Covering risks constitutes the core business of insurance – that will not change. Though new side opportunities also pop up every once in a while, one of which – a very traditional one – has just been given a major push by the coronavirus crisis, writes ERGO CDO Mark Klein: insurers are moving from being annex sellers to tech providers for the rapidly growing online trade.
More and more people are insuring lifestyle products such as smartphones, luxury eyeglasses, premium headphones, or e-bikes against damage and loss. Because if such a high-priced product is lost or damaged, the customer suffers not only financially but emotionally, too.
Indeed, these are gadgets that consumers have simply come to love and can hardly do without. So it is not surprising that the annex market has been growing in the double-digit percentages for years. With our insurance products, we at ERGO are closing a gap in this rapidly growing segment.
The term “annex” means that when you buy a product, for example a smartphone, you can also take out insurance – as an “annex” – in the same transaction. This is convenient and customer-friendly, because it saves customers a second sales process. In addition to warranty extensions that provide cover after a manufacturer's warranty expires, electronic equipment insurance constitutes today’s generation of high-volume annex products.
ERGO is not the largest, but one of the fastest growing annex insurers in Germany. Our clients include Amazon, Cool Blue – the largest online retail platform in Belgium and the Netherlands – Check24, 1&1, Otto, Yello, the Apollo parent Grand Vision, Expert ESC and many more.
But what does this all have to do with digitalisation? The answer clearly comes from the economic consequences of the coronavirus pandemic. Indeed, the digital transformation accelerated by the virus has been particularly evident in online sales.
ERGO’s sales volume with annex insurance has declined at walk-in shops. In the online business, on the other hand, the volume has practically exploded and we have seen enormous growth. And the trend will not end with the coronavirus, but will continue to expand. And this is exactly why annex sales stand on the threshold to technology business.
Online shops are powered by highly efficient back-office processes. The algorithms are programmed to make the customer journey run smoothly and – in the case of online smartphone purchases, for example – to ensure that the process remains trouble-free, from customer order through home delivery. The “insurance pixel” needs to fit seamlessly into this process and the algorithm.
We slip into the digital supply chain using a simple pop-up window or check-out box, without our partner company having to deal with any major programming changes. The result is a kind of “shop in shop system”, which doesn’t annoy the buyer but still stands out with a marker, asking: “Would you like insurance with that?”
In a partnership, flexibility and a custom fit are absolute keys to success. Does our partner only want the risk coverage, i.e. it will take care of claims management itself? Or does it want an all-round seamless solution, where the annex insurance is deeply integrated into the product customer’s journey, without the partner having to intervene? We are flexible, we can offer any variant, and we customise!
In terms of customising, we as insurers can even be a kind of sales consultant for partner companies. We can help provide shoppers with an even more personalised and tailored service experience, provided that the data interfaces comply with our very strict data protection requirements.
With the help of the collected data points, partner companies can better focus on their customers. If we also apply our machine learning know-how and Artificial Intelligence, we can become enablers for our business partners – in other words, tech providers with data-driven support.
Together with our clients, we have built up unique expertise in the retail sector, which we will now significantly expand and transfer to our international core markets.
And that is not all. We will now be even more tightly pooling the know-how we have acquired in all annex lines, and setting up an integrated field of “Business-to-Business-to-Consumer (B2B2C)” competence. ERGO Mobility Solutions and ERGO Travel Insurance will be networking more closely with the retail annex business in this regard.
While annex business is not directly comparable with the sophisticated mobility sector to which our ERGO Travel Insurance and, above all, ERGO Mobility Solutions contribute, the technical experience in merging and integrating different systems, gained from the online retail business, can also be useful there.
Just consider the automobile, which in recent years has engendered completely new mobility concepts that are pushing insurance solutions to flexibly adapt. This segment will be undergoing developments that we want to actively help shape through our focus on B2B2C.
More specifically, we will continue to develop areas such as infrastructure, product development, data management and sales – together with our partners BMW, Volvo, Great Wall Motors, Amazon, Cool Blue and Apollo – and align them in such a way that buyers benefit from increasingly better services, and fully integrated, comprehensive digital solutions.
In the context of our ERGO Ambition 2025 strategy, we call this our “Dual Mission”. On the one hand, we are expanding our ecosystems and cooperations in the travel, mobility and the annex businesses, decisively strengthening the investment in B2B2C and continuing to focus on our digital insurer "nexible". On the other hand, we will be digitally leading in the insurance sector by 2025. As an insurance and technology provider, we support our business partners in building ecosystems.
Those who think in terms of overall systems – and who manage to integrate themselves deeply into their customers’ value chains – will gain a competitive edge as insurers. I am sure of that.
Text: Mark Klein