As editor-in-chief of the German insurance magazine, “Zeitschrift für Versicherungswesen”, Marc Surminski observes the changes in the industry on a daily basis. In this interview with //next, the insurance expert talks about the limits to digitalisation and the future of sales.
Mr. Surminski, digitalisation has changed the face of the industry significantly – and the coronavirus, in turn, has increased the pressure to accelerate digitalisation. Will customers only be using apps to take out insurance in a few years’ time?
"Only" is not the right word here. But we will certainly be using a lot of apps in future, and we will have a great many digital solutions for taking out insurance.
Will there be major differences – depending on the type of insurance?
Yes, definitely. At this point in time, it is not exactly a vision of the future anymore, since we already have many such apps for straightforward policies in specific situations: for example, if I am standing at a ski lift and I need to take out accident insurance in a hurry. You can already do this using an app. Some companies are working with Amazon’s virtual assistant, Alexa. This allows you to take out simple insurance, such as pet insurance, or standard covers for devices. So the apps are already in place today for very simple policies, and the number will increase considerably in future. That offers great future potential.
And where are the limits?
The more complex the product is, the trickier it becomes. The exciting question for the future will be what can actually be automated and displayed digitally? For example when using an app in sales activities. This is not a question you can answer with a simple "yes" or "no".
So the more complex an insurance is, the greater the customer’s need for advice?
In future, I can certainly see non-complex insurances migrating to the area of digital contracts. Personal liability covers, for example, or motor insurance. Residential building coverage is a little more delicate – when it comes to calculating the sum insured, for instance. In this case, existential risks are involved.
How do you assess the situation for life insurance?
That will be interesting. I can imagine it will be possible in future to take out term life insurance with an app. You can arrange digital cover today for pension provision, even with all the tax implications, and questions like risk and the long-term security of the investment. However, most customers have no idea about these things. They would still prefer to be face-to-face with an experienced professional advisor before they purchase a product.
What does that mean for the future of insurance agents? Will they have to specialise in the more complex products?
That’s exactly right. The days when you could live comfortably with a large property portfolio are gone. It is good to have existing portfolios, but they will start to crumble as customers age. The field of the future for agents is providing well-qualified personal advice, for example on things like pension provision and nursing care.
So insurance agents will not become obsolete in the future?
No, they will still be needed in cases where expertise is called for. Most people seek guidance in these situations and want to discuss matters with an expert. That presents a great opportunity for personal sales. At the same time, we should be clear that there will be fewer agents. The contraction process will be greater than we can imagine. The numbers at the chambers of commerce and industry are falling sharply, and that trend is bound to continue. We will have fewer agents, but perhaps that is not such a bad thing.
Because we have too many agents across the board. It is a densely populated market, and that increases the pressure because there is stiff competition. There are also people in this industry who haven’t been pulling their weight, who were poorly qualified and haven’t taken the duty of providing good advice too seriously. The situation has become much better thanks, among other things, to government regulation. This process of quality consolidation will continue.
What would you advise someone who is considering a career in the insurance industry?
As I mentioned, it is a sector that is contracting. Sales force numbers are declining, and the number of back-office staff is as well. But there are great opportunities for qualified, digitally savvy back-office people who perform more than just basic administrative tasks. And similarly with sales staff: there is still a strong demand in the insurance industry for people who combine communicative and digital communication skills. Of course, the days when unqualified career changers were let loose on customers are long gone.
What impact is digitalisation having on the insurance industry? Can it be compared with the banking sector?
Despite all the parallels, there is one major difference: In the insurance industry you do not have so much contact with customers. Their policies run, and if everything goes smoothly and they have no claims to make, there is neither sight nor sound of the agent. There are fewer customer touchpoints than with banks. Of course, this makes the business a little more brittle.
But if something goes wrong, I need a personal contact.
That’s right, and then it gets tricky if a problem arises. That applies for technical problems too, when someone needs to be available. Then it is make or break time for personal support.
Will comparison portals increase competition in the future?
Definitely, they act as an accelerator. That is the area in the insurance industry where digitalisation has been most noticeable so far. Insurtechs, in other words tech companies that have specialised in digital solutions and services for the insurance industry, are currently little more than an interesting experiment. They are completely irrelevant in terms of volume. In contrast to comparison portals, such as Check24. These are having a really noticeable effect in the industry. Agents are coming under quite heavy pressure.
Insurance products are being specially packaged to make sure that they feature as high up in these rankings as possible.
Yes, people are asking themselves: what must I offer to achieve top ranking? And, needless to say, special attention is being paid to the vexatious matter of price. Companies then offer top conditions at a bargain price. We know that this is not economically sustainable in the long term. Yet people keep trying the approach. The result is that revenues come under even greater pressure, intensifying competition in the process.
In terms of digitalisation, what must an insurance company do today to ensure it is still in business in ten years’ time?
That is a billion-euro question. Every insurance company is investing a lot of money to investigate this matter. I think you need to look at what competitors are doing. And by that I don’t mean other insurers, but the companies that set the standards in the digital market – the Amazons and Googles of this world, for example. You can never match what they do because they have quite a different business model. But you need to look at what Amazon offers – a perfect sales process. Insurers also need to try to make things as simple as possible for the customer. That is extremely important. Here is a recent example: A friend asked me about travel health insurance. I recommended a leading provider who is also high in the ratings. Afterwards, he was very impressed with the checkout process. He told me: “It was almost as easy as ordering from Amazon.” That has to be the target! Many insurers are still not able to do this. But it is still a worthwhile achievement if a company at least manages to come close to the customer experience with Amazon.
In this context, how do you assess the developments at ERGO?
There is no question that ERGO has weathered some difficult times. But I have the impression that the extensive restructuring measures implemented in the last few years are now taking effect. In life insurance, the company is again perceived in the market as an attacker – for example, on the product side. And with the consistent integration of all sales channels – including direct sales online – ERGO is certainly a few steps ahead of the industry in terms of implementing digitalisation. I also see the company playing a pioneering role in the forward-looking fields of robotics, voice technology and the use of smart data.
What changes has the coronavirus crisis brought?
The coronavirus has made it clear that a company like ERGO has become so technically sophisticated that its employees were all able to work from home at short notice - without compromising quality of service. In general, I expect the coronavirus to accelerate digitalisation significantly. What often used to take an excruciating amount of time is now happening much more quickly. And we have seen that it is possible to communicate with customers digitally, without any major glitches. Of course, we will have to wait and see how the coronavirus will impact growth in the medium term. But one thing is certain: the crisis has given digitalisation a major push.
Interview: Helge Denker / Ingo Schenk