In the following interview with Dr Robin Kiara, Martin Korn, Senior Consultant in the Financial Services business unit, discusses the digitalization of the insurance industry, particularly with regard to the current coronavirus crisis.
Dr. Robin Kiera has been one of the top insurance experts in Germany for twelve years and is also an absolute insurtech insider. He is a speaker, author and consultant. In addition to large transformation projects in companies, he helps start-ups to scale and optimize their structures. He previously worked for Allianz, Warburg Bank and Goodgame Studios.
What impact has digitalization had on the insurance market as a result of the coronavirus situation?
Kiera:
Most insurance companies were able to send their employees to work from home at short notice. However, there are areas, such as the application process and claims processing, where employees had to be present and this was sometimes tricky to implement.
There were individual cases in which it was not possible to sign signature-relevant insurance documents digitally – because people had resisted this for years and had not yet implemented it. But even this could be implemented quickly in the end. But here, too, the ‘crucial question’ arises as to why many things take so long and are only implemented quickly when it is five past twelve.
Yes, that’s a good question. As an external observer, you often get the impression that insurance companies stop working when you sign and that you often have to wait a very long time for a response.
Kiera: There are now legal regulations here. The days when customers were prepared to wait several weeks for a response are over. Even some colleagues from the insurance industry can no longer stand having to submit their health insurance documents via some poorly programmed app. There’s no need to spend crazy amounts of money on poor service. My favorite example: I was at a board meeting of a large insurer a few months ago – when you were still allowed to – and the CEO told me, “We don’t even want the customer to call, it’s a business transaction, it costs money”. It’s difficult to focus on the customer with people like that. That was a real old-school board member. It’s difficult to focus on the customer with people like that.
And what about the younger board members? Are they more open-minded?
Kiera: Totally. Of course, there are also so-called doubters, but most of them are still “on fire” for their careers and are now on the board of medium-sized or smaller insurers with the aim of driving the industry forward. To do this, they need successful cases. That’s why they are very active, enterprising and willing to tackle new topics. I also have the impression that the time for “fake digitalization” is simply over.
To what extent has corona affected the industry economically? From the outside, you don’t notice much. Many customers think that as long as they pay their premiums, nothing will happen to the industry.
Kiera: Yes, but the problem is new business. It’s true that so far there have been no major cancellations, insolvencies or even economic collapses. We will see how this continues in the coming weeks and months. Because slumps in existing business could still occur then. Another topic is business closure insurance. There are limits here too, as some risks in life are not insurable because the premiums would be too high. Of course, policyholders can also insure themselves against wars or pandemics, but this then costs almost unaffordable annual premiums. After all, the system lives from the fact that there is an insurance community of customers who, if a claim occurs, all bear the loss of one customer. You can’t insure losses that ultimately affect everyone. That’s not possible, it’s simply not affordable.
Generally speaking, if you’ve managed to establish a good customer portfolio over 200 years, then the figures for new business don’t look as dramatic as they would for a restaurateur whose sales collapse completely. But if you come from the industry, you also know that new business is one of the most important targets, and if this collapses, it also causes financial problems. I recently spoke to a foreign insurer that is also active in Germany and he said he was glad that his sales staff had been so active online and on social media in recent weeks. There had hardly been any drop in sales. This means that those who are not active online are currently helpless or even facing a shambles.
Does this mean that those who are already selling digitally and have set up a corresponding platform are doing better than the others?
Kiera: For me, it’s not just about the closing route or the website, it’s also primarily about staying on the radar of your customers as a salesperson.
How much does the well-known door business of insurance companies account for? Is this currently disappearing completely?
Kiera : It’s not disappearing everywhere. It has fallen sharply in some areas. There are brokers and salespeople who are still making good sales and have adapted. Others have been more preoccupied with private issues than with sales in recent weeks. That is the big difference. New business also varies from insurer to insurer, i.e. from product line to product line. There are insurance companies that have experienced a 10, 20 or even 90 percent slump. But to be honest, these companies should think about what they can change or do. Insurers can also adapt to different situations and use creativity to initiate different sales activities without having to attend face-to-face appointments.
There are very different types of insurance. Are some classes of insurance doing better than others at the moment?
Kiera: I’ve heard that health and supplementary health insurance are currently doing quite well because people are more aware. There are also insurance brokers who have closed deals in the last few weeks and submitted them to InsureTech companies, suddenly posting record months. This example shows that the current situation also offers opportunities and that good insurers can do business.
With my company pension plan, I still receive everything by post. Although I have been given digital access, I still receive regular letters.
Kiera: That’s a good example. That’s exactly what customers simply no longer tolerate today. But it also offers a huge opportunity. Insurers are no longer winning over their customers through price alone, but through additional digital services. In the area of occupational pension provision, for example, customers could be put in a position to analyze their assets or even build them up. The possibilities are endless, but you have to do something about it.
Are there any insurance companies that actually already work completely digitally and where you no longer have to bear these superfluous costs?
Kiera: There are a few. They vary depending on the subsidiary. Among the large providers, some are already doing quite well. I also know companies that are completely digitalized. But they started radically replacing their IT systems five to eight years ago, before the word InsureTech even existed.
Data security is once again an issue. After all, you can’t send pension documents by e-mail.
Kiera: But that’s not the customer’s problem, it’s the insurer’s. Turning a bad analog process into a bad digital process can’t be the answer to changing customer behavior. In the banking industry, there is online banking and even apps that can be used to transfer money, why shouldn’t this also be possible in the insurance industry?
To what extent is the VAIT (Insurance Supervisory Requirements for IT) a driver for insurance?
Kiera: BaFin is not an ‘obstacle to innovation’ – on the contrary, BaFin diligently grants licenses to new market participants and also helps them. Dr. Grund has publicly emphasized this countless times. BaFin’s focus is on security and added value for the customer, and not on maintaining encrusted structures. Bafin not only talks the talk, but – as a glance at the topic of pension funds shows – also acts in accordance with its statements. However, not all decision-makers seem to have realized this yet.
Kiera: A question from my side at this point. What is the approach when it comes to bringing in executives? Are candidates poached from other insurance companies or sought from outside?
As an executive search consultancy, we look for candidates from outside the industry in most technology sectors. They are generally not to be found in the insurance industry. If we have people from the specialist field, they have to come from another insurance company. However, it is often said ‘bring us someone with fresh ideas’ – well, there aren’t any because the insurance industry hasn’t really evolved in many cases. My view of the insurance industry is that the prevailing mentality is at least ten, 15 or 20 years overdue.
In the past, if a candidate in the banking sector didn’t meet the should-haves or must-haves, they were out. Today, banks no longer dare to do that. It is now known that the industry has suffered and that certain compromises have to be made. And they also know that professional gaps can be filled with training and further education. In other words, we can identify digital experts, but they usually have no insurance know-how. This could be taught to potential candidates, but they often lack the willingness and flexibility to do so, which means they stand in their own way again. As a result, vacancies often remain unfilled for up to two years until a potential candidate is found. However, during these two years, a career changer could have been offered the opportunity to train and benefit from their fresh ideas. Here, the current attitude of banks is already further ahead than that of the insurance industry – in the IT sector.
Conclusion:
There are still some insurance companies that have managed to switch to working from home during the coronavirus pandemic, but are still a long way from digitalization in the area of digital application processes and customer applications, or have difficulties promoting innovation because they don’t have the budget for it or think they can do it better themselves. Perhaps also because they shy away from one or two investments or because they are flirting with taking over an InsureTech company and have misinterpretations of their own possibilities. Unfortunately, the industry has not yet fully arrived in the digital age. There are some small and medium-sized companies that have implemented digitalization with agility and creativity. Unfortunately, many large companies lack this characteristic.
