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The insurance industry:
A complicated love affair  

Our //next columnist – and tech enthusiast – Markus Sekulla is taking a close look at the insurance industry and is not taking a leaf out of his mouth. He states: Without innovations, digital strategies and adequate reactions to the market, this will not be the "future" for this industry. But, on the other hand, he sees many reasons for hope!

Smart Speaker

No other profession conjures up quite as many preconceptions as the one practised by the men and women of the insurance industry. The industry uniform, grey two-piece suits and ties, stands out as an anachronism of the 20th Century, and goes perfectly with the industry’s perceived pace of innovation and forward-thinking capabilities, which, were one to judge using this century’s standards as set by start-ups and Silicon Valley ... could be considered non-existent.

But before I indulge any further in stereotypes, let us examine the current state of affairs at ERGO, where I received the opportunity to see the industry up close and personal over the past few months.

Before striding through those large, glass doors I of course sifted through the results of a quick online search to see how the industry was faring. My efforts shortly yielded an article from the Handelsblatt, a German newspaper, about a study performed by the management consultancy company, ZEB. Their conclusion was gloomy (link in German only): 

„Versicherungen kommen bei digitaler Transformation nur langsam voran“

To put it lightly, the article paints a bleak picture of the industry. The general consensus – at least in my little digital bubble – is that those who fail to jump on the digital bandwagon now will very soon be eating their competitors’ dust. But perhaps that was just one unflattering article?

Unfortunately not: A recent study by the Boston Consulting Group levelled an equally serious criticism at the industry: not a single insurance company made their list of the 50 most innovative companies in the world.

The evidence was stacking up against the industry. Well that’s done it for me. It’s time to close my laptop: I’m going to see for myself.    


9 a.m. at the station

One of my preconceptions about the insurance industry turns out to be true: walking through the "Viktoriastraße" underground station near ERGO headquarters in Düsseldorf, one does tend to see more blazers and dress shoes than in Silicon Valley ... many more. But that’s also true of Milan and nobody raises an eyebrow there. The first few meetings are productive, and I’m surprised that they use so many words native to my digital world. Our conversation topics list like my feed reader: bots, AI, insuring electric scooters, etc.

Now I’m confused. Why is everyone complaining that the industry has yet to undergo a digital transformation, yet here I am getting down and digital with ERGO?   

Innovate or Die

While I was living in New York City in 2014/15, an insurance company was making it big with funny posters on trains. The advertising claims went something like this: 

  • Doctor’s appointments via app and video call,
  • get an Amazon voucher worth one dollar for every day you take 10,000 steps and
  • free gym memberships for every customer. 

InsureTech startups quickly caught the attention of young New Yorkers, who concluded insurance policies with the likes of Oscar and Lemonade. Every larger insurer would have seen these trends and asked why they didn’t have something similar up their sleeve. No, the US and Germany are not cut from the same cloth, and there are fewer regulations in the US than here. Make of that what you will, but one cannot ignore the fact that the drive to innovate is rooted much deeper in American culture than here in Germany.

But back to Germany in 2020. We had doctors’ appointments via video forced upon us by COVID-19. In 2019, 10% of people stated that they had attended a doctor’s appointment via video. Now in the summer of 2020, that figure has climbed to 30%. The pandemic has also forced digitalisation in other areas. 

Both my first few days at ERGO and the pandemic affirm that the industry realises the need to innovate. This is a good thing because competition is now approaching on all fronts. It’s like the mineral water producers that only ever kept an eye on their direct competitors, until one day someone came along with a pressurized cylinder for making bubbly water. In just a few short years, carbonated water machines had made their way into many households.

It is becoming clearer to me that insurers who do not innovate, follow digital strategies and respond adequately to the market have no future. This is not merely theory. We only need to look at other industries to see the real-life carcasses of those who failed to act: video stores vs. Netflix, or (soon) the classic automotive industry vs. Tesla. 

Speaking of Tesla: in May, the company was looking for automotive insurance experts for its new factory in Brandenburg and to strengthen its position in Germany. The ad said, “Forget everything you know about automotive insurance pricing from the past hundred years.” “[…]you will assist in developing 21st-Century pricing methods tailored to Tesla drivers.”

It is not just Tesla and start-ups you have to watch out for; the competition really is coming at you from all fronts. A great example: Amazon offers COVID-19 insurance cover in India. What this means for the industry as a whole: innovate or die.

There has been some progress – there has to be

After the first few weeks and the first critical discussions about what one can do to remain a good customer-centric partner in the insurance market of tomorrow, it becomes clear to me that I am operating under the assumption that everyone in Germany needs (and wants) solutions that are even more digital. Yes, they do save time. The share of policies concluded online remains low, however, even though the opportunities are there and are encouraged heavily by advertising and website banners. This is explained by customer behaviour. According to the ZEB study I mentioned earlier, we more or less still prefer face-to-face contact when concluding insurance policies that require a lot of consultation. 

I have concluded that it is not simply about taking classic insurance products online. Instead, new products and services must be offered that surpass our current understanding of insurance. Legislation also has to play its part. Telemedicine has been possible for some 20 years – in theory at least. Next is to offer all of these new products and services. The emphasis is not meant to be on the products, but instead on industrial innovations in AI, e-mobility, bots, etc. 

I am reminded of a heated discussion I heard over coffee at a tech company many years ago. The one sentence I can recall most clearly came from a middle-aged man: “Listen here, I sold insurance door to door for four years, you can’t fool me!” Perhaps in the future we will say, “I tailored bespoke services for online customers for four years, you can’t fool me!” Until next time.

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