London Innovation Centre 11th May 2015
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Attendees Martin Shaw Association of Financial Mutuals
Don Ratcliffe Metropolitan Police Friendly Society Ltd
Matthew Robinson Accenture Facilitator
Jamie Fiveash B&CE Benefits Scheme
Chris Lerpiniere Reliance Mutual
Jess Sarsfield-Desai Accenture Facilitator
Lee Schopp British Friendly
Elaine Fairless E D (Financial) Ltd
Steve Ferrari Family Investments
Nicholas Merriman Avanade
Jason Rose Foresters Group
Andrew McQuade Accenture
Courtney Marsh Health Shield Friendly Society Ltd
Legal Disclaimer Martin Shaw - CEO of the Association of Financial Mutuals - notified all attendees at the beginning of the day regarding the need to avoid the exchange of any commercially sensitive information, e.g., pricing, margins, costs, commercial plans, etc. This was adhered to by all attendees and was monitored by 2 two facilitators and 4 support staff, who were briefed what conversations should be avoided, based on guidance from Accenture’s legal team.
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Our Journey We came together from across the Mutual Financial Services sector to explore, What is the likely future role of digital
within the Mutual Financial Service industry over the next 5 years and how is innovation disrupting this landscape? The day started by exploring some technologies that demonstrated ways that digital is affecting how companies are interacting with and responding to their customers, as well as evolving their internal ways of working. From this, we set the context by exploring the current trends within the financial services industry and beyond, followed by a discussion on how this made us feel and what this could mean for Mutual Financial Services going forward. As a group, we then reflected on history, to understand how the current digital landscape had come about. We looked at some innovative case studies and discussed how these might be applicable to Mutuals, before hearing from a panel of experts on topics ranging from digital trends within the Financial Services industry to “Mutuality in the 21st Century” and also how a more established player was taking on digital. We looked at possible future scenarios and focused on how this could impact Mutual Financial Services. After considering what orthodoxies could be holding us back from evolving as a sector, we brainstormed our visions for Financial Service Mutuals by focusing on: the opportunities does digital bring smaller, niche organisations; how data and insights can be used to drive customer-centricity; and finally, how Digital can increase brand awareness, maintain loyalty and differentiate. We finished the day by reflecting on all we had seen and made a personal commitment in light of this.
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Our Journey and interacted with a number of innovative technologies We observed As devices become increasingly connected, they are producing more data, which could be used to gain insight into the consumer. They also provide another touch point with the consumer and can even connect to other ecosystems. For example, the toothbrush app can show news reels. Could this be taken further to provide personalised content/adverts depending on health?
Augmented Reality
Internet of Things
Blippar becomes the lens through which the real world can be spontaneously 'unlocked' and converted into interactive experiences. The app recognises images, symbols and objects in the real world and using the smartphone’s camera, GPS and internet, displays an additional digital information layer onto the physical object.
Babylon, the virtual surgery, gives patients access to doctors 12 hours a day, six days a week, and enables them to book video or phone consultations, text a question or picture to a GP or nurse, and arrange consultations with specialists.
Virtual Service
OneMillionTweetMap monitors all Twitter activity in real time, plotting
Customer Social Analysis
each tweet against its geographical location. It can also identify the exact street a Tweet has been sent from, the content of the message and even who it was sent to. Please see: http://onemilliontweetmap.com/
First Direct became 'the 1st bank to embrace crowdsourcing in the UK with its “Labs” initiative, which invites UK residents to share their thoughts and suggestions on various services and products and then use the inputs to innovate new products & services
Giff Gaff Community Forum allows users to crowdsource solutions to problems and propose new ideas. A real-time preference analytics solution delivered as customised software-as-a-service. The patented TrueChoice technology measures in real time how individuals make decisions, their buyer values, willingness-to-pay and purchase likelihood.
Personalisation 4 3
Our Journey and interacted with a number of innovative technologies We observed xWare42, a Fintech start-up, is launching xPay, which enables banks to provide customers with richer insights on their bank statements. xPay layers additional information about a transaction, such as location or receipts, therefore providing customers with a more holistic overview of their purchases. It also enables banks and their potential partner retailers to offer personalised offers to customers, encouraging further transactions.
Artificial Intelligence
Data Enrichment
Amelia is a cognitive knowledge worker which interfaces on human terms. She is a virtual agent who understands what people ask – even what they feel – when they call for service. The pioneering Robotic Process Automation software Blue Prism enables business operations to be agile and cost effective through rapid automation of manual, rules based, back office administrative processes, reducing cost and improving accuracy by creating a "virtual workforce".
Quividi is a facial recognition tool that can determine the age and gender of an audience to deliver relevant advertising content, while Emotient analyses facial expressions to deliver insights on the person’s attention, engagement and sentiment.
Sensors
3D printing has the potential to reshape entire industries and supply chains in the near future as printer and material costs come down in price. The value of the 3D printing industry is predicted to be worth $8bn globally by 2020.
Drones
Drones: Parrot AR Drone 2.0 is a radio controlled flying quodcopter that can be operated and controlled via an iPhone or Android app. The drone can record pictures, videos and navigations data that can be instantly uploaded via the app.
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We introduced ourselves by describing the effect of digital on activities “I read an article the other day about Tinder…the way people can choose today with just swipes! Perhaps for FS there is a good way to match themselves to the product”
“Customers now demand 24 hour access - businesses should always be contactable . The little boundaries between work and personal life mean there are massive opportunities” “This has absolutely fundamentally changed! We recently launched an online platform with customer messaging and we were surprised by the strong uptake. We have to change how we operate to offer the best form of customer service” “The Internet has allowed different methods of payment – before long it will be your watch”
“People use to mechanically service their own cars. But now with telematics, self parking and now even driverless cars it represents all sorts of challenges for the law. Who is responsible for accidents?! “ “Entertaining still means meeting and talking to people. However, what they do once they meet, is still influenced by digital”
“I still have cash but I thought about virtual currency. I look at my own kids and they are more aware about the tools that show them their money instantly. How do you give these tools to allow people to manage their money?” “British Airways has transformed the whole industry. They really cottoned on to the value of customer data and have become much greater than just an international flight company. They are also realising that digital is about the blend with physical human6 interaction too” 5
We considered Our Journey the context of the rapidly changing landscape that we are operating in… “It's a positive point that small businesses have an opportunity to think digitally – our size should not stop us, our capacity to innovate means we should be able to grow exponentially”
“We need to be more radical in our thinking”
“We need to gear up operations to give our customers what they need”
“I’m struck by the point that the internet is there 24/7 but our businesses are there 9-5”
“The world is different today, from what is was yesterday, so just look out for tomorrow” “Smaller businesses can be more nimble, as they don't have complexity and drag like big businesses”
“Customer expectations are increasing exponentially”
“Airbnb are small but they have grown because they offer a service that gives the customer what they want”
“You can't run a company without data! Google can do everything because they know everything. In insurance they could underwrite risk without even a questionnaire”
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We reflected Our Journey on the origins of the digital revolution and how it has evolved into the landscape of today
“AOL coined the phrase “You’ve Got Mail” and within seven years average online user time had leapt from 5 minutes a day to 58 minutes”
“In 2001 Apple had launched a prototype iPod with 5GBs of storage - by 2007 the iPod would sell over 1 billion units”
“The consumer, or the public broadly, took control from business as “social media” gave them their voice at scale and very publicly”
“92% of the world’s data was created in the last two years and more people have access to mobiles now than to clean water”
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We explored Our Journey how other organisations across different industries are innovating through digital
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Our Journey Kunal Chakraborty then spoke about digital trends in Financial Services Kunal is a Senior Manager in Accenture Strategy. Having worked at two early-stage high-growth tech start-ups in UK/Europe he now helps organisations to utilise disruptive digital technologies to create new products and innovative business models to drive growth.
Q
“What are the broad digital trends in Financial Services today and which ones would you say Mutuals could benefit from?”
A
The first thing I want to talk about is disruption in the business models. If you think about the general business models of today - how we can create a business and then generate revenue - there has been a significant shift because of technologies. Gartner state that if you don't understand digital then you could lose a quarter of your customers instantly. Data and mobility, in particular, has allowed customers a lot of options – the paradigm change is significant because the two are a lethal cocktail to in your armoury and there are lots of options of how to adopt these for insurance companies and within banking. Consumers are now extremely well-informed and share this with their peers, so if you are not up to scratch then your accountants will soon know it. Here’s an example of how a new business model has been created, whilst an old one has been destroyed. It used to take 7-9 days to send money to the Himalayas. Transferwise now provides an amazing digital platform, with no currency exchange but by linking a guy in the UK, who wants to send money, and someone in the Himalayas, they can transfer the money at little cost – they charge 1%! The experience is quick - it takes me less than a minute – and easy. It’s much easier than any of the big banks because it's a consumercentric experience rather than being product-led. It’s made my life amazing! Another trend is the sharing economy and I believe it’s going to take over FS. We love owning stuff but things are changing because people simply care about access - from my house to TV, everything will be on demand. Uber is on demand for example. People do not want to own things - millennials in particularly just rent - and this will impact the business model for insurance companies. Metro mile, for example, gives you pay per usage insurance. New technology, such as the Internet of Things, is also disrupting business models because it enables sharing and greater data insights. I know more than anyone that you can break down the insurance model. For example, a machine learning algorithm within a platform can predict the risk better than any trained expert. In 2 years time how will this impact the underwriting business model? Take the concept of Metromile and think about how you can translate that into life and health insurance…
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Our Journey Followed by Steven Mendel speaking about Bought by Many Steven is the CEO & founder of Bought by Many – a start-up which allows individuals to group together with others who have the same insurance need. This allows the collective power to negotiate better deals or unique access to policies for the group.
Q A
Please explain the story behind Bought by Many and whether Mutuals can learn anything from your model?” I'm an actuary by profession and then I spent time as a McKinsey consultant, followed by 10 years in retail financial services. For a long time, I was shocked with how Financial Services dealt with customers. From a personal example, I was getting ready to leave Close Brothers to launch a start-up and wanted to continue my corporate healthcare but an individual plan was four times the price of a corporate plan. The justification from AXA was that I individually produce more admin and more risk. The concept of Bought by Many is that we bring individuals together with something in common and negotiate with insurance companies. The individuals then buy directly from insurers. We also socially bring these communities together. That's what the outside world think we do anyway. In reality though, it starts with the insurers. We ask them how they want to grow their book. Some say, we like new risks, so bring us the risks and we'll be happy. Others say, can you bring the same type of business but at a lower cost to market – that’s also good. Others would like gaps filled, so the entire book is more balanced. We connect these demands of the insurers with the supply of customers, by analysing web-searches for insurance. From the words they use for example, we can understand precisely what customer are searching for and also link to what they are talking about on social media. Where the insurance companies have gaps – we can pair and fulfil these with those customers. We can also take that data and create effective advertisements by putting it in language that individuals use to discuss those issues. For example, people call Staffordshire terriers “staffies”. We have groups specifically targeted at them. You won't see us on social media unless you fit one of our groups. We also ask people to engage with us, and they do – this concept can very quickly go viral. We have huge discussion groups about diabetes, which are considerably longer than any of the pet conversations. We believe that we are “mutuality for 21st century” and through this we are building micro-communities of people.’ Customers don't take our word for it, they take it from the people who are part of the group. We simply interject when something is factually incorrect or when we think that we can help. When people come on to our site, they give us access to vast amounts of information. Through this huge amount of data, we can provide much better insight into how people behave and run their lives, and this is much more effective than the bits of data you usually put on an insurance form. 11
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Our Journey Finally, Matt Hutchins spoke to us about Nationwide’s Digital agenda Matt is the lead of Accenture’s UKI Insurance practice and also worked closely with Nationwide Building Society – helping them to navigate their Digital journey.
Q
How has Nationwide leveraged digital to engage with its ‘members’/customers & what was their thought process in driving this?
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So what does Digital actually mean to Nationwide? Well, they started addressing digital when they were roughly half way through rebuilding the bank following the Financial Crisis. It’s important to remember that they were less exposed than many of the other banks but they were driving up investment and shoring up a new mortgage data centre. Part way through this, they realised that the volume of transactions would double due to digital and had to react. They also realised that they were fundamentally underpenetrated in digital from the customer perspective. They firstly looked at social collaboration and listening, in order to develop their presence. They went on to be the first bank to set up online 24/7 social listening – it’s been very successful. With a heavy branch network too, they also looked at how to digitalise the advice process in a cost effective way. They travelled to the US to look at personalisation and the direct customer experience, in comparison to branches. They pushed themselves to work out how they could deal with this. Additionally, Digital was a completely new thing for them so they set up a new team to run as a separate entity from the mothership and then absorb their findings back into the business.
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Our Journey We then opened up to a group discussion Q: Nationwide took a team outside the business to ‘innovate’. Is this a good thing to do or should you get the whole leadership team involved? Is one better than the other?
A: The way Nationwide did it, they allowed people to think outside the box and assess potential projects away from the day-to-day – particularly by testing things. Gradually these ideas could be absorbed by the organisation. The Digital Society is about the whole of Nationwide becoming digital but it required time for people to build up the capability. Being too disruptive, within the box, can bring the whole organisation down at once. You need to also be pragmatic about what can be done in real life. Every organisation has an immune system, and you have to be careful of that. If you can’t work to optimise what you have, then build as teams away from the mothership, where the restraints are removed. They separate teams should aim to be so good that they can kill the mothership. Testing is also vital. Nationwide did a very significant and positive test that changed everything. The tone of leadership has now changed – they are talking about digital in every sentence. Q: Steven, why do you think you haven’t scaled up as quickly as some of us were expecting? A: We describe ourselves as a next generation insurance intermediary - version 3.0 if you like. Our social platform is evolving and the next part of what we are doing is at the front end. This is because customers complain about the interaction they have with the insurers that we broker their relationships with. We’re therefore looking to demonstrate how this interaction, such as when they submit claims, should be done. It's certainly not out of necessary desire to do this, but I hope we can do enough to show the industry players that they can achieve an excellent level of customer service. Take the parallel example of Google with its Nexus phones. They created these models not because they wanted to sell phones but to simply demonstrate what the Android platform should be able to do for others. Bought by Many’s 5 year game plan is to go into longer term plans, such as life insurance. We’ve already been approached by a life insurer who wants to sell cover to a group with impaired kidneys. I believe there will be a lot more value in longer term plans. 13
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Our Journey We then opened up to a group discussion Q: The way you talk around some of these things, like data and search, you make it sound very easy. When I talk to the techies they insist it’s difficult. What tips would you have to overcome this? A: Quite simply, don't do it yourself. There is a stark contrast and I don't think you need to. We spend years coming up with what we do and that’s our people‘s core focus. We’re the first FS company to create a WhatsApp partnership – the Economist believes this is the future platform so why don’t you leverage it with us? I’m not telling you not to do it yourself but there is an alternative. From that perspective too, we would love insurers to do more with front end-integration. But we’re taking on the responsibility as the middle man - we've gone from spending £50,000 to £300,000 that's just making sure the backbone is there. There are definitely firms out there who you can work with, so definitely make the most of it.
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Following lunch, we spent time exploring some scenarios where Financial Our Journey Services had been disrupted…such as an Advisor/Broker Platform “This model demonstrates that we now have more capacity to offer personalised insurance” “We spoke about how transparency in the broker market is growing. We asked ourselves if you leverage digital platforms to improve customer experience? It’s definitely a yes!
“You could put the aggregator in reverse – ‘here's my data who wants to have a go at under writing’”
“Brokers should have an extra interaction layer. One argument says that nothing changes, if there are only so many brokers you might start targeting your marketing towards certain brokers - like an estate agent that isn't on Rightmove. They might also start demanding more commission and that puts the price up for the customer” “If someone came in with this disruptive proposition, we would need to counteract it using digital”
“We do income protection insurance. If I knew a bit about who it would save costs, increase ease but finding those groups of people is difficult. Our children might get used to a central data source that people can access if they give permission. It is scary to us but they might be used to it” 15
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And Journey also Personalised Investment Portfolios services through companies Our partnering with Social media players “More personalised marketing messages will force value as we can use status updates to target products. It also gives us opportunities to up sell junior ISAs and trust funds and adjust the indicative price of funds in future”
“It could even introduce a savings culture” “The level of financial literacy is very low. This could potentially expand the market. It would give customers exactly what they need”
“If someone went shopping and provided recommendations, I would be more likely to have a look at it”
“It like a virtual pub discussion, but on a forum. This gives us opportunities around marketing – especially for customers to think what they would do with the investment. They would concentrate on the verbs – for example going to university and not just the noun of investment”
“The kids are leaving Facebook and going to Instagram or Snapchat but I doubt these are our audience” “We have a track record of telling customers what they want but this would be a way for us to listen to them” 16
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And Journey then finally, individual pricing for life insurance through lifestyle Our monitoring and services “This is turning Star Trek into reality!”
“Within the group, we thought this was very positive! The better data would reward the individuals who look after themselves and make underwriting easier. Customers could be treated as individuals, instead of a group. We don't see it increasing our costs significantly and would ultimately encourage better lifestyle. We should definitely be encouraging customers to do this”
“This definitely changes our relationship with policy-holders - the interaction goes from yearly to daily touch points. That means we can build a stronger brand but we need a stronger customer experience”
“What about those existing customers that you have poor data on. How do you back fill this data?”
“There would be other organisations that would be very interested in this data. There would be a state of confusion if data does not align but if there was a central service/store, more companies would buy in”
“There’s a question that if I had multiple policies, which companies have got the right info and who's analysing my data effectively? Would you get consistent and regulated digital signatures? Who would own my data?”
“There are risks to consumers. If you do not hand over this data, you become a less quantifiable risk. 17 year olds, for example, almost have to have this black box in their car in order to afford insurance. Some more affluent people would say, ‘well I'm not bothered about knocking 20 quid off a month, if I can drive 95 mph on the motorway’” 17 16
Our Journey We shared our biggest insights from the day so far I shouldn't worry about the limitations of our firm. There are firms who know about data and digital and we can partner together
Risk will be underwritten in new ways and we need to ensure that we are not left behind
The opportunities seem to be endless but it’s how you capitalise
Are we actually going where we thought!?
The landscape never stops, it's a shifting scene…almost like a treadmill really Consumers adapt though technology adoption
There is a huge cost in doing nothing. This is not a fad, this is the next wave 18
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Our Journey the orthodoxies that could be holding us back We considered “We can’t afford to make mistakes”
“FS is too boring for social media”
“Customers buy purely on price” “We need brokers”
“Regulation stops innovation”
“People need to be protected by insurance companies”
“It’s ok not to innovate”
“Insurance is a product, not a service”
“Old insurance companies do not have enough data” “We don’t have the time or resources”
“We only know what we know”
“Mutuals have a right to remain”
“Business-asusual should be our focus”
“Innovation doesn’t drive ROI”
“Change/innovatio n doesn’t drive ROI”
“We can’t afford to make mistakes”
“Post is the most reliable form of communication”
“Legacy IT platforms aren’t good enough to cope with change”
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We then flipped the orthodoxies to consider potential ideas for the future of Financial Service Mutuals Small organisations have an advantage & therefore my organisation should…
Leapfrog competitors by going direct with innovative products Identify small, niche communities that are attractive to underwrite Increase the flow and speed of comms with the members
Reach a large scale audience through social media
Create niche business models that maximise customer value Operate business models that are difficult to replicate Buy scalable digital technology to be costefficient in growth
Data allows us to be more customer-centric & therefore my organisation should…
Establish service channels that match customer demand
Align offerings to clients’ circumstances
Fit our brand within our customers’ daily digital experiences
Create communities where customers can be our advocates
Be pricecompetitive through accurate pricing of risk Design products that customers want and need
Be easy to do business with
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We then flipped the orthodoxies to consider potential ideas for the future of Financial Service Mutuals Digital can help increase brand awareness & maintain loyalty so my organisation should… Show what our product does and NOT what it is
Use digital to reconnect indirectly with legacy groups of customers Take cost out to fund differentiation through innovation Attract younger age cohorts through social media
Co-operate with other organisations to share and build skills
Focus on customer issues not products
Digital should not be tackled alone so my organisation should… Be involved with Fintech accelerators
Collaborate with universities to understand leading practices
Be transparent if we were to share members’ data
Personalise & quantify the offer 21
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We finished Our Journeythe day by reflecting on all we had seen and made a personal commitment in light of this What did you commit to….?
You’ll receive them in the post!22 21
Thank you for attending and we hope you found your day insightful.
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Appendix
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Our Journey how other organisations are innovating through digital We explored
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Our Journey how other organisations are innovating through digital We explored
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Our Journey how other organisations are innovating through digital We explored
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