When Ingvar Kamprad opened the first Ikea self-service furniture store in the Swedish town of Älmhult, back in 1958, his competitors were up in arms. They threatened to boycott his suppliers (which is why IKEA’s production had to be based in Poland for a time) and unceremoniously uninvited Kamprad from the Stockholm Furniture Fair. But customers loved Ikea right from the start and made Kamprad’s idea a business megastory. Since then, the self-service principle has not only been copied a million times over but has also become a kind of business principle for fully digital InsurTechs. By digitalising the most complex insurance models, these are now so successful that they have become real competitors for the traditional insurance market. Driven by the aspiration to be seen “as little as possible as insurers” in the public perception.
Autumn is high season for insurance companies. There’s a lot going on, particularly in motor, because that’s when drivers can change their third-party liability and motor own damage cover. In 2021, however, the second year of the coronavirus pandemic, the number of changes made industry-wide was lower than it had been for some considerable time. Except, that is, for digital insurers: ERGO’s own InsurTech, nexible, saw well-above-average growth in new motor customers.
nexible is trendy. According to the “InsurTech-Radar” industry report, 70% of InsurTechs specialising in end customers strongly expanded their new business during the coronavirus pandemic. Price is decisive, and many digital insurers score with lower-cost policies. Anyone who sees price as the only argument, however, is mistaken. People choose InsurTechs because they work like online shops. Buying – or insuring – quickly, comfortably, anywhere and anytime, that’s what it’s all about.
nexible offers fully digital processes for all services – from completing the insurance application and changing policy data, all the way to claims settlement. An individual quotation is produced within 90 seconds. The vast majority of services are available 24/7. For so much flexibility, however, customers must also play their part.
We’ve already been familiar with the principle of self-service for quite some time. Checking in online with the airline prior to departure is as normal as cleaning one’s teeth in the morning. It’s a ritual that has long become second nature since it was first offered by an airline in 1999. Customers love this service because it saves time, especially if they only have hand-luggage.
But the principle was invented by Ikea. For the Swedish furniture store, we customers are at the same time warehouse operatives and amateur assemblers. We collect the Pax flat-pack wardrobe ourselves from the high-bay warehouse – and even find that cool. We also assemble it at home, of course, an original Ikea principle (even if we don’t always find that cool). We therefore also consider the furniture to be more valuable – we did make it, after all.
With nexible, motor customers can change their address, email address, password and bank details round the clock in the customer portal. An international insurance card can also be downloaded immediately for printing by customers who are planning a trip by car. Customers can also report a change of driver or a second driver, using the self-service portal.
What I particularly like is the feedback from digital process users. Customer feedback is always thoroughly honest and sometimes turned out to be bad when the insurer first started up. With the new claims process, though, we are getting almost consistently positive ratings. Customers find it good to pitch in themselves, because that’s part of the fast, flexible, anytime and anywhere promise.
On the other hand, nexible doesn’t have a service hotline. That said, its chatbot is getting better and better. But the best thing is when the online process is self-explanatory and creates transparency. Anyone arranging their insurance digitally can calmly explore beforehand, in order to arrive at the individually most suitable and most cost-effective option. With the standard “What’s not covered” and “Are there any coverage restrictions?” boxes, nexible customers have transparency about the scope of cover.
For all the similarities between PAX flat-pack wardrobes and the motor online route, there is one key difference: the level of complexity in the insurance industry is many times higher. It’s not only legal and regulatory requirements that mean certain standards must be met. Actuarial science and individual risk calculation make mandatory disclosure necessary when insuring online.
But InsurTechs like nexible are showing impressively that they are getting better and better at this. This ERGO subsidiary has not only digitalised its processes vertically from A to Z but also horizontally. nexible has made the leap to multi-product insurer – after motor, it has now added three other products to its digital portfolio. In 2020 and 2021, besides a highly innovative travel insurance policy, it also added an e-bike cover and dental insurance.
With technologies and increasingly better know-how in relation to online processes, solutions that just a few years ago seemed scarcely possible are now practicable. Jan Messen, responsible for insurance business at Google Germany, even no longer rules out a Tesla moment in the insurance sector.
Comprehensive life or health insurance policies – the most complex insurance products of all – cannot be bought in online shops, as they are too complicated and require too much in-depth advice. These products are – quite rightly – an integral part of the classic principle of insurance with comprehensive advice. They are considered not able to be digitalised. A “Tesla moment” means, however, that precisely that will be possible – some day.
But, even today, it’s already worth investing in completely digital insurance solutions. Self-services that work smoothly and create positive customer experiences are an efficiency booster. Thanks to its high level of automation, nexible keeps its costs low, and this is something that customers can benefit from directly. The ERGO subsidiary thus offers its motor product up to 50% cheaper than some competitors.
It’s not the technology that’s decisive, however, but the customer. Technologically, much more would already be possible today than we actually implement. We could ramp up many individual processes to an automation level of 100%. Everything would run via algorithms and the customer would be served solely by a machine – quickly and professionally.
But it’s abundantly clear from the feedback that many customers don’t want this. They often have the deeply rooted human need to interact with real people on the other side. Especially when it comes to accidents involving personal injury, for example, communication must be with real people. One of the key tasks of nexible’s Chief Technology Officer Valentina Brebenaru is therefore to know and recognise customers’ wishes – before she brings technologies on board.
nexible recently entered into a partnership with the British online platform for used cars, Cazoo. Together with ERGO Mobility Solutions, nexible was able to develop its own application process within a very short time. The team has also scaled its motor online application route for the Austrian market. This is a huge advantage of InsurTechs – once the online processes have been established, the models can easily be scaled.
Another advantage of online insurers is that they include numerous data points. More parameters are measured via online routes and incorporated into customer processes, for example. That sounds like transparent customers. InsurTechs can use the data points for the customer’s benefit, however, for example in order to better be able to calculate risks.
I’m proud of what nexible has achieved. I still remember the launch very well. nexible went live in autumn 2017, right at the start of the season when people change their motor insurance. A digital insurer under the ERGO umbrella, tasked with challenging ERGO’s own traditional business model.
Launched as a young rebel, a Ford Mustang with screeching tyres, nexible has now grown up. In 2017, the targeted customers were primarily digital natives, the so-called “first movers”. Today, InsurTech users are all those who appreciate the benefits of online shops – in other words almost everyone.
The ERGO subsidiary in Düsseldorf has become a company with 44 staff and a business model that allows customers to arrange, manage or cancel their individual insurance cover entirely online.
In an extremely challenging competitive environment – with Wefox, Clark and Neodigital, Germany is now home to several unicorns or “almost unicorns” – nexible continues to want to be one of the trailblazers in the automation of the insurance sector. And if things continue to go as they did in 2021, our chances are very good!
Text: Mark Klein, CDO ERGO Group