Personal Insurance

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CONTENTS
Insight

Friday May 17, 2013



Signals of Change Scanned by the Strategic Innovation Team

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Putented Homun Genes
Bitcoin
riverless Curs
ABS utu now in
Google Iurth
Mupping
the
Homun
Insight Highlights
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Insight: Highlights

Friday May 17, 2013


The Strategic Innovation framework helps us determine the relevance of signals of change for our business.
11 Strategic Risks to the PI business emerge from 7 areas of Structural Change.


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BRAIN research project
received $100m funding
from the US govt to
develop a comprehensive
map of the human brain.

The US Supreme Court is
deciding whether
companies can patent
human genes and the
Indian Supreme Court has
ruled against Novartis on
HIV drug, both actions
against asymmetries that
have characterised
commercial enterprise.

Bitcoin: a proof of concept
for future digital
currencies?

The use of Google Earth
by the Australian Bureau
of Statistics is another
example of big data
visualisation, becoming
more effective.
Anticipated disruptions
from driverless cars are
being discussed in
mainstream media

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Insight

Friday May 17, 2013



Alternative systems of value exchange are characteristic of an area of structural change we have called FINANCE 2.0. They
are a constituent element of two of our Strategic Risks RISK 2.0 and GLOBAL. Would we be prepared to do business in a
borderless, user-determined currency?

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NEW CURRENCIES
Bitcoin: bubble or the future of currency?
In the past weeks the value of the virtual digital currency tripled
before falling 50% in a few hours. Bitcoin has a global circulation worth
more than $US1.4B, yet it belongs to no nation and is issued by no central
bank. It can be used to buy gold in California, hamburger in Tel Aviv or a
house in the US. An important aspect of Bitcoin is that it offers untraceable
transactions. This makes it the currency of choice on black market site Silk
Road, an illegal underground eBay-like site whose url is only accessible via
the Tor encrypted web-browser and network.

Opinions diverge about Bitcoin. Techno enthusiasts and libertarians see
the future in it, whilst other dismiss it as a bubble: eg Paul Krugman sees
its value "conjured out of thin air because contrary to traditional currencies
backed by the power of the state, which defines them as legal tender and
accepts them as payment for taxes, Bitcoins, however, derive their value, if
any, purely from the belief that other people will accept them as payment."
Both views could be valid:
1) In the short-term it is likely to be a bubble. It follows a speculative
pattern, fuelled by media frenzy, as illustrated by the correlation between a
Google Trends search on "bitcoin" and its price chart.

2) In the long-term, whatever the Bitcoin market will look like in 5-10
years, it serves as a proof-of-concept for a decentralized crypto-currency,
which cannot be manipulated by governments nor changed by monetary
policy. Bitcoin shows something entirely new: a true, stateless, virtual
currency rooted in nothing other than confidence in the set of rules that
surround it. It could open a third chapter in the history of money: after
commodity based (e.g. gold), politically based (e.g. dollar), this would be a
math based currency (because it's minted by a computer algorithm). This
would be a response to falling confidence in the soundness of government-
backed fiat money in an era of quantitative easing. Notwithstanding the
many risks and issues, the algorithmic approach to controlling the money
supply used by Bitcoin could go a long way to creating a sound store of
value.
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Insight

Friday May 17, 2013



In addition to aiding in the treatment of known illnesses (with incidence on Health and Life Insurance), this program will likely deliver
more insight into brain patterns and understanding of human behaviours, such as, for example, consumer choices, risk appetite and
risk choices in multiple situations. It will also accelerate progress in Artificial Intelligence. This suggests an acceleration of one of the
areas of structural change we are following - VIRTUALISATION which drives strategic risks such as RISK 2.0 and ASSETS.

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HUMAN BEHAVIOUR
Mapping the human brain
Last month, Obama announced the funding of a
$100 million BRAIN program (Brain Research
through Advancing Innovative Neurotechnologies) to
do for the human brain what has been earlier achieved
for the human genome: funds are intended to develop
a comprehensive map of the human brain, its
functions and networks, that will allow for treatments
for conditions such as epilepsy or Parkinson, but also
dementia and strokes.
The timing matches the readiness of key technologies
that have paved the way and will enable the initiative:
sequencing of the human genome, the development of
new tools for mapping neuronal connections,
increasing resolution of imaging technologies, and the
explosion of nano-science. These technologies
present unprecedented opportunities for integration
across scientific fields. The key technology is the MRI
scan which picks up at the molecular level what is
happening inside brain tissue.
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Insight

Friday May 17, 2013



Cars that have no accidents, mobility that does not depend on individual ownership, the technology that makes that possible and
the consumer demand for it are features of two areas of structural change we are observing VIRTUALISATION and DATA
which are behind two of our Strategic Risks RISK2.0 and ASSETS.

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NO COLLISIONS
Driverless cars
Mainstream media interest in driverless cars is ramping up: after a comprehensive article in Forbes, the
latest report is from the Economist. The disruptive implications of vehicle technologies for car insurers are
now being called out. Some observers anticipate that the market might be reduced by 75%. Driverless
technology has the potential to reduce accidents by up to 90% and significantly change traditional patterns
of car ownership. Governments are watching the possible healthcare, infrastructure and environmental
benefits of driverless cars, which is possibly why regulators appear to be working quickly to enable the
introduction of driverless cars in the US. Driverless car technology may commercially enter the US market
by 2018.
In a scenario reminiscent of Kodak's research conducted in the 1980s which led it to conclude that digital
photography was still a decade away, insurance executives such as Progressive's CEO believe that
driverless cars are probably not something that need keep anyone awake for quite some time". Their
argument is based on the time it will take to sort out regulatory complexities and for drivers to adopt the
technology.
However analysts believe that disruption will happen well before driverless cars become ubiquitous: even
a 20% adoption of incremental driver-assist and collision avoidance technology might result in material
reduction of premiums. If in the long term, with this technology, car insurance as we know it goes away,
the question is about the medium term scenario. Vehicle to vehicle and vehicle to infrastructure
technologies represent opportunities for new data intermediaries and application providers to enter the
value chain. Market and customer perception of risk and of the need for insurance may change ahead of
full implementation or regulation of the technology. If insurers push away liability and increase prices on
driverless cars, car manufacturers or start-up companies could offer cheaper insurance and eat away at
the edges of the market as disruption grows.
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Insight

Friday May 17, 2013



These cases are illustrative of growing pressure on asymmetries of information wielded by incumbent industry players looking to
maximise profit. They form part of patterns of structural change we are calling SOCIALISATION and COMPLEXITY, which give rise
to two of our Strategic Risks: ASYMMETRY (information asymmetries in favour of commercial enterprise are actively regulated
against and punished by consumers) and TRIBES (consumers/citizens structure themselves around communal values and
collaborative enterprises, instinctively mutual and adept at self-management, effective in managing open sourcing).

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INTELLECTUAL PROPERTIES OF THE HUMAN BODY
Patenting human genes
The US Supreme Court is hearing arguments to decide in June
whether companies can patent human genes, in a landmark case
against Myriad Genetics who patented the BRCA1 and BRCA3
genes, indicators of risk of breast and ovarian cancer. The outcome
could alter the course of US medical research. Myriad claim their
patent corresponds to the cost of finding the genes. The American
Civil Liberties Union is challenging that right, arguing that Myriad is
acting as a gatekeeper on all research on those genes, and is
stifling it.
20% to 40% of the Human Genome is covered by patents. Some
are held by companies, while others by institutions committed to
"open source genomics" who hold them "pre-emptively", to stop
commercial companies from having them.
In a similar vein, giant Swiss pharmaceutical company Novartis lost
a court case with the Indian Supreme Court on an HIV-AIDS
drug: patients will now be able to access the generic drug that costs
$170/month rather than $2,200/month for the Novartis brand.
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Insight

Friday May 17, 2013



This is a classic example of the DATA structural change and the emergence of our ASYMMETRY risk: this information is not only
made public but also presented in a way that enables other companies and customers to do their own analytics. This Google Earth
mash-up illustrates the increasing availability of government data in software that will make it useable, therefore marketable.

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OPEN SOURCE INFORMATION
Socio-Economic Data from the ABS
Last month the Australian Bureau of Statistics released its measure of the
relative level of advantage and disadvantage across the nation on the
basis of information contained in the 2011 census. The Socio-Economic
Indexes for Areas covers indication of Education and Occupation through
education variables (degrees, occupational skills), Economic Resources
through variables related to income and housing circumstances, and
Relative Socio-economic Advantage and Disadvantage (IRSAD) through
variables such as income but also such aspects as overcrowding in
homes, people's occupations, the number of cars per household, the
number of households with single parents, and also the number with no
internet connection.
The IRSAD index provides a score for each geographical area (the higher
the score the higher the advantage), which allows for areas of various size
to be compared. The ABS has compiled this data down to Statistical Areas
with an average population of 400 people each (which they call SA1). This
allows for an extremely detailed picture of cities and major areas. They
have also produced map overlays that can be uploaded into Google Earth:
dark blue denoting "most advantageous" and dark red "most
disadvantaged".
SEIFA data can be used across a wide range of organisations: by
governments to determine areas that require funding and services, by
political parties who mine the data to assist with their election campaigning.
Suncorp is looking at this data and currently testing to see if it can be
merged to our risk modelling dataset. The question is whether this adds
predictive capability to the existing model.
This data could be used in other business areas to focus local marketing
campaigns, or determine areas in which to open future WorkAtHome Hubs
(meant to be set up such as targeted employee demographic live within
30mins of a Hub).