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Global Trend Map No. 18: Europe (Part 2)

In Part I of our profile for Europe, we reviewed our statistics for the region, which we gathered in the course of our Global Trend Map (download the full thing here), and outlined a number of qualitative themes, exploring the first two of these:

  1. Growth opportunities in a relatively saturated market
  2. The European consumer and Europe’s early adopter status
  3. How European insurers can deliver on their customer promise with new tech
  4. Dynamic, real-time insurance and IoT
  5. Progress on developing connected insurance models across the continent

Here we explore themes three to five in discussion with two in-region influencers:

  • Switzerland-based venture capitalist Spiros Margaris, VC (InsureScan.net, moneymeets and kapilendo)
  • Charlotte Halkett, former general manager of communications at U.K.-based telematics provider Insure The Box (now MD of Buzzvault at Buzzmove)

Delivering on the Customer Promise

In Part I, we posited that Europe holds a slight innovation lead over our other major regions, finding this borne out in the more disrupted distribution landscape (with affiliate, aggregator and direct-to-customer channels all relatively well established).

However, embracing innovative distribution methods is only part of the story for European insurers seeking to engage digitally savvy and ever-more-demanding consumers; another key aspect is to incorporate a greater level of personalization into products.

“The consumer is used to a really personal experience now, and that is exactly the same as when they’re buying a pair of shoes online,” comments Charlotte Halkett, formerly of Insure the Box (and now at Buzzmove). “They’re used to being able to get something if they want it, where they want it and at the cost they want, including complete information like the exact half hour it’s going to turn up in their house and what color it is.

“That’s the same for the £1,000 insurance they’re going to buy, they want to have that real personalized experience to get the cover they want, how they want it, and to be able to influence the price that they’re going to pay. The big, overwhelming message is that the insurance industry is going to need to be flexible and innovative, because consumers are becoming ever-more-demanding, and the base level of their expectations is rising all the time.”

Personalization in insurance extends from offering positive customer service across channels to customizing policy prices on an individual basis (UBI). Halkett believes that the U.K. market in particular has been a leader in this sense:

“The complexity of pricing has always been at the cutting edge in the U.K.,” she says. “From developing general linearized modeling through to telematics, the initial development has occurred within the U.K. And it’s partly to do with this being a worldwide center of insurance, that’s true, but it’s also to do with the consumer. It’s very consumer-led: consumers are very willing to adopt, consumers are very willing to try new things.”

Halkett believes that the U.K. has served as a guinea pig for in-car telematics and that the models developed here can benefit a wide range of insurance markets. This impression fits in with our product-development stats for Europe overall: Auto was indeed one of the lines respondents identified as driving the most product innovation in the region, the other being health (see our earlier post on product development). We explore UBI models, especially as they relate to the auto line, as our next theme.

“It is important to listen to your customers and speak their language in order to influence your top and bottom line. If you want to satisfy your customers, you have to know what they want and need, what they’re saying about you, and how they feel about your products, services and brand.” — Monika Schulze, global head of marketing at Zurich Insurance

All these customer initiatives, if they are to be more than just good intentions, require far-reaching back-office transformation; investment is required in new technologies and solid digital capabilities (such as analytics), and these in turn need to be grounded in well-conceived strategies if they are to truly take root and flourish at an organizational level. Let’s look now at what European insurers are doing practically to deliver on their customer promises.

Encouragingly, a large majority of European respondents acknowledged having formal digital, mobile and cross-platform strategies, so digitization appears to be well underway among European (re)insurers, consistent with our other regions (see our earlier post on digital innovation). We also found a strong increase in analytics focus/investment among our European respondents, as well as a reasonable level of coordination of analytics across their organizations (see our earlier post on analytics and AI).

Analytical and machine-learning models have plenty to get their teeth into with what customer data has been captured directly by insurers, but they can additionally be supplied with external data from third parties. We found this practice to be widespread in Europe, as indeed were formal data-governance strategies.

“The one who is doing similar business to you should be considered as a chance and not as a risk – being connected via Open APIs based on your open insurance ecosystem. You will win because your processes and technologies are faster, cheaper and more customer-oriented than others, because you are open.” — Oliver Lauer, formerly head of architecture/head of IT innovation at Zurich

One major hurdle for the implementation of more data-driven, customer-centric systems is the presence of legacy, and this is just as present in Europe as anywhere else. Legacy systems came in second place among the internal challenges for Europe (in line with the global trend), and was additionally identified by our European contributors Halkett and Margaris as a serious challenge for the region. Margaris highlights a couple of particular pain points as far as legacy systems go:

“If you have legacy systems, it’s difficult to put cutting-edge technology on top of them,” he says. “Legacy systems make it so much harder for incumbents to innovate and to comply with regulations.”

Taking Insurance into the Real World, Real-Time

In Part I of our profile on Europe, we tentatively identified Europe as an early adopter, and we saw this tendency manifested in the prevalence of new-age distribution channels and personalized, customer-centric products.

Here, we extend this line of inquiry by turning to the vanguard of personalization in insurance, namely the Internet of Things, and exploring the progress it has made within European insurance. IoT is the final frontier of customer-centricity in the sense that it takes insurance into the real world on a real-time basis, placing the customer literally, and not just figuratively, at the center.

If Europe is marginally further along the journey of customer-driven disruption than our other regions, as we have suggested, then we would expect IoT to be marginally ahead, as well. And while the technology is making strides the world over, our stats do place Europe above trend on the IoT-for-insurance adoption curve, at least in terms of current platform implementation (more details in our dedicated Internet of Things section), and the pre-eminence of the continent in this field is borne out by much of our broader research.

While Internet of Things was not a priority area that Europe led on in our insurer priorities section (it came second behind Asia-Pacific), Europe did achieve top spot for mobile, customer-centricity and claims – which form a constellation very auspicious for IoT-enabled business models and innovation.

Margaris tends to agree on the importance of IoT for European insurers, and Halkett, as we have already mentioned, credits the U.K. market as having fostered the development of in-car telematics.

“The IoT development (expected to reach $20.8 billion by 2020, according to Gartner Inc forecast) should help a new insurance to emerge, increasing customer-centricity and decreasing costs. An example of IoT impact on insurance is wearable tech, a passive way to monitor health and wellbeing, in real time and for everything. By identifying those who seem to be looking after themselves, insurers can drive premiums down for them.” — Minh Q Tran, general partner at AXA Strategic Ventures

The real opportunity consists not just in personalized experience à la retail but in personalized pricing, so that the price customers pay reflects their real-world usage as captured by connected devices.

It is thus that personalization and premium-price reductions actually go hand in hand; rather than requiring two strategic thrusts, they can be part of one IoT-enabled customer-centric approach. These two Ps – price and personalization – are the two main advantages enjoyed by insurtechs, so insurers looking to the future, and to future-proof themselves, should definitely be taking an interest in IoT.

See also: Global Trend Map No. 15: Products  

While still only a minority of insurers in Europe have a strategy on usage-based insurance (UBI), this is in line with our other key regions; we expect to see this percentage rise dramatically across the board over the coming years. Auto, home and health are the leading lines across all our regions in terms of the expected IoT benefits, though the benefits of sensor networks in other lines should not be ignored.

Auto is an example of a line that has already been extensively transformed by IoT in the form of telematics. This area is home to solutions of varying sophistication, from smartphone apps to “black boxes” built into cars. Depending on the richness of data coming from in-car sensors, a variety of insurance use cases and business models are enabled.

The one that most immediately jumps to mind is UBI, incorporating dynamic pricing and driving behavior modifications. By making customers’ premiums dependent on how they drive, insurers both encourage better driving (which is good for everybody) and lower the cost of premiums, which helps to get more people, more affordably, on the road.

“The joy of all insurance is the same: the financial desire of the insurance company is completely aligned with customers’ needs. So nobody wants to have crashes! The consumer doesn’t want to have crashes, and the insurance company would like to reduce the risk on their books,” Halkett says. “With telematics, you really get to do that; it’s not only that you get to understand the risk of the individual consumer, it’s that you get to influence that risk, so the risk that you write does not have to be the risk that you keep.”

Even if premium prices remain the same, a premium with the potential for reduction is an infinitely more saleable proposition than the fixed-price alternative. And it is not solely up to drivers to educate themselves – insurers can take a much broader tutelary role by communicating tips and advice on a continuing basis. In this way, companies like Insure The Box are much more than just providers of telematics.

“We take customers, and then we make them safer drivers,” Halkett says, “and we do that via communications, online portals and via direct messages to the consumers, all the time rewarding safer driving behaviors.”

From language courses to money-saving apps, gamification has proven itself time and time again to be a powerful force for bringing about positive outcomes, and the case with telematics is no different. The key is to engage the customer via whichever touchpoints are the most natural and offer the highest level of trust and engagement.

Insurers should not therefore conceive IoT solely in terms of inbound traffic (data traveling from customer devices to their back office) but also as a means of achieving higher engagement for their outbound messaging (from insurers to customers). Halkett points out the potential of connected home devices, such as the voice-enabled Amazon Alexa, for initiating contact with consumers in a world where “mobile” refers to much more than portable telephones.

“Automated data capture through IoT does not just help insurers preempt claims, it also helps mitigate losses and improve customer service when claim events do occur, by rooting out fraudulent or inflated claims and enabling faster turnaround of legitimate ones. Provided customer privacy concerns form part of the discussion, there is no reason why connected claims cannot be a win-win for everyone.” — Mariana Dumont, head of new projects at Insurance Nexus

Beyond facilitating UBI models and continuous customer engagement, IoT solutions also give insurers detailed insight into what is actually happening on the ground on a second-by-second basis. Admittedly, this requires a lot of data and sophisticated models and, in telematics for example, is certainly a lot more than just detecting high G-forces.

Indeed, Halkett recounts an example from the early days of Insure The Box, where a spike in G-forces triggered an accident alert but actually turned out to be nothing more than the forceful slamming of one of the car doors. Nowadays, though, the company can reliably detect the telltale signs of accidents and other claim events from the incoming stream of black-box data in real time and react accordingly. With motor accidents, speed is of the essence, so being able to dispatch an ambulance instantaneously to the scene can be the difference between life and death: the ultimate in claims loss mitigation.

This data is also useful in the inverse case, where insurers want to demonstrate that an accident has not in fact occurred (and that, therefore, an associated claim is fraudulent).

The business case for IoT in claims is self-evident; as we recall from our Internet of Things post, a majority of our respondents selected claims as one of the areas best-placed to benefit from IoT. Further still, in our stats on claims, a majority of respondents believed that IoT would affect the claims department, and a majority also acknowledged having a high level of focus on claims loss mitigation.

The immediate access that IoT gives to data, which does not have to be sought out and gathered but simply ends up in insurers’ back-end systems as a matter of course, is driving the development of automated, or straight-through, claims-handling. We found a reasonable incidence of automated claims-handling among our European respondents, whose claims departments also expressed a strong focus on customer experience.

In the context of continually expanding horizons, we asked ourselves what the next stage of dynamic real-time insurance might be. Continuing this section’s particular focus on the auto line, we of course cannot ignore the amount of chatter around autonomous driving and what it means for the insurance industry.

While some believe that autonomous driving may eliminate the auto line, the truth of the matter is that human error is not the sole source of catastrophic events on the road.

“You don’t just eliminate all risks by making your vehicles autonomous,” Halkett points out.

“And that’s before you even start to think about what you’d need to do to have an entirely autonomous ecosystem. The environment is going to have to have so many significant changes before it can support current autonomous functionality, and the journey between now and 100% autonomous – even if that does happen, and it’s not certain it will – is not straightforward at all, and there will be lots of different forms of mobility between now and then.”

Halkett underlines rural and city driving as two key hurdles to be overcome on the way to full autonomy. For now and the immediate future, she believes there is food for thought enough in the intermediate stages between today’s conventional cars and the putative point of total autonomy in the future:

“We’re going to have multiple different vehicles, some with ADAS systems, some with minor help for driving in there and some with barely more than a glorified cruise control, up to fully autonomous vehicles, all on the road at the same time with drivers behind the wheel with very differing levels of experience and expectations for that driving, too.

“And what they are going to want from their insurance is a seamless product that just covers them for whatever they’re going to do – that is the reality of what the insurance industry is facing over the next 10-20 years.”

Instead of focusing exclusively on different degrees of autonomy within what is essentially a private ownership paradigm, Halkett believes insurers should also be looking laterally, at emerging mobility formats:

“I would be looking at things like ride-sharing, things like shared ownership and different forms of vehicles, before we ever got to the point of complete autonomy,” she concludes.

Driving Connected Insurance Models Across the Continent

Our exploration of Insurance IoT and telematics has so far leaned toward the U.K. But what sort of progress have new-age insurance models made across the continent as a whole?

Another country that currently boasts plenty of IoT buzz is Italy. Our influencer Matteo Carbone, of the Connected Insurance Observatory, draws attention to the telematics leadership shown by the Italian market, citing the nation’s 2.4 million connected cars (as of the start of 2016), compared with 3.3 million in the U.S. and 0.6 million in the U.K.

However, to compare IoT progress in blanket fashion across different national markets and insurance lines can be like comparing apples and oranges with pears and plums, given the uncategorizable variety of the problems IoT solves and the sheer number of different business models it enables.

In Italy, for example, telematics boxes have been mandatory in all new cars for several years now, as a result of legislation aimed at reducing fraudulent whiplash claims. Such legislation does not currently exist in the U.K., but, as we have pointed out, the U.K. telematics market could be considered a front-runner in other respects.

“Italy is recognized as the most advanced auto insurance market at the global level for telematics. Leveraging the experience of the auto business, the country is affirming its position as a laboratory for the adoption of this new paradigm by other business lines.” — Matteo Carbone, founder and director at Connected Insurance Observatory

Leaving aside the question of who leads and who trails, one thing is certain: that IoT-based solutions for insurance, both within the auto line and beyond, are only going to become more prevalent as the unit cost of sensors comes down and the demonstrable savings from the technology rise further.

“The cost of technology is coming down all the time, and customer understanding is going up,” Halkett says. “So the business model becomes easier and easier for a wider portion of the market. Consumers in other countries will more readily adopt these sorts of technology-led products, and insurance markets are becoming more sophisticated, as well.”

To continue with our auto focus, we can see how the advantages of in-car telematics – whether we are talking road safety, lower premiums or counter-fraud – are advantages for people of every age in every market, so there is no fundamental limit on the applicability of the technology.

“At some point in time, everyone is going to get connected. People will feel more empowered as they have a greater control on preventing risk events. This will be the origin of the new business model. In some countries, insurers don’t have a high level of trust because they are establishing conditions and changing prices, and the relationship is only one way. This is going to change, because in the future clients will have their data as an asset.” — Cecilia Sevillano, head of partnerships, Smart Homes, at Swiss Re

This is not to say that the specific use cases will be the same everywhere. Halkett believes that the technology will bring about a bigger quantum leap, from a road-safety and world-health point of view, in those countries where infrastructure currently lags.

“I think when you stand back and start looking at the benefits of telematics, there’s an awful lot that could be used in different markets for very different reasons,” she says.

“For example, if you look at the accident alert service and it tells you when someone has had a serious road accident – that would be so useful in rural areas in poorer countries which perhaps do not have the same infrastructure or the same emergency services as we do in the U.K. And to have that pinpointed alert would be even more valuable in countries where not everyone has a mobile phone and hospitals are perhaps less accessible.”

This is a classic case of high-end technology bringing the full benefits of insurance to the lower-end market, a recurring theme across our other regional profiles, as well; underdeveloped markets, especially when they lack the burden of legacy systems, have a chance to catch up with and even leapfrog more established markets.

Margaris believes that this will be the case, not just for IoT adoption but for innovation more generally, in those parts of Europe that are currently less developed.

“The truth of the matter is that in less affluent countries you will see a faster adoption of insurtech because it’s cheaper and more personalized than what the incumbent insurance players offer,” he says. “Furthermore, I believe that the richer the countries, the less there is a need by consumers to adopt the cheaper business models that are offered by fintech and insurtech startups. So, therefore, I would say, the more developed the country, the longer it will take for innovative technology and business models to be adopted.”

Looking beyond Europe for other emerging markets with leapfrogging potential, Margaris points to Africa as a ready-made example, referring specifically to mobile technology:

“Look at Africa, where with a normal phone – not even a smartphone – you can already transfer money, you can do anything,” he comments. “Because with low incomes, you will find a greater need for innovation.”

This forms an unfavorable contrast with some established markets, and Margaris sees his native Switzerland as a case in point:

“In Switzerland, where I live, there is a lesser need for innovative business models because people have enough money. Not everyone is well-off, of course, but in general, there’s such a comfort level that people say, the status quo works well, so we don’t need to go for fintech or insurtech solutions that are or might be cheaper or better.”

Margaris picks out insurtech and AI as two growth areas towards which sizeable investments are currently flowing, with London and Berlin being the premier European hubs. As for how the insurer-insurtech confrontation will play out, he points to the case of fintech – which has a couple of years’ lead on insurtech – as a likely indicator of how things will go here as well.

See also: Global Trend Map No. 16: Regions  

“If we look at fintech, which is in a more advanced phase than insurtech, you see a clear trend of cooperation, meaning partnership or outright buying by incumbents. I think this will also happen to the insurtech space,” he explains.

While this prognosis (cooperation winning out over competition) is generally positive for insurers, Margaris believes that in some ways insurers have it more difficult than banks:

“Banking has the same issues, but banks are much more experienced with customer interaction on a daily basis, while, with insurance, usually you talk to an insurance agency once a year, like when you have a claim. So legacy technology and the insurtech industry as a whole is worrisome for the insurance industry, but it’s also an opportunity.”

“Insurtech will offer new ways to harness IoT potential, with use of AI and machine learning. Through partnerships with these startups, incumbents can definitely accelerate their modernization. And this is a win-win situation as insurtechs have technological expertise and, in return, insurance leaders can provide them the one resource which they lack: money.” — Minh Q Tran, general partner at AXA Strategic Ventures

This compromise between incumbents and new entrants, at least for now, stems from the fact that neither has all the ingredients to win outright. While we pointed out the two trump cards of insurtechs in Part I our our Europe profile (price and personalization), let’s now examine the advantages enjoyed by incumbent insurers.

“Insurers have the customers, they have the money and they have the brand,” Margaris says. “They can adapt quickly and say: OK, let’s take the cutting-edge technology, and we can make it happen.”

He gives the pharma industry by way of an analogy:

“The pharma industry spends billions on R&D and innovation. At the end, most of them – the big pharma players – who have much more experience in this field of innovation, they buy biotech companies and integrate. Because what the big guys do well is selling and distribution. If you give an insurance company a great product, they know how to make the most out of the potential. Incumbents and insurtech startups have to play to each other’s strengths.’

Halkett agrees that traditional insurers have plenty to offer as part of any insurance model of the future, in particular the sheer volume of data, insights and expertise that they have at their disposal. However, she questions whether today’s incumbents are structured in such a way as to make the most out of these assets.

There may need to be a move away from a centralized model toward more of an ecosystem play, with the insurer overseeing different components of a technology stack. Insure the Box is itself an example of this, being owned as it is by Aioi Nissay Dowa Insurance Europe, which is the ultimate bearer of risk and also has a long-standing partnership with automotive OEM Toyota.

“The insurtech discussion all too often centers on the premise that shiny new startups will win at the expense of the tired old incumbents. Many see the battleground between them being at the distribution end of the customer journey. For me, the insurtech opportunity extends all the way along the value chain.” — Nick Martin, fund manager at Polar Capital Global Insurance Fund

At the end of the day, it is not a case of either/or with the partnership and insurtech-domination models, and we are likely to see some insurtechs eventually make it big alongside insurer-insurtech tie-ups.

“It will happen. We’ve seen the Googles, Amazons, Facebooks of this world, and we’ll see the same thing occur in insurtech, whereby some will become huge players. However, I believe we will see more partnerships or acquisitions because it’s very hard to scale,” Margaris concludes.

As ever, you can read ahead straight away and gain access to all our global trends, key themes and regional profiles, by downloading your complimentary copy of the full Trend Map whenever you like.

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.