The Dual Agenda of the World’s Largest Insurers
Global Systemically Important Insurers Put Digital First While Revamping Infrastructure
Many established insurers today are transforming themselves into cutting-edge digital enterprises, a feat that is particularly challenging with large, traditional IT infrastructure. But some of the largest insurers are making the transition successfully, and many in the industry can learn from what they are doing.
The Global Systemically Important Insurers (G-SIIs) are increasingly becoming more innovative, employing startup techniques to bring digital technologies to their consumers and expanding their partner ecosystems, while simultaneously pivoting infrastructure to the cloud and reassessing non-strategic functions.
by Phil Ratcliff
The G-SIIs are nine companies considered by the international Financial Stability Board to have an influence on the stability of the global financial system (see sidebar). While these companies are not unique in the difficulties they face, they do serve as examples for the industry. They are often the first to confront technology challenges and offer a model for solutions.
Many G-SIIs align on what Aegon CEO Alex Wynaendts has described as a need to connect with customers while reducing expenses.
“In simple principle, at the heart of our strategy is that every customer should be able to decide how he or she wishes to interact with us, be it digitally, by phone or face-to-face,” said Wynaendts in a January 2016 address to analysts and investors. “It is our customers that choose, not us. And in terms of digital, utilizing the very latest technology both supports the customers’ experience and simplifies our business.”
Aegon’s strategic priorities are typical of the G-SIIs’ “dual agenda” to meet changing consumer demand for innovative digital service capabilities while renovating the existing technology infrastructure.
The company’s customer-related goals include offering products throughout the customer lifecycle, providing omnichannel access, expanding customer education, and engaging directly and digitally with customers. At the same time, Aegon is looking to simplify the business through digitization and self-service tools.
Digitization is a common objective for G-SIIs. Some are working to be “digital-first” companies that interact with customers primarily through digital channels. AXA, for instance, partnered with Facebook in 2014 to boost the insurer’s digital, social and mobile footprints.
G-SIIs are also working hard to increase their innovation. They are creating innovation “sandboxes,” or small laboratories for digital experimentation. They are expanding leadership to include a chief digital officer. Many have opened innovation labs in technology hotspots, such as California’s Silicon Valley and London’s Silicon Roundabout, to encourage big ideas.
G-SIIs have also been investing in startups to find solutions that would be difficult to build internally. Insurers such as Allianz have founded venture capital subsidiaries and other entities to foster startup activities. In 2015, CB Insights reported a 460 percent increase in this type of investment by insurers, bringing total investment in technology companies to $1.78 billion since 2010.
In the move to digital, insurers must grapple with existing technology infrastructure. While some digital advances can be grafted onto existing technology stacks, an essentially digital environment often requires the replacement of previous-generation technology.
Moving to the cloud is a primary step in the digital evolution. Though some insurers have been reluctant to take advantage of cloud efficiencies, largely due to concerns about compliance and securing private client information, G-SIIs are increasingly confident in cloud capabilities.
Prudential Financial began shifting IT to a cloud environment as early as 2011, and Aviva has put cloud infrastructure at the heart of its digital-first business strategy.
Another step in the evolution for G-SIIs is a focus on core competency and divestiture of the non-strategic.
As G-SIIs contemplate how to allocate capital, they increasingly focus on sales, underwriting, marketing, new business and the placement of risk. In the case of back-office and other non-core activities, they are moving to a more connected ecosystem, selecting best-of-breed partners and orchestrating services in support of business activities.
The insurance industry — and those who support it — can learn much from watching the behavior of a select few. The G-SIIs shine a light on ongoing challenges and technology solutions that drive future success.
CSC and the G-SIIs
CSC has provided software and services to eight of the nine current G-SIIs. Services include:
- Consulting services
- Installed applications
- Application testing
- Cloud services
- Business process services
- IT services
- Data conversion
What Are the G-SIIs?
The list of Global Systemically Important Insurers was established in 2013 by the Financial Stability Board. This international board, founded by G-20 countries, works to promote international financial stability by developing policy measures that apply to the G-SIIs. The annually updated list is the insurance counterpart of Systemically Important Banks, which are critical to the global financial system. Currently, five G-SIIs are headquartered in Europe, three in the United States and one in China.
- Aegon N.V.
- Allianz SE
- American International Group Inc.
- MetLife Inc.*
- Ping An Insurance Company of China Ltd.
- Prudential Financial Inc.
* MetLife recently won a U.S. federal court ruling to shed its status as a systemically important financial institution (SIFI) as designated by the domestic Financial Stability Oversight Council (FSOC). However, that ruling has no bearing on the G-SII status conferred upon the insurer by the FSB.
Phil Ratcliff is global industry general manager for insurance at CSC.