Tag Archives: lumenlab

Easy Pickings in Southeast Asia

With GDP rates in SE Asia exceeding 6.3% per annum, with premium growth for life, accident and other policies higher than 13% last year in the region and with insurance penetration rates of 5% or less, we seem to be looking at a slow, fat rabbit.

But we don’t seem to be able to shoot it. Why?

See also: Innovation — or Just Innovative Thinking?  

While numerous global and regional insurance carriers have created venture capital funds, insurtech incubators and grand initiatives, the carriers’ fundamental view of the world has not changed. Consider the following: In 2016, there were approximately 75 deals in private tech investment by reinsurers and insurers, up from three deals in 2013. On the face of it, this is encouraging. However, of the total tech deals completed in 2016, more than 72% involved U.S.-based startups and only 12% involved ones in Asia. In other words, the fastest-growing markets of the world received only a fraction of the total tech investments from the insurance industry, which is not exactly transformational.

You can’t shoot even a slow, fat rabbit if you don’t aim at it.

If we assume an average of a $2 million for each of those private deals, this equates to $150 million in total capital commitments. Let’s be generous. If the average deal size was $10 million, the total industry commitment would have been $750 million, or less than .02% of the industry’s $4.5 trillion in annual premium.

Can you imagine a private equity firm like Blackrock investing only two-hundredths of a percentage point of its assets in products and ventures for the future? Neither can I.

In all fairness, it is not easy to disrupt the status quo in insurance.  After all, for well over a century, insurance was a game the house almost always won. Other than catastrophic events (hurricanes, tsunamis, floods, etc. — many of which are co-insured by local and federal governments), insurance has been a safe bet if, of course, you are the house.

In the face of change, many insurers have recently undertaken initiatives to break the mold. MetLife recently created LumenLab in Singapore, where a 7,800-square-foot facility is an incubator for innovative startups from outside the insurance industry. But with MetLife’s earning declining more than 19% from 2015 to 2016, is it enough? Aviva, a British multinational with more than 33 million customers across 16 countries, recently launched an initiative to encourage entrepreneurs to develop disruptive solutions. The mission statement reads: “Our mission is to connect with extraordinary talent, uncover breakthrough innovations and give those breakthrough innovations the opportunity to thrive.”  That’s very passionate, but what is the end game?

See also: Insurers Are Catching the Innovation Wave  

True innovation, transformation and disruption are cultural issues, and must be cultivated and encouraged from the top. Most insurance CEOs do not engage in high-altitude mountain climbing, scuba diving or any other extreme sport, nor do they hang out at the Google campus. Most importantly, they do not spend a lot of time in Bangkok or Shanghai. But they should, because that is where the new markets are forming.

There are, of course, exceptions to the rule. The first is Axa, which has created Axa Ventures, a true, well-funded venture capital subsidiary with a mission to invest in disruptive ventures that can actually get to market. The fund is led by Minh Tran, who has a successful history in venture capital and disruption. The second and less obvious group is Munich Re, based in Germany, which has launched numerous digital and venture initiatives. Germany has become a center for insurtech, and, while Munich Re’s efforts are, in my opinion, still not completely coordinated, it is clearly making a company-wide effort.

If insurance carriers want to lead the pack, they must embrace models similar to the one Axa has created, and they must make a corporate commitment to transformational change — especially in emerging markets. Disruption does not happen overnight, but it does happen. And, in a legacy industry ripe for change, it will happen sooner rather than later.

The question is whether it will be led from the inside or whether the industry will be dragged kicking and screaming into the future from the outside.

7 Symbiotic Ties With Insurtechs

Our previous blogpost introduced the Top 10 insurtech trends for 2017. We received a lot of requests to share more of our view with regard to the last trend we mentioned: symbiotic relationships with insurtechs. Banks and insurers are looking for ways to learn much more from the fintechs and insurtechs they are investing in and partnering with. This is indeed a critical issue to accelerate innovation in banking and insurance.

In our new book “Reinventing Customer Engagement: The next level of digital transformation for banks and insurers,” we actually included seven best practices — seven examples of banks and insurers that created very different ways of working with fintechs and insurtechs. (The book will be available Feb. 23, but you can already pre-order at Amazon).

Corporate Venturing

Virtually every bank and insurer is organizing competitions and hackathons or supports one or more accelerator programs. Some have started their own corporate venture arm. Obviously, corporate venturing should not be the main way for financial institutions to reinvent themselves. It is a means but not an end in itself. The challenge of the digital transformation is essentially a cultural one that involves the whole company, not just the technology. Working with fintechs and insurtechs offers the opportunity to rethink and accelerate innovation. Innovation is not about asking customers in focus groups what they want. It is about understanding new technologies and how they will interact with consumer behavior. And that is one of the things fintechs and insurtechs are much better at than incumbents. Therefore, financial institutions need to really immerse in the fintech community to stay on pace or maybe even a step ahead in a rapidly changing technology environment, or, better still, to shake up the status quo and accelerate change in the stagnant financial industry.

Minh Q. Tran (AXA Strategic Ventures). Key note address at DIA Barcelona in 2016

Banks and insurers are looking for ways to learn much more from the fintechs and insurtechs they are investing in and partnering with — whether it is about specific capabilities or concrete instruments they can use in the incumbent organization, or whether it is about the culture and the way of working. (At last year’s edition of our Digital Insurance Agenda, Minh Q. Tran, general partner at AXA Strategic Partners, and Moshe Tamir, global head of digital transformation at Generali, shared their view. Check here for the interview with Tamir. Obviously, expect more such keynotes addressing this critical issue at DIA Amsterdam, which will take place May 10-11, 2017.)

We have come across quite a few different models in which relationships between financial institutions and fintechs/insurtechs seem to flourish. In this blogpost, we included seven examples. This is not meant to be exhaustive. New kinds of symbiotic relationships evolve every day, and of course they can be combined.

1. DBS Bank: Fintech Injections

Neal Cross, chief innovation officer at DBS Bank, involves fintechs in his own distinctive way: “I don’t do innovation, I do sales. I sell programs that solve business problems inside the bank. We always start with their problems, around business model innovation or around KPIs. The start-up community plays a key role in our programs. I often tell our business units: ‘Give us 20 of your staff, we will split them into teams and pair them with startups.’ By embedding our staff in this agile, lean mean way of working, everyone benefits. We make sure our teams work within structured processes that include research, experimentation and prototyping, followed by implementation. Everything we do is focused, and we get senior sponsorship before embarking on a project, so we don’t have problems with innovations that end up not being implemented.”

Neal Cross

2. Aviva: Icons

This is the best practice that we included in our previous blogpost. Andrew Brem, chief digital officer at Aviva: ‘In our view, ‘icons’ are needed to spearhead the digital transformation process. Our digital garages in London and Singapore are such icons. They are a very concrete and visual manifestation of our digital journey – for everyone across Aviva. The garages are not just idea labs to house ‘skunk works’ teams. They are real places, where we make and break things. We run digital businesses from the Garages, and we design and build our digital ecosystems such as MyAviva. Anyone from Aviva is welcome to come and hold workshops and meetings there, to see and feel our digital capabilities at first hand. The garages also help us engage with insurtechs and inject their culture into our organization; by launching startups ourselves, but also by partnering, mentoring and investing. Aviva Ventures, with a fund of £100 million, is also housed in the garage, and so are some of the startups they invest in, such as the IoT home security startup Cocoon.”

Aviva Garage, Shoreditch, London

3. Deutsche Bank: Digital Factory

In the summer of 2016, Deutsche Bank started its “digital factory.” More than 400 IT specialists and banking experts from the private, wealth and commercial clients division are working on a specific site in Frankfurt to develop new digital products and services for the bank’s customers. In addition, there are 50 places for external partners from the fintech community. The digital factory is obviously also connected with the Deutsche Bank’s innovation labs in Berlin, London and Palo Alto CA.

4. Munich Re: Interfaces

Andrew Rear, CEO of Munich Re Digital Partners: “To avoid a culture clash, we have set up a separate Digital Partners unit in 2016. To make the interface between the two worlds work, two things are vital: The first is speed. Startups move fast and don’t accept the limitations of a corporate diary: ‘Time is money’ is literally true for them. We therefore need to move with the same sense of pace. The second is decision-making: Start-ups make decisions; they don’t arrange committees. Therefore, we don’t do that, either. All the key decisions from Munich Re’s side are in our hands. In our model we do the things startups don’t need to control, to make their proposition live. That can include policy administration, compliance, reporting and product pricing; the ‘boring insurance’ stuff. We have stakes in our start-up partners but we don’t interfere in the way they engage their customers. The positive effects on our ‘regular’ organization are noticeable. For example, people in compliance and risk management were not used to these new speeds but are already adapting and finding new ways to fulfill their responsibilities in a way that is manageable for the start-up.”

Example of an interface between Munich Re and startups at regional level is Mundi Lab. Mundi Lab is an accelerator partnership between Munich Re Iberia & Latin America and Alma Mundi Ventures. Augusto Diaz-Leante, senior vice president of Munich Re Life, Spain, Portugal and Latin America, explains how the cross-fertilization with startups works: “We select startups from all over the world, such as RiskApp from Italy and Netbee from Brazil. Twenty Munich Re executives mentor these startups one-on-one. The best-performing companies with the highest potential to disrupt the insurance industry have the opportunity to work on a pilot program in one of the Munich Re Iberia or Latin America markets. In this way, the sharing of knowledge, experience and expertise is made very concrete.”

The Munich Re Mundi Lab team

5. Zurich: Open Innovation

Zurich created a platform to bring together the innovation initiatives and projects in the group. Xavier Tuduri, CEO of ServiZurich Technology Delivery Center: “In the Zurich Innovation Lab, we generate disruptive ideas and strategic R&D projects for the global Zurich group. We believe in open innovation, a collaborative model that means combining the internal knowledge, for example regarding markets with external talent and disruptive technologies. In this way we are always at the forefront of the latest disruptive fintech and insurtech developments, while being able to quickly develop tangible prototypes that fit and inspire our businesses. These are prototypes, without risky high investments, for example regarding using drones for risk assessment. Each prototype project is led by an employee of ServiZurich who works together in a team with several start-ups, universities and institutions. In this way, our people and organization get injected with new ways of working and thinking.”

6. Chebanica!: Co-Opetition

If a financial institution wants to behave like a fintech, it needs to open up, think of what the ecosystem could look like, be at the forefront to see what is happening and partner with fintechs to accelerate innovation, to learn or to advance the sector as a whole. Roberto Ferrari (CheBanca!) is a protagonist of this mindset: “We believe in a ‘co-opetition’ model. There will be things in which we will be competing with fintechs and other banks, and areas where we will be cooperating with the same parties. Therefore, we try to make the Italian fintech community grow. Building a larger cake will be for the good of the whole financial ecosystem, innovation is key and startups will always be the lifeblood of any sector. We among others launched the Italian fintech awards and the Smartmoney blog, which is now the most important vertical innovation in banking blogs in Italy. We now have a very strong presence in the Italian fintech community, and we are close to all developments and connections. I and other C-level executives at our bank speak to at least five to six fintechs each week, and we have already launched two new services – award-winning Mobile Wallet and Robo Adviser — thanks to our partnership with some specialized Italian fintech startups. We help them by partnering, but also we want to help them to go abroad as scale is key to succeed.”

Roberto Ferrari (right) with Matteo Rizzi (left, one of the most influential fintech experts)

7. Metlife: Capability Building

Lee Ng, vice president and COO of LumenLab, MetLife’s innovation center in Singapore: “LumenLab and our new businesses are distinct from MetLife’s core business. Our mission is to create a growth engine that launches disruptive new revenue-generating businesses for MetLife, targeting the needs of Asian consumers across health, aging and wealth. But we do work with in-country experts to develop plans for testing the new business ideas and assess market potential. In our first year we, for instance, launched BerryQ, a quiz app that rewards users for their health knowledge; Rememory Stories, a platform to capture intergenerational stories; and developed CONVRSE, virtual reality experiences around service and sales for financial services. We notice a real mindset shift within MetLife because of this cooperation. The people we work with develop skills about new ways of testing new ideas, new toolkits and new ways of thinking. Our core insurance business thus improves their performance, through adopting new behaviors like curiosity, velocity, experimentalism and bravery. In others words, we are lighting a path for innovation at MetLife.”

MetLife’s LumenLab, Singapore

We believe that it will be increasingly important to adopt a culture of constant innovation, to stay in sync with all that is going on out there. Rather than trying to change their DNA, which is quite impossible, banks and insurers should think that constant innovation is the only way to adapt the DNA to the change that is taking place. You can, for example, buy great algorithms, but if you are not able to transform your culture, the implementation of these algorithms will fail. A banker shared with us: “I see working with fintechs like vaccinations in biology: these injections in our cytoplasm help us prepare ourselves for new attacks and adapt to changing environments. If you acquire new fintech companies, you could destroy them if you don’t adapt to them as an organization. You have to adapt the mindset of your own people. It is like playing a piano. Some people sit down on their piano chair and move their chair to the piano. Other people don’t want to change their position and try to pull the piano to their chair. We should therefore teach people to move their chair after sitting down. How to move the chair will depend upon the situation, but should always deliver value to our customers.”

Working With Fintechs and Insurtechs at DIA Amsterdam

Maximizing the results from working with insurtechs is an essential subject on the Digital Insurance Agenda. So definitely expect us to pay ample attention to this at DIA Amsterdam: our two-day conference connecting insurance executives with insurtech leaders. Check out www.digitalinsuranceagenda.com for more information.