Transforming from

a traditional to a

digital insurance

company

Solmaz Altin

September 7, 2016

2

Digital transformation

Current impact & effect of Digital What do we know about Digital?

Future (uncertain) effects on our business model What do we not (fully) know about Digital yet?

Implications for our target picture and strategy How do we respond?

3

Digital technologies are converging and creating unprecedented

rates of change

SOURCE: McKinsey Global institute

1,7–6,2

2,7–6,2

0,2–1,9

1,7–4,5 Advanced robotics

3,7–10,8 Mobile Internet

Cloud technology

Internet of Things

Autonomous and near-

autonomous vehicles

5,2–6,7 Automation of knowledge work

Annual economic impact1 of selected digital technologies by 2025 USD trillion, annual

Scenarios

Conservative Agressive

X–Y

1 Defined as additional GDP + consumer surplus due to specific technology

4

@pontifex with

> 9m

followers as of April 2016

4

The change brought by digital is affecting every aspect

of our lives

5

We need to increase pace of our innovation as more and more

start-ups will arrive

2011 09

5,000

05

500,000

2000

5,000,000

50,000

Source: Upfront Ventures

Cost to launch a tech start-up, USD

Open source

software

Cloud and

Amazon Web

Services

1 Global annual insurance premiums

Death by a

thousand cuts

When start-ups succeed,

they take commas rather

than basis points from

incumbents

$3.8 Trillion1

$3.8 Trillion1

6 Source: CB Insights

InsurTech funding, USD millions

2013 2014 2015

223

740

2,651

Industry heavyweights and

Internet giants also attacking +

InsurTech investments have increased by 10 times in 2 years

7

Unbundling insurance – all business model under attack

Source: Allianz

Digital Ventures

8

Digital transformation

Current impact & effect of Digital What do we know about Digital?

Future (uncertain) effects on

our business model What do we not (fully) know about Digital

yet?

Implications for our target picture and strategy How do we respond?

9

10

0

30

50

20

70

40

60

15 10 05 2025 20 90 70 65 1960 95 2000 80 85 75

Digital will lead to a major shake-up of all industries

Projections

based on

current data

SOURCE: CB Insights based on data from Innosight/Richard N. Foster/S&P

Driver of change: creative

destruction [Foster, 2001]

Macro changes shifting markets

Customer behavior

Technology

Inability of incumbents

to respond

Low-cost and high speed and lean

operations and IT

Redesign of business models to

adapt to new needs and economic

realities

+

Average company life span on S&P 500 index (years)

10

2015 2035 2050 2000

Conservative

Partial automation

Self-driving

technology

100

20

0

15 - 30%

premium

decrease

Premiums for

OEM systems

and product

liability

insurance

(indicative)

40

60

80

In Motor, signs of change are already visible – leading to shrinking

premiums in traditional businesses Disruption of motor insurance by car automation Motor-insurance-based model

"Motor" as the anchor product to up-sell into

other insurance categories; also as base product

to fund agency models

Source: Schedule P data; national highway and Rand data; assumption: 3% inflation

Relative premium in constant USD (recent and projected), indexed at

2016 value

… Health

Accident

Liability

Building, household

Life

Motor

?

11

Simultaneously, several megatrends already today visible –

without knowing which one exactly will change the world

Rapidly growing start-

up ecosystem

Creative and broad

funding sources

Current "hypes" Next thing with transfor-

mational impact

We don’t know what

will happen – just

that it will

3D

printing

Robo Advice Augmented/

virtual reality

Block-

chain

"Nano-

technology"

Customer

expectations

& rapid

adoption

Significantly

reduced

factor & setup

costs

Economies of scale, scope + network effects

12

Digital transformation

Current impact & effect of Digital

What do we know about Digital?

Future (uncertain) effects on our business model What do we not (fully) know about Digital yet?

Implications for our target

picture and strategy How do we respond?

13

FOMO (Fear Of Missing Out) mindset FOMM (Fear Of Making Mistakes) mindset

Are we focused on defense … … or offense?

Yes, tons of start-ups that

might affect our industry

will fail …

… but it is the ones that

survive that will become

the problem

Here is why disruptors will fail

"hey don’t have our balance sheet …"

"Supply chain is complex …"

"Our portfolio is stable – our success for the next

30 years booked …"

"We’ve been doing this for 140 years …"

"Clients trust us. They won’t trust some start-up …"

"We have a cost advantage …"

"Our risk management capabilities are proven …"

Response to disruption is shaped by the organization's mindset

14

Insurers will have to profoundly change their business

models via global digital transformation

From traditional models ... … to the digital insurance of the future

▪ Complex products same as

30 years ago

▪ Fragmented LoB covers

▪ Simple, easy to understand; fully digitized

with modular structure

▪ Comprehensive, “360 degree” customer solutions

Products

▪ Paper-based, limited digital support ▪ Fully leveraging digital channels Customer

communication

▪ Agency or broker-based ▪ Digital distribution

- Multi-channel/access for mature markets

- Digital-/online only business models

Distribution

▪ Local solutions the norm ▪ Global collaboration driven by a Single Digital Agenda Collaboration

models

▪ Purely actuarial driven ▪ Big Data & actuarial driven Offers/pricing

▪ Handling of loss after damage has

occurred ▪ Via enhanced customer experience & value delivered

across insured topic Value generation

▪ Ecosystem for Allianz products vital part of value

proposition

▪ External innovation rarely used Ecosystem &

ext. innovation

15

To be successful in the digital world, we combined core topics under one

Single Digital Agenda

Digital

integration

roadmap

5 Digital Strategy 1 Digital by default as a core pillar of the corporate strategy

Digital Value

Capture 2 A B

Transform your core business and develop new ones

Digitally re-think existing

business

Innovate new revenue

streams

Single digital

agenda

Digital culture,

talent and orga-

nization 4

Transition to a digital way of working

Structure Leadership

Agile operating

model and

culture Talent

Foundational

Digital

Capabilities 3 Advanced

analytics Next Gen IT

Digitally

enabled

operations

Customer

centricity

Build critical capabilities required to rapidly scale digital

16

Allianz will be connected to start-up ecosystem via scouting and

intelligence activities in 5 search fields Search fields in focus of start-up ecosystem (examples)

Mobility Connected

property

Digital health InsurTech and

wealth

management

Cybersecurity

and data

intelligence

Robo advice,

digital broker,

claims

management

Cybersecurity,

digital identity,

artificial intelligence,

analytics

Car management/

telematics, mobility,

management

Property manage-

ment and security

Prevention, patient

adherence, self-

servicing