about the customer.
In Europe, BNP Paribas Cardif’s Habit@t home insurance
policy uses a telematics system to monitor the house,
send alerts and activate tradespeople when things go
wrong. In the US, some insurers provide a free Nest
Protect alarm and offer discounts to those customers
who sign up for a “safety rewards” programme, which
informs the insurer that the device is working properly.
Further ahead, it is obvious that additional discounts
could be offered for access to more data from smart
home devices.
13. IDC Energy Insights.
14. The NPD Group Connected Intelligence Home Automation Advisory Service, June 2015, reported that one-in-four Millennials has already installed at least one such device and
41 per cent already aware of and interested in owning smart home products
From sensors in buildings
From sensors in household goods
0
20
10
30
40
Organisations
alreadydoing
so
W
ithin
2
years
W
ithin
2-5
years
W
ithin
5-10
years
N
ever%

- 14
The connected customer
Fig 5 The timeframe for when organisations will make
extensive use of data from the connected customer to deepen
customer insight
There’s a fast-emerging market for sensors in wearable
devices that have obvious advantages for health insurers,
enabling real-time monitoring of a range of risk factors,
early identification and targeted intervention when
issues arise as well as providing opportunities for
ongoing engagement with customers.
Last year wearable fitness device shipments – including
smart wristbands, sports watches, other fitness
monitors, heart rate monitor chest straps and smart
garments - tallied 70.2 million units; this is forecast to
top 91 million in 201615
. Gartner believes that the smart
garment product category has the greatest potential for
growth going forward, with shipments forecast to grow
from 0.1 million units in 2014 to 26 million units in 2016.
Health and life insurance is seen as the
most likely place for telematics-based
innovation after motor
The data outflows from these devices and garments
could transform health management and insurance.
The industry is certainly aware of this, with respondents
to this year’s survey citing health and life insurance as
the most likely area for telematics-based innovation
after motor and ahead of last year’s second place spot,
buildings.
of health and life insurers
expect to extensively use data
from wearable devices by
2020 and 68 per cent by 2025
This is reflected in the number of insurers planning
to tap into data from wearable devices in the next five
years: 42 per cent of those working in health and life
product lines expect to extensively use this data by 2020
and 68 per cent by 2025. That still leaves 32 per cent
not planning to make good use of this data in the next
decade, which, given the surge in uptake of wearable
fitness trackers, could leave a sizeable proportion of the
industry blind to valuable real-time data on a range of
factors related to a policyholder’s health and wellbeing.
Sensors in the body are more of a stretch: just 16 per
cent expect to make extensive use of this technology in
the next five years, rising to 46 per cent within 10 years.
Overcoming the data hurdles
47%
agree that at least half my
organisation’s customers
would be willing to provide
greater access to their
personal data in exchange for
lower premiums
While a proliferation of sensors and wearable devices
will create vast reams of real-time and accurate
customer data, there is no guarantee that insurers will
have access to this treasure trove. Many consumers
remain reticent about sharing personal data: more than
half our respondents don’t expect to be able convince the
majority of their customers to provide greater access to
personal data even in exchange for lower premiums or
shopping discounts.
This suggests a weakness in the relationship between
insurer and insured; after all, supermarkets collect large
amounts of data through their loyalty card schemes,
demonstrating the power of brand and reputation when it
42%
15. Gartner, Inc press release November 2014. In August 2015 Ralph Lauren launched its PoloTech smartshirt that uses silver fibres woven directly into the fabric to give accurate
biometric including heart rate and variability, breathing depth and recovery, intensity of movement, energy output and stress levels, steps taken and calories burned.
Sensors in wearable devices
Sensors in the body
0
40
20
60
80
Organisations
alreadydoing
so
W
ithin
2
years
W
ithin
2-5
years
W
ithin
5-10
years
N
ever
%

15 -
comes to data. To earn access to valuable data, insurers
most overcome a significant trust gap: according to
one study of Millennial attitudes, 28 per cent believed
insurance companies rely on consumer ignorance to
inflate premiums16
. Some insurers are succeeding in
overcoming this hurdle, however. Telematics-driven
Discovery Insurance in South Africa, for example,
provides fuel voucher rewards to customers based on
data about their driving behaviour. Engaging customers
through innovative use of telematics and personalised
experiences can, it seems, build trust levels that make
financial rewards and discounts effective.
Further ahead, customer attachments to their data
may loosen: surveys suggest shoppers are increasingly
willing to share GPS-enabled data17
and younger
customers, who have grown up online, have fewer
qualms about sharing even the most intimate data, with
more than one quarter of Millennials prepared to give
up blood, urine, and personal data for lower insurance
premiums18
.
agree that incumbent
insurers are not investing
sufficiently in their use of
new data sources to be able
to stave off competition from
potential new entrants
Thereiseveryincentivetoinvestincustomerengagement
now in order to access data sources in the coming years
or risk seeing valuable data flows divert to those players
that have an effective strategy to exploit the Internet of
Things. This should be a key priority to protect market
share, and yet 75 per cent of our respondents believe
incumbents are not investing enough in the use of new
data sources to be able to stave off competition from
potential new entrants. This could prove costly.
Bizarre new world: the Internet of sharks, sheep and Disney princesses
It is not just consumer products that are being given voice in this connected world. As well as a vast array of
industrial applications, sensors are increasingly being used in agriculture. Silentherdsman, for example, is a
radical new way of remotely monitoring cattle detecting changes in patterns in rumination, estrus and eat-
ing, enabling farmers to identify the optimum time for artificial insemination or pick up on early indications of
illness or other hazards. Soil sensors can similarly be used to monitor agricultural crops, detecting levels of
nutrition, external pollutants and early warnings of floods. Connected sheep can be used to text shepherds of
hazards, reindeer can be used as Wi-Fi hubs to increase internet coverage in remote areas, improving emer-
gency responses, while Clever Buoy picks up on the unique sonar signature of sharks to alert lifeguards to
their proximity.
Other initiatives are more frivolous. Disney’s Magic Band, for example, uses the Internet of Things to provide
a frictionless user experience at its theme parks, allowing guests to access rides and pay in restaurants: after
ordering food, the server knows exactly where the customer is sitting and payment is made automatically via
the band. An Internet of Clothes, meanwhile, can help fashionistas stay on top of their wardrobes, with tagged
garments reminding the owner of when they need to be worn and unloved items donating themselves to char-
ity.
For insurers, such developments present clear opportunities to provide timely offers to increase household
or travel cover as well as tips about staying safe or minimising fire risk. In the future, there will be no aspect
of life that won’t be tagged and transmitted. Insurers must ready with strategies and systems to find mean-
ing amid this cacophony of digital chatter or risk losing their data-edge as the Internet of Things becomes the
Internet of Everything.
75%
16. Pegasystems/CapGemini survey, June 2015
17. The proportion of shoppers willing to share current location has increased from 19 per cent in 2011 to 36 per cent in 2013, according to an IBM survey in 2013.
18. Pegasystems/CapGemini survey, June 2015

- 16
Dell viewpoint
The Internet of Things (IoT) is at the very heart of the future of insurance. This special chapter provides insights
to the question – why is IoT important right now for insurance? There is a significant gap between insurer
ambitions and their current capabilities which, despite being a pressing strategic issue, has so far seen limited
progress. This is a call to action from Dell Insurance Services which believes insurers should expect their
advisory partners to offer new IoT-enabled business models and solutions - in particular how the IoT can a)
improve customer targeting b) do more accurate risk pricing, c) significantly reduce claims ratios, d) secure
greater loyalty & reward, providing greater lifetime value, and e) ultimately develop new innovative products
and services.
Next generation IoT propositions will spawn new business models. An initial target is the smart property (likely
the connected commercial property in the short term; perhaps, connected home as well) which will provide
an invaluable safe haven to small business owners. AXA Insurance recently noted the staggering fact that
80% of small business owners never recover from major insurance catastrophes like fire or flood. In parallel,
we will see work forces accelerate the move towards rewarding (and advising) their employees on wellness
and, in turn, reducing insurance risk and claims. However, whilst insurers have led the way in matching data
to risk appraisal, this report provides a stark warning that without rapid and significant investment there will
be more than enough opportunity for trusted brands and new entrants from other verticals to exploit these
opportunities.
Lee Brooke-Pearce is a strategic business advisor for Dell Services for Insurance, focusing on, amongst others, end-to-end solutions for
the Internet Of Things across personal and commercial lines of insurance.
www.dell.co.uk
Dell Insurance Services provide insurance capabilities and solutions to both General Insurance
and Life & Pension institutions globally. Dell’s comprehensive & innovative set of competencies
enable improved customer engagement, increased operational efficiency and extended business
models.
»» Data analytics capabilities to help understand and predict customer needs, cross sell and
up sell and improve customer experience
»» Online and mobility solutions to enable self-service and anywhere, anytime, any device
access to the product and services
»» Digitisation of operational processes to reduce operational costs, improve customer
experience and drive higher profit margins
»» Business Process Outsourcing services, supported by Dell’s award winning Robotic
Automation services
»» Comprehensive legacy modernisation services to successfully ‘address the legacy
challenge’ within the Insurance sector
»» End-to-end Internet of Things hardware, software and services enabling ‘next generation’
insurance offerings
»» Comprehensive Cloud services to enable enhanced time of market, agility and scalability
For reference, Dell Insurance Services is the second largest L&P TPA provider in North
America. We run more than 56,000 product variants on a single multi-tenanted platform across
four global operation centers supporting millions of policies for over 30 market leading insurers.

17 -
Chapter Four
Engaging the connected customer
For insurers, these high levels of defection similarly
come at a cost: one study suggests that up to US$470
billion in life insurance and property & casualty
insurance premiums will be up for grabs globally as a
result of declining customer loyalty and the perceived
commoditisation of products20
. Increased regulatory
focus on transparency and potentially unfair “lock-ins”
could drive further market churn.
As customers readily switch provider in pursuit of the
lowest premium, the focus on price has left many lines
teetering on the knife edge of profitability; in motor, for
example, 80 per cent of the market scraped into the black
by propping up profits through reserves releases21
. This
cannot continue without eroding the financial resilience
of the sector.
77%
of respondents agree that
the increased use of price
comparison websites means
that the industry’s general
approach to renewals pricing
is unsustainable
Improving customer loyalty will be key to reversing
churn rates and improving profitability. Yet insurers
have few opportunities to interact with the customer
to earn this loyalty: claims is an obvious “moment of
truth” when companies have the opportunity to impress
through excellent service but for most customers the
only touch point is the once-a-year policy renewal. This
is a process now dominated by visits to aggregator sites,
which means customer decisions are heavily weighted to
price considerations: 77 per cent of respondents agree
that the increased use of price comparison websites
means that the industry’s general approach to renewals
pricing is unsustainable.
agree that unless insurers
engage customers much
more frequently than at
present, they cannot win the
true loyalty of customers who
do not make a claim
Reclaiming the renewals initiative will mean reframing
the proposition so the customer focuses not on price but
on value for money. However, a customer won’t be able
to perceive this added value unless there’s increased
visibility of the insurer’s role: this means replacing
the annual renewals reminder with an ongoing and
meaningful dialogue that offers clear benefits to the
customer. Insurers clearly recognise the need to raise
their game when it comes to customer engagement:
respondents to our survey called the current approach
“archaic” and “inexplicable” and 87 per cent agreed that,
unless insurers engage much more frequently than at
present, they cannot win the true loyalty of customers
who do not make a claim.
Putting the customer in the driving seat
77%
agree that enabling
customers to influence
insurance costs through
their behaviour on a daily
basis holds the key to shifting
the focus away from annual
renewal and thus reducing
propensity to switch
General insurers suffer the second highest rate of customer churn in the whole of
the UK service industry19
. Only supermarket shoppers are more fickle, and the costs
of this shop-around culture are plain to see in the hollowed out profits posted by the
big supermarket chains in recent years.
19. Report by Chartered Institute of Loss Adjusters, Keeping the Customer Satisfied, 2014
20. Accenture Strategy Report, Capturing the Insurance Customer of Tomorrow, 2015
21. EY UK Motor Insurance Results seminar, June 2015
87%
Sponsored by:

- 18
The good news is that it has never been easier for
companies to engage customers with regular and
personalised messages. While this can be a blunt tool in
the hands of some retailers22
, insurance companies are
uniquely placed to intervene with meaningful and valued
communications.Thisisaresultnotonlyoftheindustry’s
skill in using data to understand their customers but
also the nature of the relationship between customer
and insurer, which involves the protection and wellbeing
of family members and valued assets.
Technology will allow companies to relay real-time
risk analysis and pricing to the policyholder so they can
directly see how their behaviour affects their premiums.
Once customers can influence their premiums through
their behaviour on a day-to-day basis, the annual
renewal will no longer be a price flash point: three-
quarters of the industry believes this level of direct
control over premium costs is the key to reducing
propensity to switch.
Some companies are already rolling out versions of this
kind of dynamic pricing. In the US, for example, Ohio-
based Progressive uses a telematics offer, Snapshot,
that beeps when customers make a hard brake,
providing instant feedback to help them improve their
driving. With Snapshot reportedly boosting recruitment
and retention rates – with a retention uplift of 40 per
cent for those that earn a substantial discount23
– it’s
clear that the feedback of data to customers can deliver
real wins for insurers on the renewals frontline.
Thereareeasierentrypoints:insurerscanoffervouchers
or discounts to encourage risk-mitigating behaviours,
such as visits to the gym or sticking to speed limits.
New York insurer Oscar Health, for example, offers a
fitness tracking device to those policy holders who link
directly to its mobile app: policyholders receive a reward
for each day that they hit their personal activity target,
which can add up to US$240 a year in Amazon vouchers.
Importantly, these are paid monthly to the policyholder,
creating a regular positive touchpoint between insurer
and insured.
The industry believes these programmes will gain
traction in the coming years. Respondents expect their
organisations to make significant investments in the
next five years in:
»» Data-analytics to provide individualised risk
information to the insured (73 per cent)
»» Incentives for customers to reduce risky behaviours
(83 per cent)
»» Gamification to engage customers in risk-mitigating
behaviours (64 per cent).
Beyond price: the power of nudge
73%
expect significant investment
in data analytics to provide
individualised risk information
to the insured
Insurers will only earn real loyalty, however, when the
interaction with the customer moves beyond price. Suc-
cessful brands, such as Apple, strike an emotional chord
with customers because their products are designed to
make life as streamlined, easy and enjoyable as possi-
ble. The insurance industry is well placed to build much
deeper emotional connections with customers; after all,
it pays out £32 billion a year in claims to help put peo-
ple’s lives or businesses back on track. Yet while the
problems Apple solves for customers are minor, they
are solved many times every day; insurers solve major
problems for customers but this happens only once or
twice in a lifetime.
Yet insurers aren’t really selling a pay out; they are sell-
ing peace of mind and ongoing support that has the po-
tential to improve the quality of life for its policy holders.
Insurers can tap into huge volumes of customer behav-
iour data and localised information to make life better
for customers, perhaps notifying policyholders of safer
routes to drive to the office, which car is less likely to be
vandalised in a given postcode, high cholesterol levels
on a shopping list or even which white goods are most
reliable. These touch points are positive, helpful and
potentially life-saving - and what’s more they are well
within the industry’s grasp: 73 per cent expect that in
the next five years they will invest significantly in using
data analytics to provide individualised risk information
to the insured.
22. A survey examining customer views on hyper-personalisation in retail found some companies are taking it too far, with customers viewing judging some personalised messages
and shopping recommendations to be “creepy” Accenture survey, February 2015
23. Progressive CEO Glenn Renwick, November 2013

19 -
24. Behavioural Insights Team www.behaviouralinsights.co.uk
The power of these personalised interventions cannot
be under-estimated: indeed, this is the basis of the UK
Government’s “nudge agenda”. The Behavioural In-
sights Team was formed in 2010 to advise on how small
targeted actions can leverage large changes in behav-
iour. There have been some notable successes: the unit
reports a more than 15 per cent rise in on time tax pay-
ments due to the insertion of a single sentence alerting
late payers to the timeliness of other taxpayers in their
area while a politely worded personalised text message
to job-seekers saw a near three-fold increase in the
chance they would take up a job interview24
.
In these instances, it is the use of personal and local
data that makes the gentle nudge so powerful. Insur-
ance companies are well placed to nudge their custom-
ers because, unlike other sectors, they are uniquely
placed to use data not to sell us more products but to
help us and our loved ones live safer, healthier and hap-
pier lives. This is a privileged position and one that can
be leveraged to build a corporate bond that can last a
lifetime.
MarkLogic viewpoint
In a connected and digital world, with increased competition and a growing spotlight on price, it is now more
of a challenge than ever for the insurance sector to differentiate themselves and maintain customer loyalty.
What’s more, the contact points available to the customer, such as premium, claim and litigation, are sporadic
in their nature and do not offer the greatest opportunities for the industry to sell new products or services.
Companies must find ways of demonstrating the value of a long term relationship to the digitally savvy and
price-sensitive customer. They must also connect with them in a way that will nurture the relationship whilst
maximizing opportunities for selling new products.
In order for insurers to be more pro-active and responsive to their customers, they need a comprehensive
view across all available data - internal and external, including social media. Without a true 360° view of a
customer, improving individual customer experience and thereby increasing the opportunity to proactively
offer new, and relevant, products is impossible. The opportunities from data are vast – the ability to analyse
information coming from connected objects in healthcare, motor or home policies will enable customers to
mitigate risk behaviours day to day, revolutionizing the relationship between the insurer and the customer
by giving him the hand to influence his premium. Relationships between the customer and their insurer will
become a continuous partnership, boosting engagement and loyalty levels, and not just a mandatory financial
burden.
www.marklogic.com
For more than a decade, MarkLogic has delivered a powerful, agile and trusted
Enterprise NoSQL database platform that enables organizations to turn all data
into valuable and actionable information. Organizations around the world rely
on MarkLogic’s enterprise-grade technology to power the new generation of
information applications. MarkLogic is headquartered in Silicon Valley with offices in
Boston, Chicago, Frankfurt, Houston, London, Munich, New York, Paris, Singapore,
Stockholm, Sydney, Tokyo, Utrecht, Washington D.C.For more information, please
visit www.marklogic.com.

- 20
Chapter Five
The insurer as innovator
Identifying the next Amazon, Uber or Twitter is difficult
as there’s no blueprint for successful innovation. There
are, however, some common characteristics that create
the right conditions for innovation to flourish, including:
»» A culture that encourages big picture thinking, that
sees the possibilities of changing human behaviour:
Amazon changed forever how we shop, Apple’s
iPhone gave rise to the mobile culture, Uber is
changing urban transportation
»» Valuing experimentation even when it fails: Google
famously allows its engineers to spend 20 per cent
of their working week on projects that interest them
»» Learning as you go: the first attempt may not work but
continuous small iterations can result in disruptive
change. Google’s massively successful AdWords is
the result on ongoing iterations
»» Recognising small is beautiful: Jeff Bezos, founder
of Amazon, believes an effective team should be
small enough that it can be fed on two pizzas. He
suggested this was six people.
»» Promoting and rewarding collaboration across
silos and functions and with third-party disruptors
– many of Google’s innovations have arisen from
conversations in one of its micro-kitchens
»» A readiness to “obsolete” yourself – Uri Neren,
the venture capitalist and founder of Innovators
International, says successful innovators look to
“obsolete” one of their products or processes before
the competition does it for them
The big question for the insurance industry is to what
extent does it create the conditions for true innovation,
and to what extent is it paying lip service to the concept?
How committed are insurers to
innovation?
Fig 6 The percentage of the industry that has invested in the
foundations of innovation
Organisations who have this already
Organisations planning to within 12 months
Organisations planning to within 2 years
Organisations with no immediate plans
More than six out of ten have no plans to
partner with a fintech innovator or to involve
customers through ideation or crowdsourcing
As the digital revolution rips up the play book, insurers have no choice but to innovate
to stay in the new game. Our findings show that the industry is confident its biggest
players can compete with digital disruptors, with 59 per cent backing one of its own
to be the most likely candidate to disrupt the market with a new product or service.
0
40
20
60
80
100
A
head
ofinnovationA
budgetdedicated
to
innovation
A
unitspecifically
devoted
to
innovation
A
partnership
w
ith
a
fintech
innovatorto
create
a
new
insurance-related
offering
Custom
ers
involved
in
generating
ideas
through
ideation
orcrow
dsourcing
%

21 -
Actions speak louder than words and it is clear too few
insurance companies are organising themselves in
order to make innovation the engine of their growth in
the digital age. On average, just 36 per cent of insurers
have a head of innovation, although this rises to 60 per
cent if we look at the very largest organisations in the
market. Just as concerning, 45 per cent have no plans to
have an innovation team and 37 per cent have no plans
for a budget dedicated to innovation.
Worryingly, given the important role collaboration plays
in generating innovative ideas, our insurers appear
reluctant to open their doors to outside ideas: 65 per
cent have no plans to partner with a fintech innovator to
create new offerings and 61 per cent have no plans to
involve customers through ideation or crowdsourcing.
This insularity does little to suggest an industry with
an appetite for disruptive innovation. Indeed, given
this reticence to embrace the features that are proven
to nurture best-in-class innovation, it may be wishful
thinking to assume that the next major disruption will
come from within the industry. Far from highlighting
an industry primed for disruption, our research
demarcates a fault line in the insurance landscape: on
one side, those companies prepping for a future shaped
by innovation and change; on the other, those wedded to
existing structures, still sure they have all the answers.
Yet, as we have seen in other industries, the digital
revolution offers no sanctuary to the complacent.
Constraints on innovation
63%
believe systems infrastructure
is a major constraint on digital
leadership
Insurers may be indulging in wishful thinking about
their organisational readiness but they are clear about
the barriers to innovation. Sixty-three per cent said
systems infrastructure was a major constraint on
efforts to become a digital leader, more than double
the proportion who cited skills or board attitudes as
constraints, and systems and capital restrictions were
the top ranking barriers to innovation.
System issues and budget restrictions are not new.
Indeed, from Y2K to going mobile, legacy systems
and budget have been a constant battle for insurance
leaders. These perennial problems also give rise to
other innovation blockers: culture, ranked third by
our respondents as a barrier to innovation, is often
characterised by a closed silo mentality that has been
fostered by old systems. Digital technology, however, is
now offering solutions to these career-long headaches
and these must be adopted with alacrity so that
companies can begin to drive forward the innovation
agenda.
85%
of large companies agreed
that improving business
agility and speed to market is
a key priority
This is particularly pressing for the largest companies
in our survey. As we have seen in other industries,
size offers no immunity to today’s competitive threats:
the speed of change in the digital age means it is now
possible for bold new entrants to rapidly scale up
customer-pleasing innovations and leave corporate
giants stranded. It is a threat our respondents are alive
to: 85 per cent of large or very large companies agreed
that improving business agility and speed to market
of new offerings is a key priority. For these corporate
juggernauts, organised to marshal thousands of people
and standardise practices across multiple departments,
the big challenge is emulating the speed, agility and
fearlessness that sets the pace at top innovation
companies.

- 22
25. The IBM Institute for Business Value projects that the number of companies that are using cloud to drive innovation will more than double from 16 per cent to 35 per cent in just
a few years.
Limbering up for the agility challenge
93%
of the larger insurers and
brokers expect to increase
collaboration with technology
providers
Size is not always an encumbrance. Large banks and
payments companies, for example, have found that
collaborative alliances with tech start-ups can unlock
innovation in the heart of some of the biggest companies
in the world. This looks to be a valid model for large
insurers, enabling them to access a hothouse of
experimentation and disruption: 93 per cent of the larger
insurers and brokers expect to increase collaboration
with technology providers, suggesting a recognition that
they might not have all the answers in-house.
81%
of large companies plan to
increase their use of cloud
computing
It is not just through collaboration that large insurers
plan to drive through innovation. Systems are also being
rethought and reinvented to improve operational agility.
Cloud computing, a technology that offers increases
in computing power accompanied by lower costs,
is expected to be a key enabler of innovation going
forward25
as it allows companies to quickly test new
ideas without massive systems investment, enabling
a more agile way of working to deliver new products
and services at speed. Encouragingly, large insurance
players are already alive to these possibilities: 81 per
cent of large or very large organisations plan to increase
their use of cloud computing.
Interestingly, there are also signs that service orientated
architecture (SOA) approaches are being rebooted.
Despite the negative headlines when many SOA projects
were shelved when the financial crisis hit, there are no
signs that insurers have written off SOA: a surprising
89 per cent of the larger insurers and brokers expect
to increase their use of SOA in the next two years to
improve their operational agility.
Into the scrum
The connected world is complex; it takes different
mindsets and disciplines working together to generate
breakout concepts and products that will connect
with customers. It’s not just about nurturing blue-
sky creativity; insurers must also work across silos to
convert radical ideas into workable and marketable real-
world solutions. It is clear that the larger organisations
are positioning for this journey: 81 per cent plan to
increase their use of scrum rather than waterfall project
management in the next two years.
Already this is yielding results: More Than used a lean
start-upapproachtodevelopitsinnovativepettelematics
offer, Waggle Pets. Released from the traditional silos
of product generation, the team behind Waggle Pets
were able to create an offering that goes beyond simple
insurance cover to the heart of what policyholders
care about, the well-being of their pet. Waggle Pets
policyholders pay a monthly fee for deliveries of healthy
pet food, a wearable pet activity tracker, toys, treats and
preventative treatments. It’s a very different approach
to pet insurance in which owner and insurer work in
partnership to improve the animal’s health and well-
being.

23 -
Chapter Six
Digital channels – taking customer
experience to the next level
Fig 7 The channels made available by organisations across
the customer life cycle
Applying for insurance Managing a policy
Making a claim
Studies suggest one in six UK adults who own a smart-
phone now look at their device over 50 times a day; one
study suggested some of us check our phones about 150
times a day27
. The ubiquity of the smartphone means in-
surers have no option but to ensure they offer a mobile
channel to connect with today’s customers.
It seems this message is getting through. Last year we
were alarmed when our research highlighted how little
the insurance industry had invested in digital channels:
in 2014 we found call centres and websites dominated
customer interactions at all stages of the policy lifecy-
cle with scant attention paid to mobile apps and social
media.
72%
of insurers and brokers
actively manage social media
as a sales channel, up from
28% in 2014
This year we find there has been a dramatic shift: in the
last 12 months the number of insurers and brokers who
actively manage social media as a sales channel has
surged to 72 per cent, up from 28 per cent last year.
This shift could not come soon enough: studies in the
UK show that Facebook alone accounts for 20 per cent
of all time spent online28
. Some insurers are also intro-
ducing video chat services to keep pace with their social
customers: video chat is now used by 61 per cent, most
widely in claims as insurers seek to deliver a personal
touch at a point of crisis for the customer.
Mobile, at last...
20%
of insurers still don’t have a
mobile optimised website
Insurers have also invested heavily in mobile in order
to close the gap with customers for whom the phone
is increasingly the “go to” device when it comes to
researching and executing purchases. Indeed, mobile
is now more engaging than desktop, accounting for 56
per cent of all time spent on the internet. The message
has got through: 80 per cent of insurers and brokers
have now optimised at least the applications section of
their websites for mobile, up from just 27 per cent last
year, and 66 per cent now offer a mobile app, up from 19
per cent last year. This still leaves one in five without a
mobile optimised website in what could prove a costly
disregard of customer preferences.
The growth in digital channels is to be welcomed but
too many insurers fail to offer a consistent journey
across the life cycle of a policy, with customers forced to
switch between mobile, online and telephone channels.
This lack of consistency is a risk: customers expect a
Customer appetite for connected technology shows no sign of waning, with
smartphones now firmly embedded in daily life. This is particularly the case for
Millennials, 87 per cent of whom say their smartphone never leaves their side, day or
night26
.
Sponsored by:
26. Research by Kleiner Perkins Caufield & Byers, Internet Trends 2015
27. Deloitte, Mobile Consumer Survey 2014
28. comScore, Inc, August 2015
Social media
Online customer portal
Mobile-optimised website
Mobile app
Video chat
(e.g. Skype and Facetime)
0 4020 60 80
%

- 24
seamless journey across all channels and increasingly
like the convenience of an individual online portal29
.
...but no room for complacency
This has been a major focus of leading insurers: 77 per
cent of our survey respondents offer an online customer
portal for applications. At the point of claim, however,
this drops to 59 per cent, undermining the convenience
of this initiative at the time it matters most to the
customer. This could explain why the development of the
online customer portal looks set to dominate investment
spend in the year ahead: it was the only channel that
attracted the prediction of significant investment from
more than half our respondents this year. Automated
online guidance was selected for significant investment
by 40 per cent of insurers. As with online portals, this is
another move towards the self-service model, which not
only scores highly with connected customers but also
has the added benefit of reducing service costs for the
company.
83%
believe their organisation
needs to increase its
planned investment in digital
channels if it is to meet the
expectations of the connected
customer
While insurers have undoubtedly invested heavily to
improve their range of digital channels over the past
year, the pace of change means there’s no scope
for complacency. As digital frontrunners continue
to raise the customer experience bar, any brake on
investment now will quickly see the industry fall short
of expectations: little wonder 83 per cent believe their
organisation needs to increase its planned investment
in digital channels if it is to meet the expectations of the
connected customer.
Fig 8 Insurers expectations on the timeframe for it to become
commonplace for the insurance industry to interact with
customers through wearable devices
Wearable devices, for example, are widely forecast to
show significant growth in the next four years; however,
only 10 per cent of our respondents plan significant
investment in smart gadget channels in the next 12
months. This could leave insurers scrabbling to play
catch-up with digital frontrunners. 51 per cent expect
it will be commonplace for the insurance industry to
interact with customers through their wearable devices
within five years, and yet 68 per cent plan no investment
at all in this emergent channel in the next 12 months,
leaving relatively little time to prepare for another
disruptive shift in customer behaviour.
Omnichannel: insurers lag customer
expectations
To the consumer there is no channel: there is just an
organisation. Customers dip in and out of channels and
expect organisations to present the same face at every
touchpoint. Leading retailers facilitate this channel
hopping, fuelling customer disappointment when other
industries fail to match these seamless omnichannel
experiences.
23%
allow customers to start an
application on one channel
and finish it on another
without restarting the
process
29. Research by Marketforce & Visionware over the summer of 2015 found that 91 per cent of insurers believe a seamless journey across channels will be critical or important to
retain Millennial customers and 76 per cent said an online portal will be critical or important to retain Millennial customers
0
20
10
30
40
W
ithin
1
year
W
ithin
5
year
W
ithin
2
years
W
ithin
10
years
N
ever
%

25 -
The insurance industry has yet to offer this level of
service. Less than a quarter of insurers and brokers
allow customers to start an application via one channel
and finish it on another without the need to restart the
process, and more than half (56 per cent) have no plans
to work towards this.
Only four out of ten believe omnichannel
integration is very important to their
organisation
In fact, it is clear that insurers are sceptical about the
benefits of omnichannel integration: only four out of
ten backed omnichannel as very important and a full 23
per cent dismissed it altogether. The experiences from
other sectors suggest this will carry financial penalties:
research indicates retailers lose 6.5 per cent of their
potential revenues as a direct result of poor omnichannel
experience30
; for insurance, where product and data
complexity further frustrates the process, losses could
be even higher. As retailers invest heavily to stem
this leakage, they will set the baseline for customer
experience so even if many in the insurance industry
don’t see omnichannel as a priority, their customers
increasingly will.
77%
expect that by 2025 their
organisation will be
building new systems
to achieve full channel
integration
Full channel integration will be neither easy nor cheap
and our respondents expect that in the short term the
industry will favour patching up existing systems: 35 per
cent expect this to be the most common approach to
achievefullchannelintegrationinthenexttwoyears.Over
a longer time frame, however, companies are expected
to build new systems: 77 per cent believe the industry’s
most common approach within 10 years will be to build
from scratch, either in-house or in partnership with an
outsourcing provider, with most favouring bespoke or
customised systems. This customisation must include
inbuilt flexibility to accommodate the emergence of new
channels, such as wearable devices, so that insurers
can adapt to ever-changing consumer expectations.
30. RIS 2013

- 26
RR Donnelly viewpoint
Today’s insurers are being challenged to communicate with customers in a variety of ways, and to provide a
seamless experience. As highlighted by this chapter, the future is digital — and it’s even more important than
you might think. While 40% of European general insurance customers in the Millennial, 18-34 age group think
mobile channels are important, a significant 30% of over-34s now think so too*. That means insurers not
only have to embrace the shift towards digital channels but also accurately capture customer communication
preferences across all age ranges. Furthermore, as this research indicates, insurers are recognising the
importance of providing a personalised service that resonates with customer lifestyles, life events and emotions.
For example, 61% of insurers now offer video chat at the point of claim, when customers are more likely to be
experiencing negative emotions.
This is in line with RR Donnelley’s own research†
, which suggests that the ‘digital wave’ of mass online
communications has been played out. Organisations are now embracing the ‘conversational wave’ — building
long-term relationships with customers and delivering highly personalised content, two-way communications
and an intelligent blend of channels. It is this appetite for an omnichannel experience that will increasingly
shape customer communications — but only after the successful integration of digital platforms and customer
data. That, of course, leads us to the big question. How can siloed organisations successfully capture customer
communication preferences, achieve a single customer view and create a seamless omnichannel journey?
The first step is to truly understand your customers, identify the touch points they use (and will use in the future)
and work out what value you can deliver at each point on that customer journey. It’s then a case of having the
people, the process and technology in place that will facilitate a cohesive customer experience. Of course this
is easier said than done — which is why many leading insurers already benefit from RR Donnelley’s resources,
capabilities and expertise.
* Capgemini, World Insurance Report, 2015 †
Ovum/RR Donnelley, The future of Customer Communications in the Enterprise, 2014
www.rrdonnelley.com
Transforming insurance customer communication experiences for the digital world.
RR Donnelley is a leading integrated services provider that leverages insurance industry
expertise to transform communications for the digital world. We put customers at
the heart of your insurance business and connect the customer experience journey,
through process management and proven technologies used by digital frontrunners.
Founded in 1864, RR Donnelley is a Fortune 500 company that employs over 65,000
people across 500 worldwide locations. In a complex and fast-changing world, RR
Donnelley provides integrated solutions to help insurance companies meet the growing
challenges of omni-channel customer communications, regulatory compliance and
global go-to-market strategies.
We combine a deep understanding of the insurance industry with leading-edge
technologies as well as process management and transformation expertise, to help
insurers across the world. From marketing services and customer communication
management to business support and language solutions, we help our clients connect
with their customers, efficiently and effectively.
For more information contact, Jerusha Lewis (Insurance Sector Marketing Manager)
jerusha.a.lewis@rrd.com or visit www.rrdonnelley.com/gds

27 -
Chapter Seven
Claims - tackling costs, improving experiences
Insurance companies increasingly recognise, however,
that the point of claim is a “moment of truth” when
customer loyalty can be earned through exemplary
service and support at a time of crisis. One survey found
that customers who had a good claims experience gave
a Net Promoter Score, a key metric of loyalty, up to 40
percentage points higher than other customers32
. It has
never been more important to get this right: last year
86 per cent of our respondents agreed that customer
reviews on social media were making the claims
experience an increasingly important differentiating
factor.
The claims experience
Insurers are keen to capitalise on the possibilities of
the moment of truth. While the number of channels
available at the claims touchpoint still lag the point of
sale, there has been intense effort to catch-up, with a
four-fold increase in the number of insurers providing
apps that support customers through a claim.
And while insurers made roughly the same level of
investment in the customer experience at point of sale
and claims over the past two years, the balance will shift
slightly in favour of claims in the coming two years, with
56 per cent putting more investment into this important
litmus test for retention rates.
Brokers have traditionally focused more on sales but
the coming years will see a dramatic shift as they seek
to use the claims experience to drive loyalty: in the next
two years 53 per cent will focus more investment on the
customer experience at claim than they will at the point
of sale, up from 30 per cent in the preceding two years.
SME claims: lessons to learn
71%
agree with the FCA’s claim
that, in general, SME claims
experiences fall below the
standard set by retail claims
experiences
Improvements in the claims experience are not uniform
across the market, however. The recent regulatory
review of insurance claims handling for small and
medium-sized enterprises (SMEs) found evidence of
a poor claims experience for this vital section of the
UK economy. The Financial Conduct Authority (FCA)
review found SMEs’ insurance needs can be relatively
complex but the businesses themselves have a similar
knowledge and experience level to retail consumers
when buying general insurance products. The main
flashpoints were a gap between SMEs’ expectations of
the claims process and the service they actually received
and poor communication that led to delays in reaching a
settlement, with obvious risks for the business.
There are lessons to be learned here for other
lines. The retail claims experience may be widely
regarded as superior to that in the SME sector but
the problems identified by the regulator – such as
inconsistent expectations, claimants unclear about
who was responsible for driving claims outcomes and
lack of clarity about next steps – are also pertinent
for consumers. The industry’s increased investment
in automated online guidance, mobile apps, customer
portals and video chat as a claims channel should
provide the clarity and transparency all claimants
deserve.
Most policyholders have little opportunity to put their insurers to the test. With as
many as one in five customers seeing little difference between one insurer and the
next, it’s little wonder churn rates remain stubbornly high31
.
31. The Accenture Strategy report, Capturing the Insurance Customer of Tomorrow, August 2015 found the number of customers who believe that most insurance carriers are the
same in terms of their products and services jumped 50 per cent in the last year, to 21 per cent.
32. Bain & Company, 2014
33. Based on the number of respondents providing a claims app in last year’s report, The Future of General Insurance 2014

- 28
Investing in empathy...
93%
agree that when it comes
to winning customer loyalty
through the claims process,
the single biggest difference
is made by empathetic staff
who engage the customer
Customers make a claim at points of high stress in
their lives. Insurers that can get this interaction right
can expect to bind those grateful customers to them:
93 per cent agree that it is empathetic staff who can
make the single biggest difference to loyalty outcomes
during the claims process. It is clear that recruiting the
right people, investing in staff training and giving staff
data they need to deliver more personalised interactions
will be vital if insurers are to fully support and reassure
distressed claimants.
...automation...
But claims handling isn’t just about lending a shoulder to
cry on: customers are also seeking to have their claims
handled efficiently and fairly. It’s essential therefore that
systems support the work of the claims handler with
increased self-service through digital channels to fast-
track solutions for stressed customers. In motor, for
example, claims apps allow drivers to trigger their own
one-stop claims process using GPS-enabled data and
connect to relevant recovery and breakdown services.
In minor traffic accidents, some carriers can settle the
claim on the spot and make a direct deposit into the
customer’s bank account. Household claims could be
self-triggered via connected smoke alarms and smart
appliances. This level of automation would not only
reduce claims handling costs but importantly free up
staff to provide highly-valued empathy and support. But
it comes with a health warning: self-service processes
must work flawlessly or they risk adding to customer
frustration at a stressful time.
...and analytics
Predictive analytics is the second
highest priority to improve the
claims process in the next 12
months.
Insurers recognise that predictive analytics can also
play an important role in smoothing claims handling.
Indeed our survey reveals that it is the second highest
priority area for claims improvement after staff training,
particularly for the larger insurers. The big players
see that predictive analytics has the potential to drive
improved performance in claims, where loss ratios
can have a major impact on profitability. Payouts
comprise roughly 80 per cent of the claims costs, with
the remaining 20 per cent being the loss-adjusted
expenses incurred in settling the claim, yet analysts
believe some carriers are overpaying on average34
by
10 to 12 per cent. Effective predictive analytics can curb
losses through improved forecasting, better claims
resource allocation, determining rehabilitation options
and preventing leakage. In the US, Chubb Corporation
deploys sophisticated models for faster and more
accurate triaging and routing of claims so it can improve
claims service and calculate more accurate payouts.
This investment yields bottomline benefits, with Chubb’s
personal and commercial lines reporting the lowest
loss ratio of the largest carriers.
Whiplash: still a pain in the neck
Despite changes to the law to curb opportunistic
whiplash claims, the UK still has the “weakest neck
in Europe”, a reputation that our respondents call “a
disgrace” and “frankly embarrassing”. According to
research from Allianz, personal injury claims remain
stubbornly high and now represent half of their overall
claims costs, even though the number of road accidents
has fallen35
. The insurance giant estimates that for every
£100 a UK insurer takes in car premiums, £30 goes on
advertising and other costs and the remaining £70 is
used to pay claims, half of which goes to personal injury
claimants. In the German market, by contrast, just 4 per
cent of claims costs are the result of personal injury
such as whiplash36
.
34. Bain & Company, 2014
35. According to the Government’s Compensation Recovery Unit, personal injury claims rose by about 50 per cent to 773,000 a year between 2007 and 2014, at a time when
accidents reported to the police fell 23 per cent and overall traffic rose slightly.
36. Research from Allianz Insurance, June 2015

29 -
37. Aviva press release, March 2015
91%
agree the level of spurious
claims in the UK won’t fall
into line with Continental
Europe without further
changes to UK law
89%
agree the banning of referral
fees should be extended to
cover all parts of the claims
process, across all insurance
lines
72%
agree the Government should
prohibit insurers settling
personal injury claims before
the claimant has undergone a
medical examination
The 2013 Legal Aid, Sentencing and Punishment of
Offender Act (LASPO) was expected to reduce the cost
of personal injury claims by banning referral fees for
personal injury cases and ending the recoverability of
success fees from the losing side. There were some
early wins: in January 2015 the Institute and Faculty of
Actuaries reported a 65 per cent drop in legal fees for
whiplash-type injury claims since the introduction of the
LASPO reforms.
Yet subsequent research indicates that the frequency of
personal injury claims has returned to pre-LASPO levels.
Aviva found that whiplash-type claims have returned to
near-record levels, with up to 200 extra claims per day
on the previous year, costing motorists £2.5 billion and
adding £93 to the average motor insurance premium37
.
The insurer’s data shows that 96 per cent of personal
injury claims it received last year were brought by third
parties such as claims management companies (CMCs),
personal injury lawyers and alternative business
structures.
Little wonder the industry is keen to see more action
to curb spurious claims: according to our research, 89
per cent want to see the ban on referral fees extended
to cover all parts of the claims process across all
insurance lines. The industry is also keen to ban insurers
from settling personal injury claims before the claimant
has undergone a medical examination as this fuels the
perception that personal injury compensation is “easy
money”. 91 per cent believe spurious claims in the UK
won’t be brought down to Continental European levels
without further changes to UK law.
agree the insurance industry
needs to invest more in
rehabilitation in order to drive
down the costs of personal
injury claims
More could also be done to reduce the cost of genuine
personal injury claims: 78 per cent want to see more
investment in rehabilitation as an alternative to
compensation payouts. This would have the benefit of
speeding the recovery of genuine claimants from what
can be potentially debilitating and painful injuries while
at the same time deterring fraudulent whiplash claims.
Costs:urgentandradicalactionrequired
75%
agree the biggest challenge
in tackling claims inflation is
that the not-at-fault insurer
has no incentive to keep costs
down
While the increased use of rehabilitation and an
extension of referral fee ban would clearly be moves in
the right direction in reducing claims costs, the industry
also sees a more systemic reason for claims inflation:
75 per cent believe the biggest challenge is that the not-
at-fault insurer has no incentive to keep costs down. It
is difficult to see how this can be addressed without a
radical change to the existing model. The emergence
78%

- 30
of P2P insurance could help by highlighting how claims
costs impact all members of the insurance pool in order
to drive changes in customer behaviour but this still
does not address the issue the lack of incentive for the
not-at-fault insurer to keep cost down.
81%
agree the drive to speed up
claims resolution to minimise
costs is leaving the industry
more vulnerable to fraud
Curbing spiralling claims costs should top the innovation
agenda, whether it’s building inhouse innovation
hubs, or partnering with external technical expertise.
The rise in claims processing costs has wide ranging
consequences; the Association of Personal Injury
Lawyers accused the industry of having a “cheaper to
pay than investigate” mentality, where insurers were
paying out at the earliest opportunity, before even
seeing proof of injury, in order to minimise the claims
processing costs. In our survey, 81 per cent agreed that
the drive to speed up claims resolution in an attempt to
minimise legal and handling costs is leaving the industry
more vulnerable to fraud. Insurers ignore this threat at
their peril.

31 -
Chapter Eight
The fight against fraud
Insurers have invested heavily in a bid to improve
prevention and detection but our survey finds there
has still been a marginal increase in fraudulent activity
over the past year, with most types of fraud showing no
change in prevalence. Despite the industry’s massive
investments, there remains a persistent and pernicious
level of fraud, from opportunistic claims to organised
crime to crash-for-cash scams.
Fig 9 Changes in organisations’ fraud levels over the past year
Significantly decreased Moderately decreased
No change Moderately increased
Significantly increased
55%
of respondents agree the
most effective way to address
organised insurance fraud
would be to stop identity theft
The industry also has new battles to fight. Fraud
investigations look set to become more complex, with
44 per cent believing fraud with a cybercrime element
is on the increase. This mirrors a wider trend across all
sectors, with the National Intelligence Bureau reporting
that seven out of ten frauds in the UK now involve a
cyber element. Insurers must be vigilant to this threat:
organised fraudsters that engage in wholesale identify
theft can evade “know your customer” checks, leaving
insurers open to surging fraudulent claims. This is
backed by our findings: 55 per cent of the industry believe
stopping identity theft would be the most effective way to
address organised insurance fraud.
Staff: on the fraud frontline
The fightback against fraud is an investment priority for
insurers: last year we reported that 80 per cent of our
respondents had elevated fraud to Board-level, ensuring
the greenlight for investment in more sophisticated
data analytics, information sharing and data processing
capacity38
. This focus on technology to improve detection
and prevention has improved the industry’s defences
but significant vulnerabilities remain. In our survey,
the joint top vulnerabilities are a lower commitment
to fighting fraud among brokers and aggregators and
a lack of staff awareness, both cited by 31 percent of
respondents as the industry’s most significant fraud
vulnerability, followed by the difficulties of preventing
hackers from accessing internal systems (23 per cent).
The industry is aware of these gaps in its defences, with
improved training of frontline staff to spot fraud set to
attract the most anti-fraud investment in the next 12
months.
Yetbudgetconstraintsareemergingasaweakspotinthe
industry’s arsenal against the fraudsters. Even though
training frontline staff came joint top of the ranking of
investment priorities, nearly half of the industry expect
only minor or no investment at all in this area.
Fraud remains a clear and present danger. According to figures from the ABI,
insurance companies uncover 350 insurance frauds worth £3.6 million every day and
the value of frauds detected is at a record high.
38. The Future of General Insurance 2014
Sponsored by:
Opportunistic
claim
s
fraud
Organised
fraud
(allkinds)
Fraud
w
ith
a
cybercrim
e
elem
ent
Opportunistic
application
fraud
Supply-chain
fraud
Crash
forcashGhostbroking
0
40
20
60
80
100
%

- 32
When it comes to new technology to help detecting
fraud, 64% of large or very large insurers expect to
make significant or very significant investment in this
area over the coming 12 months. Although this drops to
52% when we look at small and medium-sized insurers.
Those who have indicated significant investment in
this field are likely to find their efforts rewarded. Given
that fraudsters are getting ever more sophisticated
and audacious in their attacks on the industry, with
cybercrime on the rise and insurers already struggling
to prevent hackers, any slowdown in investment will be
quickly exploited.
Small-and medium-sized insurers and brokers are
particularly vulnerable: 64 per cent of them are not
intending any significant investment in training frontline
staff and 63 per cent have no plans for major investment
in technology. These under-resourced organisations
could prove to be the weak link in the chain.
Insurers also suspect brokers and aggregators have a
lower commitment to tackle fraud and this is certainly
supported by our findings: brokers expect to invest
significantly less in anti-fraud measures across the
board and 63 per cent of brokers have no plans to make
any significant investment in anti-fraud technology.
Analytics: beating fraud, winning
customers
67%
agree that predictive analytics
is the best way for the
insurance industry to make
fraud checks less annoying
for customers.
There has been a shift in technology investment; last
year more sophisticated predictive analytics was the top
anti-fraud investment priority but this year it is frontline
staff training that is the priority area, with only 40 per
cent planning significant investments in predictive
analytics, although this rises to 53 per cent among the
largest organisations. Yet the outputs of sophisticated
predictive analytics will allow frontline staff to spot red
flags and other common fraud identifiers. Predictive
analytics are also key to ensure that ever more stringent
fraud checks don’t impinge on the customer experience:
67 per cent agree that predictive analytics is the best
way for the insurance industry to make fraud checks
less annoying for customers. Investment here will
increasingly be the distinction between the winners and
losers not just in the fight against fraudsters but also
the race to retain customers.
79%
agree that the Deep Web is
a largely untapped source of
data that could significantly
improve fraud analytics
There’s also evidence of a lack of appetite to invest in the
use of new data sources to combat fraud: 59 per cent
plan no or only minor investment in new data sources.
Insurers that fail to deploy Deep Web analysis to mine
the vast majority of web data that is not reached by
conventional search engines39
will be blind to patterns
and red flags that could put the fraudsters on the back
foot: 79 per cent of insurers agree that the Deep Web is
a largely untapped source of data that could significantly
improve fraud analytics. There is clear disconnect
between this finding and the lacklustre investment
planned in new data sources: closing this gap should be
the goal of the industry if it wishes to stay ahead of the
fraudsters.
39. By some estimates, the iceberg-like Deep Web is 500 times larger than the surface Web. According to a study published in Nature, Google indexes no more than 16 per cent of
the surface Web and misses all of the Deep Web.

33 -
Syntetics Solutons viewpoint
The findings in this year’s Future of General Insurance Report resonates with much of what we see in our
interactions with our insurance clients.
Insurers have become much better at identifying opportunistic fraud taking place but many are still struggling
to apply the required technology and analysis that will enable them to predict and therefore prevent fraudulent
activity from impacting them. This is why we have invested heavily to ensure that our SIRA and Orion platforms
can provide the network visualisation and analysis capabilities to help insurers predict and identify complex,
organised fraudulent activity that may otherwise remain hidden.
We also agree that enhanced training and awareness of staff is of paramount importance, as a lack of training
often has an impact on the quality and accuracy of data that is captured. We have seen many instances whereby
a client would like to be able to take advantage of technology to aid their fraud prevention only to discover
that the quality of their data severely restricts what they can achieve. Therefore, investing in the right people
can have a significant uplift in the quality of data capture and consequently improve the ability to make good
decisions - technology can only do so much.
The other area which improves our clients’ ability to prevent fraud is the ability to syndicate their data with other
insurers and other business sectors, and furthermore to enrich it with information from external sources. This
syndication and enrichment provides them with intelligence on a much wider scale than those working simply
with their own data, or being limited to one business sector. Having this cross sector view of adverse activity
has frequently assisted our clients in identifying emerging fraud patterns and gives them the ability to prevent
adverse impacts on their business.
www.synectics-solutions.com
Synectics Solutions is a data management and software development company
providing financial crime, fraud prevention and information analysis services.
The solutions they build have been incredibly successful in reducing risk, combating
fraud or financial crime and enabling public and private sector organisations to meet
their regulatory commitments. In keeping with their company values they work very
closely with all their clients’ to ensure that the solutions they provide are moulded
to fit their needs, and are configured to provide the maximum level of effectiveness
depending upon the markets in which they operate.
Synectics flagship fraud prevention systems – SIRA and Orion– have been built from
the ground up by working with key Financial Services organisations, and a host of fraud
and financial crime professionals. Front-end user control and flexibility is supported
by specialist consultancy resource that enables these systems to easily adapt and
evolve to changing fraud trends.

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