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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.

Top 10 Insurtech Trends for 2017

The beginning of a new year is usually the time to predict key trends for the year to come, and so it goes with the insurtech sector as well. Most lists focus on the latest sexy technologies and applications. But, after a year, we find these have hardly gained any traction and so cannot really be considered “trends” in our view. To call something a key trend, new and innovative is not enough. It requires adoption at scale. We, therefore, decided to take a different approach, resulting in quite a different kind of list.

Being consultants for several blue chip insurers, speaking at conferences and attending boardroom meetings, we meet insurance executives on a daily basis. Consequently we have a fairly good idea about what’s at the top of their agenda as well as the pace in which change will take place, and in turn what insurtech solutions are most likely to fit into those plans. These insights resulted in our Top 10 Insurtech Trends for 2017, illustrated by some awesome insurtechs that joined us at the previous DIA event.

Trend 1. Massive cost savers in claims, operations and customer acquisition

Already a major trend, of course, but one that will gain even more importance in 2017. Quite a few insurers face combined ratios that are close to 100, or even exceed that number. Digitizing current processes is absolutely necessary, for operational excellence and to cut costs. Digital transformation of insurance carriers started in 2015, really took off in 2016 and will be mainstream by 2017 and beyond. Virtually every insurer, big or small, that takes itself seriously will continue to look for ways to operate more efficiently in every major part of the costs column: in claims expenses, costs of operations and customer acquisition costs. Technology purchases and investments by insurance carriers will further explode in these areas, as will the number and growth of insurtechs that cater to that need.

With OutShared’s CynoClaim solution more than 60% of all claims can be managed automatically, resulting in lower costs as well as increased customer satisfaction. Results of the first implementations: as much as 50% decrease in costs, 40% increase in customer satisfaction. The solution takes six to nine months to implement, whether it is from scratch or a migration of established operations to the platform, which is quite spectacular in the insurance industry. Check this out.

See also: How Insurtechs Will Affect Agents in 2017

Trend 2. A new face on digital transformation: engagement innovation

At the end of the day, digitized processes and a lower cost base are table stakes. It is simply not enough to stay in sync with fast changing customer behavior, new market dynamics and increasing competitiveness. No insurer ever succeeded in turning operational excellence into a competitive advantage that is sustainable over the long term. More and more carriers realize that engagement innovation is the next level of digital transformation. From a customer point of view, this is not about a new lipstick or a nose job but about a real makeover. Engagement innovation not only includes customer experience, but customer-centric products, new added value services and new business models, as well. Insurtechs that really innovate customer engagement for incumbents have a great 2017 ahead.

Amodo connects insurance companies with the new generation of customers. With Amodo’s connected customer suite, insurers leverage on digital channels and connected devices such as smartphones, connected cars and wearables to acquire and engage new customers. Amodo collects data from smartphones and a number of different connected consumer devices to build holistic customer profiles, providing better insights into customer risk exposure and customer product needs. Following the analysis, risk prevention programs, individual pricing as well as personalized and “on the spot” insurance products can be placed on the market, increasing the customer’s loyalty and lifetime value.

Trend 3. Next-level data analytics capabilities and AI, to really unlock the potential of IoT

Many insurance carriers have started IoT initiatives in the last few years. In particular, in car insurance it is already becoming mainstream, with Italy leading the pack. Home insurance is lagging, and health and life insurance is even more behind. All pilots and experiments have taught insurers that they lack the right data management capabilities to cope with all these new data streams — not just to deal with the volume and new data sets, but more importantly to turn this data into new insights, and to turn these insights into relevant and distinctive value propositions and customer engagement. Insurtechs that operate in the advanced analytics space, machine learning and artificial intelligence hold the keys to unlock the potential of IoT.

2016 DIAmond Award winner BigML has built a machine-learning platform that democratizes advanced analytics for companies of all sizes. You don’t have to be a PhD to use its collection of scalable and proven algorithms thanks to an intuitive web interface and end-to-end automation. Check this out.

Trend 4. Addressing the privacy concerns

To many consumers, big data equals big brother, and insurers that think of using personal data are not immediately trusted. Quite understandable. Most data initiatives of insurers are about sophisticated pricing and risk reduction really. Cost savers for the insurer. However, the added value of current initiatives for customers is limited. A chance on a lower premium, that’s it. To really reap the benefits of connected devices and the data that comes with it, insurers need to tackle these data privacy concerns. On the one hand, insurers need to give more than they take. Much more added value, relative to the personal data used. On the other hand, insurers need to empower customers to manage their own data. Because at the end of the day, it is their data. Expect fast growth of insurtechs that help insurers to cope with privacy issues.

Traity (another 2016 DIAmond Award winner) enables consumers to own their own reputation. Traity uses all sorts of new data sources, such as Facebook, AirBnB and Linkedin, to help customers to prove their trustworthiness. Munich Re’s legal protection brand DAS has partnered with Traity to offer new kinds of services. Check this out.

See also: 10 Predictions for Insurtech in 2017  

Trend 5. Contextual pull platforms

Markets have shifted from push to pull. But so far most insurers have made hardly any adjustments to their customer engagement strategies and required capabilities. In 2017, we will see the shift to pull platforms, as part of the shift to engagement innovation. Whereas push is about force-feeding products to the customer, pull is about understanding and solving the need behind the insurance solution and being present in that context. Risk considerations made by customers usually don’t take place at the office of an insurance broker. Insurers need to be present in the context of daily life, specific life events and decisions, and offer new services on top of the traditional products. Insurtechs that provide a platform or give access to these broader contexts and ecosystems help insurers to become much more a part of customers’ lives, be part of the ecosystem in that context and add much more value to customers.

VitalHealth Software, founded among others by Mayo Clinic, has developed e-health solutions, in particular for people with chronic diseases such as diabetes, cancer and Alzheimer’s. Features include all sorts of remote services for patients, insurers and care providers collaborating in health networks, access to protocol-driven disease management support. All seamlessly integrated with electronic health records. VitalHealth Software is used by insurers that are looking to improve care as well as reduce costs. Among other OSDE, the largest health insurer in Argentina and Chunyu Yisheng Mobile Health, a fast-growing Chinese eHealth pioneer with around 100 million registered users that is closely linked to People’s Insurance Company of China (PICC).

Trend 6. The marketplace model will find its way to insurance

Marketplaces: We already see the model emerging in banking, and insurance will follow fast. Virtually every insurer offers a suite of its own products. Everything is developed in-house. More and more carriers realize that you simply cannot be the best at everything, and that resources are too scarce to keep up with every new development or cater to each specific segment. In the marketplace model, the insurers basically give their customers access to third parties with the best products, the most pleasant customer experience and the lowest costs. The marketplace business model cuts both ways. Customers get continuous access to the best products and services in the market. And costs can be kept at a minimum through connecting (or disconnecting) parties almost in real time to key in on new customer wishes and anticipate other market developments. In 2017, we will witness all sorts of partnerships between insurtechs and incumbents that fit the marketplace model.

AXA teamed up with the much-praised 2016 DIAmond Award winner Trōv to target U.K. millennials. Trōv offers customized home insurances by allowing coverage of individual key items rather than a one-size-fits-all coverage set with average amounts. Check this out.

Trend 7. Open architecture

A new ecosystem emerges, with parties that capture data (think connected devices suppliers) and parties that develop new value propositions based on the data. Insurers will have to cooperate even more than they are currently doing with other companies that are part of the ecosystem. When an insurer wants to seize these opportunities in a structural way, it is no longer only about efficiently and effectively organizing business processes, but it is also about easy ways to facilitate interactions between possibly very different users who are dealing with each other in one way or another. Again, banking is ahead of insurance. For our new book, “Reinventing Customer Engagement: The next level of digital transformation for banks and insurers,” we spoke to many executives in banking, as well. German Fidor Bank has set up an open API architecture called fidorOS, enabling fintechs to develop financial services themselves on top of an existing legacy system. Citi says that “any financial institution that doesn’t want to rapidly lose market share needs to start working in a more open architecture structure.”

The Backbase omnichannel platform is based on open architecture principles. It leverages existing policy administration systems capabilities and adds a modern customer experience layer on top, creating direct-to-consumer portals and giving the opportunity to integrate best-of-breed apps as well as improving agent and employee portals. Swiss Re, Hiscox and Legal & General are some of the insurers that use the Backbase platform. Check this out.

Trend 8. Blockchain will come out of the experimentation stage

When Goldman Sachs, Morgan Stanley and Banco Santander decided to leave the R3 Blockchain Group many thought this was proof that blockchain technology apparently was not as promising as initially expected. The contrary is true. It is not uncommon to join a consortium to speed up the learning curve, and then drop out and use the newly acquired knowledge to build your own plans and gain some competitive advantage, especially with a technology as powerful as blockchain. We believe a similar scenario will not take place in the B3i initiative launched by AEGON, Allianz, Munich Re, Swiss Re and Zurich. Thinking cooperation and ecosystems are just much more in the veins of the insurance industry. Plus there are plenty of use cases that cut both ways: improve operational excellence and cost efficiency as well as customer engagement. That is good news for the insurtech forerunners in blockchain technology.

Everledger tackles the diamond industry’s expensive fraud and theft problem. The company provides an immutable ledger for diamond ownership and related transaction history verification for insurance companies, and uses blockchain technology to continuously track objects. Everledger has partnered with all institutions across the diamond value chain, including insurers, law enforcement agencies and diamond certification houses across the world. Through Everledger’s API, each of them can access and supply data around the status of a stone, including police reports and insurance claims. Check this out.

A worker inspects a 5.46 carat diamond before certification at the HRD Antwerp Institute of Gemmology, December 3, 2012. HRD Antwerp analyses diamonds with specially designed machinery, as even for experts it is impossible to visually tell the difference between a synthetic stone and a naturally grown one. Picture taken December 3, 2012. REUTERS/Francois Lenoir (BELGIUM – Tags: BUSINESS SOCIETY SCIENCE TECHNOLOGY) – RTR3B8HW

See also: 5 Predictions for the IoT in 2017  

Trend 9. Use of algorithms for front-liner empowerment

Algorithms that are displacing human advisers generate headlines. Robo advice will for sure affect the labor market’s landscape. For a costs perspective, this may seem attractive. But from a customer engagement perspective this may be different. To relate to their customers, financial institutions need to build in emotion. Humans inject emotion, empathy, passion and creativity and can deviate from procedure, if needed. Banks and insurers need to create a similar connection digitally. With so many people working at financial institutions, there is also an opportunity to create the best of both worlds. We see the first insurers that deploy robo advice to empower human front-liners. This is resulting in better conversations, higher conversion and, finally, greater solutions for customers.

AdviceRobo provides insurers with preventive solutions combining data from structured and unstructured sources and machine learning to score and predict risk behavior of consumers — for instance, predictions on default, bad debt, prepayments and customer churn. Predictions are actionable, because they’re on an individual customer level and support front-liners while speaking to customers.

Trend 10. Symbiotic relationship with insurtechs

Relationships between insurers and insurtechs will become much more intense. All the examples included in the previous nine trends make this quite clear. Insurers will also look for ways to learn much more from the insurtechs they are investing in — whether it is about specific capabilities or concrete instruments they can use in the incumbent organization, or whether it is about the culture at insurtechs and the way of working. We see an increasing number of insurers that are now using lean startup methodologies and that have created in-house accelerators and incubators to accelerate innovation in the mothership.

The Aviva Digital Garages in London and Singapore are perfect examples. They are not idea labs, but the place where Aviva runs its digital businesses, varying from MyAviva to some of the startups Aviva Ventures invests in – all under one roof to build an ecosystem and create synergies on multiple levels.

This Top 10 of Insurtech trends that we will witness in 2017 sets the stage for the Digital Insurance Agenda. It reinforces the need to connect insurance executives with insurtech leaders, which is basically our mission. It helps us to create an agenda for DIA 2017 Amsterdam that is in sync with what insurers need and what the latest technologies can provide. Check Digital Insurance Agenda for more info.